EXHIBIT 4.2
XXXXXXXXXXXXXXXX.XXX, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement") is
made as of the 15th day of November, 2001, by and among XXXXXXXXXXXXXXXX.XXX,
INC., a Washington corporation (the "Company"), XXXXXXX XXXXXX AND XXX XXXXXX
(the "Founders"), the holders of shares of the Company's Series A Preferred
Stock listed on EXHIBIT A hereto (the "Series A Holders"), the holders of the
Company's Series B Preferred Stock listed on EXHIBIT B hereto (the "Series B
Holders"), and the holders of the Company's Series C Preferred Stock (the
"Series C Stock") set forth on EXHIBIT C hereto (the "Series C Holders" and,
collectively with the Founders, the Series A Holders, and the Series B Holders,
the "Holders"). The Series A Holders, the Series B Holders and the Series C
Holders shall be referred to collectively hereinafter as the "Investors" and
each individually as an "Investor."
RECITALS
WHEREAS, the Company proposes to sell and issue up to two hundred ten
thousand three hundred thirty-six (210,336) shares of its Series C Preferred
Stock ("Series C Stock") pursuant to that certain Series C Preferred Stock and
Warrant Purchase Agreement of even date herewith (the "Purchase Agreement");
WHEREAS, the Company and certain of the Holders have entered into that
certain Amended and Restated Investor Rights Agreement, dated as of September 8,
2000, as amended by Amendment No. 1 to such agreement dated April 16, 2001 (the
"Prior Investor Rights Agreement"), and desire to amend and restate such
agreement with the terms and conditions of the Agreement; and
WHEREAS, as a condition of entering into the Purchase Agreement, the
Series C Holders have requested that the Company extend to them registration
rights, information rights and other rights as set forth below.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
AGREEMENT
1. REGISTRATION RIGHTS. The Company and the Investors covenant and
agree as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in
1.
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
and the declaration or ordering of effectiveness of such registration statement
or document;
(b) The term "Registrable Securities" means (i) the shares
of Common Stock issuable or issued upon conversion of any of the Company's
Series A Preferred Stock, the Series B Preferred Stock, the Series C Stock, and
the Common Stock issuable upon exercise of warrants to purchase Common Stock
held by the Investors, (ii) the shares of Common Stock issued to the Founders
(the "Founders' Stock"), and (iii) any other shares of Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the shares listed in
(i); provided, however, that the foregoing definition shall exclude in all cases
any Registrable Securities sold by a person in a transaction in which his or her
rights under this Agreement are not assigned. Notwithstanding the foregoing,
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(l) thereof so that all
transfer restrictions, and restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.10 of this Agreement;
(e) The term "Form S-3" means such form under the Securities
Act as in effect on the date hereof or any successor form under the Securities
Act;
(f) The term "SEC" means the Securities and Exchange
Commission; and
(g) The term "Qualified IPO" means a firm commitment
underwritten public offering by the Company of shares of its Common Stock
pursuant to a registration statement on Form S-1 under the Securities Act, the
public offering price of which is not less than $12.00 per share (appropriately
adjusted for any stock split, dividend, combination or other recapitalization)
and which results in aggregate cash proceeds to the Company of $20,000,000 (net
of underwriting discounts and commissions).
1.2 COMPANY REGISTRATION. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders other than the Holders) any of its stock 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 Company stock plan or a transaction covered by
Rule
2.
145 under the Securities Act, a registration in which the only stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered, or any 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), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20)
days after mailing of such notice by the Company in accordance with Section 3.3,
the Company shall, subject to the provisions of Section 1.6, cause to be
registered under the Securities Act all of the Registrable Securities that each
such Holder has requested to be registered.
1.3 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use 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 one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for up to one hundred twenty
(120) days.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
3.
the statements therein not misleading in the light of the circumstances then
existing, such obligation to continue for one hundred twenty (120) days.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange 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, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated 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.
1.4 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the 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 Holder's Registrable
Securities.
1.5 EXPENSES OF COMPANY REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications of Registrable Securities pursuant to
Section 1.2 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, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements (not to exceed
$10,000) of one counsel for the selling Holder or Holders selected by them with
the approval of the Company, which approval shall not be unreasonably withheld,
shall be borne by the Company.
1.6 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.2 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of
4.
the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders)
but in no event shall the amount of securities of the selling Holders included
in the offering be reduced below twenty percent (20%) of the total amount of
securities included in such offering, unless such offering is the initial public
offering of the Company's securities.
1.7 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify, and hold harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (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"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to
each such Holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them 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(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable to
any Holder, underwriter or controlling person 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 expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
5.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the 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, 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 expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.8(b), 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(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that in no event shall any indemnity under this subsection
1.8(b) exceed the net proceeds from the offering received by such Holder, except
in the case of willful fraud by such Holder.
(c) 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 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 reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
6.
considerations; provided, that in no event shall any contribution by a Holder
under this Subsection 1.8(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. 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.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders 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 SECURITIES EXCHANGE ACT OF 1934. With a view
to-making available to the Holders 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 Company to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), 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
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
1.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of all of such Holder's Registrable Securities, provided the Company
is, within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the securities with
7.
respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act. For the purposes of determining
the number of shares of Registrable Securities held by a transferee or assignee,
the holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under Section 1.
1.11 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that, during
the period of duration (up to, but not exceeding, 180 days) specified by the
Company and an underwriter of Common Stock or other securities of the Company,
following the effective date of a registration statement of the Company filed
under the Securities Act, it shall not, to the extent requested by the 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 Company held by it at any time during
such period except Common Stock included in such registration; provided,
however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company that has been declared effective
which covers Common Stock (or other securities) to be sold on its behalf to the
public in an underwritten offering; and
(b) all officers and directors of the Company, all holders
of one percent (1%) or more of the then outstanding capital stock of the
Company, and all other persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 1.11.
Notwithstanding the foregoing, the obligations described in
this Section 1.11 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
1.12 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be
entitled to exercise any right provided for in this Section 1 after the earlier
of (i) three (3) years following the consummation of a Qualified IPO, or (ii)
such time as Rule 144 or another similar exemption
8.
under the Securities Act is available for the sale of all of such Holder's
shares during a three (3)-month period without registration.
2. COVENANTS OF THE COMPANY
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
each Holder of at least 20,833 shares of Registrable Securities (other than a
Holder reasonably deemed by the Company to be a competitor of the Company) (as
adjusted for stock splits, combinations, recapitalizations and the like):
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
shareholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail and,
beginning for the 2000 fiscal year, prepared in accordance with generally
accepted accounting principles ("GAAP") and audited and certified by an
independent public accounting firm of nationally recognized standing selected by
the Company;
(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, an unaudited profit or loss statement, a
statement of cash flows for such fiscal quarter and an unaudited balance sheet
as of the end of such fiscal quarter; and
(c) with respect to the financial statements called for in
subsection (b) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment, provided that the foregoing shall not restrict the right of the
Company to change its accounting principles consistent with GAAP, if the Board
of Directors determines that it is in the best interest of the Company to do so.
2.2 INSPECTION. The Company shall permit each Holder of at least
[20,833] shares of Registrable Securities (except for a Holder reasonably deemed
by the Company to be a competitor of the Company) (as adjusted for stock splits,
combinations, recapitalizations and the like), at such Holder's expense, to
visit and inspect the Company's properties, to examine its books of account and
records and to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by the Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 2.2 to provide access to any information which it reasonably considers
to be a trade secret or similar confidential information.
2.3 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 2.3, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined). For purposes of this Section
2.3, a "Major Investor" shall mean any person who holds at least 20,833 shares
of Registrable Securities (as adjusted for stock splits and combinations and the
9.
like). For purposes of this Section 2.3, Major Investor includes any general
partners and affiliates of a Major Investor. A Major Investor who chooses to
exercise the right of first offer may designate as purchasers under such right
itself or its partners or affiliates in such proportions as it deems
appropriate.
Each time the Company proposes to offer any shares
of, or securities convertible into or exercisable for any shares of, any class
of its capital stock ("Shares"), the Company shall first make an offering of
such Shares to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 15 calendar days after delivery of the Notice,
the Major Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which equals
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Major Investor bears to the total number of shares
of Common Stock then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities).
(c) The Company may, during the 45-day period following the
expiration of the period provided in subsection 2.3(b) hereof, offer the
remaining unsubscribed portion of the Shares to any person or persons at a price
not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 60 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.3 shall not
be applicable (i) to the issuance or sale of capital stock (or options therefor)
to employees, consultants, officers and directors, pursuant to plans or
agreements approved by the Board of Directors for the primary purpose of
soliciting or retaining their services, (ii) to or after consummation of a
Qualified IPO, (iii) to the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities, (iv) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, (v) to the issuance of securities to financial institutions
or lessors in connection with commercial credit arrangements, equipment
financings, or similar transactions, the terms of which are approved by the
Board of Directors, (vi) to the issuance or sale of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, (vii) stock splits,
stock dividends or like transactions, (viii) to the issuance of securities to a
strategic partner in connection with license agreements, joint marketing
agreement, technology development agreements or similar strategic relationships,
the terms of which are approved by the Board of Directors, or (ix) to the
issuance of securities to academic or research institutions in
10.
connection with the license of technology or research and development services,
the terms of which are approved by the Board of Directors.
(e) The right of first offer established by this Section 2.3
shall terminate and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 13 or 15(d)
of Exchange Act, whichever event shall first occur.
(f) The right of first offer set forth in this Section 2.3
may not be assigned or transferred, except that (i) such right is assignable by
each Holder to any wholly owned subsidiary or parent of, or to any corporation
or entity that is, within the meaning of the Act, controlling, controlled by or
under common control with, any such Holder, (ii) such right is assignable
between and among any of the Holders, and (iii) such right is assignable to a
transferee who acquires at least 20,833 shares (as adjusted for stock splits,
combinations, recapitalizations and the like) of Registrable Securities.
2.4 VISITATION RIGHTS. The Company shall permit each Holder of at
least 600,000 shares (as adjusted for stock splits, combinations,
recapitalizations and the like) of Registrable Securities to appoint one
representative, reasonably acceptable to the Company, to attend all meetings of
the Company's Board of Directors in a nonvoting capacity, and in connection
therewith, the Company shall give such representative copies of all notices,
minutes, consents and other materials, financial or otherwise, which the Company
provides to its Board of Directors; provided, however, that the Company reserves
the right to exclude each such representative from access to any material or
meeting or portion thereof if the Company believes upon advice of counsel that
such exclusion is reasonably necessary to preserve the attorney-client
privilege, to protect highly confidential proprietary information or for other
similar reasons.
2.5 QUALIFIED SMALL BUSINESS. For so long as any of the
Registrable Securities are held by a Holder (in whose hands such Shares are
eligible to qualify as "Qualified Small Business Stock" as defined in Section
1202(c) of the Internal Revenue Code of 1986, as amended (the "Code")), the
Company will use its reasonable efforts to comply with the reporting and
recordkeeping requirements of Section 1202 of the Code, any regulations
promulgated thereunder and any similar state laws and regulations.
2.6 TERMINATION OF COVENANTS.
(a) The covenants set forth in Sections 2.1 through Section
2.5 shall terminate as to each Investor and be of no further force or effect (i)
immediately prior to the consummation of a Qualified IPO, or (ii) when the
Company shall sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any other transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Company is disposed of,
provided that this subsection (ii) shall
11.
apply to a merger effected exclusively for the purpose of changing the domicile
of the Corporation.
(b) The covenants set forth in Sections 2.1 and 2.2 shall
terminate as to each Holder and be of no further force or effect when the
Company first becomes subject to the periodic reporting requirements of Sections
13 or 15(d) of the Exchange Act, if this occurs earlier the events described in
Section 2.6(a) above.
3. MISCELLANEOUS
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns of the
parties (including transferees any of the Preferred Stock or any Common Stock
issued upon conversion thereof). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than 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.
3.2 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the holders
of a majority of the Registrable Securities then outstanding, not including the
Founders' Stock; provided that if such amendment has the effect of affecting the
Founders' Stock (i) in a manner different than securities issued to the
Investors and (ii) in a manner adverse to the interests of the holders of the
Founders' Stock, then such amendment shall require the consent of the holder or
holders of a majority of the Founders' Stock. Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each are holder of all such Registrable
Securities, and the Company.
3.3 NOTICES. Unless otherwise provided, any notice required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
party to be notified at such party's address or fax number as set forth below or
on EXHIBIT D hereto or as subsequently modified by written notice.
3.4 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of Agreement
shall be interpreted as if such provision were so excluded and (c) the balance
of Agreement shall be enforceable in accordance with its terms.
3.5 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of Washington, without giving effect to principles of
conflicts of laws.
12.
3.6 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 and the same instrument.
3.7 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.
3.8 AGGREGATION OF STOCK. All shares of the Preferred Stock held
or acquired affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
3.9 ADDITIONAL SERIES C PURCHASERS. If 210,336 shares of Series C
Preferred are not sold on the date of this Agreement, the Company has the right,
pursuant to Section 1.2(c) of the Purchase Agreement, at any time prior to 13
February 2002 to sell that number of shares of Series C Preferred equal to the
difference between 210,336 minus the number of shares of Series C Preferred
Stock issued and sold on the date of this Agreement to one or more additional
purchasers as determined by the Company. Any such additional purchaser shall
execute an Addendum Agreement substantially in the form attached hereto as
EXHIBIT D and shall become a party to this Agreement and shall be considered a
"Series C Holder" for purposes of this Agreement.
[Signature Page Follows]
13.
The parties have executed this Amended and Restated Investor Rights
Agreement as of the date first above written.
COMPANY:
XXXXXXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Address: 00000 000xx Xxxxxx X.X.
Xxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
EXHIBIT A
SERIES A HOLDERS
SHAREHOLDER NAME NUMBER OF SHARES OWNED
ADS 1212 Trust 49,375
Xxxxx X. Xxxxxxxx 20,833
Xxxxxx X. Xxxxx 83,334
GC&H Investments 20,834
Xxx X. Xxxxxxx 20,834
C. Xxxxxxxx Xxxxxxxx 41,667
Xxx Xxxxxx 325,000
Xxxxxxx Xxxxxx 325,000
Xxxxxxx X. Xxxxxx & Xxxxxxx X. Xxxxxx 20,834
Xxxx Xxxxxx 20,834
Xxxxxx X. Xxxx and Xxxxxxx X. Xxxx 31,667
Xxxxx X. Xxxx, Xx. 50,000
Xxxxxxx Xxxx 50,000
Nordsee Partners 41,667
Xxxx Xxxxxxx 41,667
Ring Associates II 83,334
Royal Hills LLC 83,333
Xxxxxxxxx Family Limited Partnership 98,751
Xxxx Xxxxxxx 41,667
You Lucky Dog Trust 49,374
Total Outstanding 1,500,005
A-1
EXHIBIT B
SERIES B HOLDERS
SHAREHOLDER NAME NUMBER OF SHARES OWNED
ADS 1212 Trust 17,622
Advanced Technology Ventures V, LP 356,644
Arch Venture Fund IV, L.P. 600,962
ATV Entrepreneurs V, L.P. 12,744
Eagle Creek Capital, LLC 30,048
GC&H Investments 8,811
C. Xxxxxxxx Xxxxxxxx 17,622
Madrona Investment Group, LLC 30,048
Nordsee Partners 17,622
Ring Associates II 15,625
Sigma Associates IV, L.P. 101,140
Sigma Investors IV, L.P. 9,979
Sigma Partners IV, L.P. 249,458
Xxxxxxxxx Family Limited Partnership 35,245
Xxxx Xxxxxxx 17,622
You Lucky Dog Trust 17,622
Total Outstanding 1,538,814
B-1
EXHIBIT C
SERIES C HOLDERS
SHAREHOLDER NAME NUMBER OF SHARES OWNED
ARCH Venture Fund IV, L.P. 713,491
ARCH Entrepreneurs Fund, L.P. 19,160
Advanced Technology Ventures V, LP 434,594
ATV Entrepreneurs V, LP 15,763
Sigma Partners IV, L.P. 303,188
Sigma Associates IV, L.P. 122,924
Sigma Investors IV, L.P. 13,477
Total Outstanding 1,622,597
C-1
