EXHIBIT 10.7
THIRD AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
BY AND AMONG
ONESOFT CORPORATION,
THE HOLDERS OF SERIES A PREFERRED STOCK,
THE HOLDERS OF SERIES B PREFERRED STOCK,
THE HOLDERS OF SERIES C PREFERRED STOCK
AND
CERTAIN HOLDERS OF COMMON STOCK
dated as of August 13, 1999
TABLE OF CONTENTS
Page
1. BACKGROUND........................................................................................... 1
2. DEFINITIONS.......................................................................................... 1
3. BOARD REPRESENTATION................................................................................. 7
3.1. Representation on the Board of Directors.................................................. 7
3.2. Observers................................................................................. 8
3.3. Expenses.................................................................................. 8
3.4. Confidentiality........................................................................... 8
4. ADDITIONAL UNDERTAKINGS AND COVENANTS................................................................ 8
4.1. Maintenance of Corporate Status........................................................... 8
4.2. Accounts and Records...................................................................... 9
4.3. Litigation................................................................................ 9
4.4. Compliance with Law: No Infringement...................................................... 9
4.5. Disclosure of Information by the Investors................................................ 9
4.6. Maintenance of Properties................................................................. 9
4.7. Insurance................................................................................. 10
4.8. Change in Operations...................................................................... 10
4.9. Defaults and Breaches Under Other Contracts............................................... 10
4.10. Investments.............................................................................. 11
4.11. Liens and Encumbrances................................................................... 11
4.12. Guarantees and Loans..................................................................... 11
4.13. Affiliate Transactions................................................................... 11
4.14. SBA Forms................................................................................ 11
5. REGISTRATION UNDER SECURITIES ACT, ETC............................................................... 12
5.1. Registration on Request................................................................... 12
(a). Request.......................................................................... 12
(b). Long-form Registrations.......................................................... 12
(c). Short-form Registrations......................................................... 12
(d). Registration of Other Securities................................................. 13
(e). Restrictions on Demand Registrations............................................. 13
(i). Restrictions on Long-form Registrations................................. 13
(ii). Restrictions on Short-form Registrations............................... 14
(f). Other Registration Rights........................................................ 14
(g). Effective Registration Statement; Rescission..................................... 14
(h). Priority in Demand Registrations................................................. 15
(i). Additional Demand Registration................................................... 15
5.2. Piggyback Registrations................................................................... 15
(a). Right to Piggyback............................................................... 15
(b). Priority in Piggyback Registrations.............................................. 16
(c). Other Registrations.............................................................. 16
5.3. Registration Procedures................................................................... 17
5.4. Selection of Underwriters................................................................. 20
(a). Demand Registrations............................................................. 20
(b). Piggyback Registrations.......................................................... 21
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(c). Holdback Agreements.............................................................. 21
5.5. Preparation: Reasonable Investigation..................................................... 22
5.6. Indemnification........................................................................... 22
(a). Indemnification by the Company................................................... 22
(b). Indemnification by the Sellers................................................... 23
(c). Notices of Claims, etc........................................................... 23
(d). Other Indemnification............................................................ 24
(e). Indemnification Payments......................................................... 24
(f). Contribution..................................................................... 24
5.7. Registration Expenses..................................................................... 25
5.8. Adjustments Effecting Registrable Securities.............................................. 26
5.9. Participation in Underwritten Registrations............................................... 26
5.10. Rule 144................................................................................. 26
6. BASIC FINANCIAL INFORMATION OF THE COMPANY........................................................... 27
6.1. Annual Report............................................................................. 27
6.2. Quarterly Report.......................................................................... 27
6.3. Monthly Report............................................................................ 28
6.4. Business Plan and Operating Budget........................................................ 28
7. TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES ACT........................................ 28
7.1. Transferability........................................................................... 28
7.2. Restrictive Legend........................................................................ 28
7.3. Notice of Proposed Transfers.............................................................. 30
8. PREEMPTIVE RIGHTS.................................................................................... 31
8.1. Pro Rata Right............................................................................ 31
8.2. Definition of "New Securities"............................................................ 31
8.3. Required Notice........................................................................... 32
8.4. Company's Right to Sell................................................................... 32
8.5. Expiration of Right....................................................................... 32
9. RIGHT OF CO-SALE..................................................................................... 32
10. RIGHTS OF SUBSEQUENT REFUSAL........................................................................ 33
10.1. Investors and Founder.................................................................... 33
10.2. Company and Other Shareholders........................................................... 35
11. INDEMNIFICATION; REMEDIES........................................................................... 36
11.1. Agreement of the Company to Indemnify.................................................... 36
11.2. Conditions of Indemnification............................................................ 37
11.3. Specific Performance..................................................................... 37
11.4. Remedies Cumulative...................................................................... 37
12. LIMITATION OF LIABILITY............................................................................. 37
13. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS............................................................ 38
14. NOMINEES FOR BENEFICIAL OWNERS...................................................................... 38
15. NOTICES............................................................................................. 38
16. ASSIGNMENT.......................................................................................... 39
16.1. Assignment of Registration Rights........................................................ 39
16.2. Assignment of Preemptive Rights, Rights of Subsequent Refusal and Co-Sale................ 39
16.3. Assignment of Rights by Company.......................................................... 40
17. CONVERSION OF STOCK AT SG'S OPTION.................................................................. 40
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18. BINDING EFFECT....................................................................................... 40
19. DESCRIPTIVE HEADING.................................................................................. 40
20. GOVERNING LAW........................................................................................ 40
21. TERMINATION; RULE 144(K)............................................................................. 40
22. SEVERABILITY......................................................................................... 41
23. COUNTERPARTS......................................................................................... 41
24. UNDERWRITING RIGHT OF FIRST OFFER.................................................................... 41
24.1. Right of First Offer...................................................................... 41
24.2. Right to Co-Manage........................................................................ 41
24.3. Ownership................................................................................. 41
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THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
----------------------------------------------------
THIS THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement")
dated as of August 13, 1999 among ONESOFT CORPORATION, a Delaware corporation
(the "Company"), the entities and individuals listed on the "Schedule of
Investors" attached hereto as Schedule A, the Series A Preferred Stock Holders
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and Series B Preferred Stock Holders listed on Schedule B attached hereto, Xxxxx
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X. XxxXxxxxx, XX, and the other Common Stockholders also listed on Schedule B
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attached hereto (the "Common Stockholders").
1. BACKGROUND.
The Company, BWSF, SG, RRH (each as defined below) and certain of the
Common Stockholders are parties to a Second Amended and Restated Investor Rights
Agreement dated as of February 26, 1999 (the "Prior Agreement"). The Company
and the Initial Investors and Additional Investors (each as defined below)in the
Company's Series C Preferred Stock (as defined below) are parties to a Stock
Purchase Agreement for the purchase and sale of shares of Series C Preferred
Stock of the Company of even date herewith (the "Series C Preferred Stock
Purchase Agreement"), the Company, SG and RRH are parties to a Stock Purchase
Agreement for the purchase and sale of shares of Series B Preferred Stock of the
Company dated as of February 26, 1999 (the "Series B Preferred Stock Purchase
Agreement"), the Company and SG are parties to a Stock Purchase Agreement for
the purchase and sale of certain shares of Series A Preferred Stock of the
Company dated as of June 11, 1998 (the "Series A Preferred Stock Purchase
Agreement"), and the Company and BWSF are parties to a Stock Purchase Agreement
dated as of November 14, 1997, and amended as of March 13, 1998 and as of June
9, 1998 (the "BWSF Stock Purchase Agreement"). In order to induce the Initial
Investors and the Additional Investors to enter into the Series C Preferred
Stock Purchase Agreement, the parties to this Agreement hereby amend and restate
the Prior Agreement as set forth in this Agreement.
2. DEFINITIONS.
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings:
Additional Investors: As defined in the Series C Preferred Stock Purchase
--------------------
Agreement and as set forth in the amended "Schedule of Investors" attached
hereto.
Affiliate: As defined in Rule 405 under the Securities Act.
---------
Appraiser: As defined in Section 10.2(c).
--------- ----------------
Authorized Transfer: (a) If a stockholder of the Company (a "Stockholder")
-------------------
is an individual, a pledge of Securities, a gift of Securities or a
transfer of Securities without consideration by such Stockholder, to or for
the benefit of any members of the Immediate Family of such Stockholder or
to any personal trust in which such Stockholder or any of such members
retains the entire beneficial interest, (b) if a Stockholder is a
partnership, corporation or limited liability company, a pledge of
Securities or a distribution or transfer of Securities by such Stockholder
to its affiliates, stockholders, partners or members or managing directors
of its members, as applicable, without consideration or at cost, and (c),
notwithstanding the
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provisions of the Stockholders Agreement, if a Stockholder is an employee
or former employee of the Company, a transfer or sale of Securities to
current employees of the Company (individually, each transferee described
in (a), (b) and (c) above, an "Authorized Transferee"), in each case
provided that, prior to such pledge, gift, distribution or transfer, such
Authorized Transferee agrees in writing to be bound by this Agreement.
Authorized Transferee: As defined in the definition of Authorized
---------------------
Transfer.
BTIP: BT Investment Partners, Inc., a Delaware corporation.
----
Business: The development and licensing of Internet-enabled customer and
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constituent interaction software products, and the provision of services
related to such software including: customization, training, integration,
and outsourced operations.
Board of Directors: The board of directors of the Company.
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BWSF: Blue Water Strategic Fund I, L.L.C., a Delaware limited liability
----
company.
BWSF Observer: As defined in Section 3.2.
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BWSF Preferred Director: As defined in Section 3.1.
----------------------- ------------
BWSF Stock Purchase Agreement: As defined in Section 1.
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Claims: All demands, claims, actions or causes of action, assessments,
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losses, damages (including, without limitation, diminution in value),
liabilities, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees and disbursements.
Commission: The Securities and Exchange Commission or any other Federal
----------
agency at the time administering the Securities Act.
Common Directors: As defined in Section 3.1 of this Agreement.
----------------
Common Stock: The authorized common stock, $.001 par value per share, of
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the Company.
Company's Notice: As defined in Section 10.2(a).
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Company: As defined in the introductory paragraph of this Agreement.
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Competitors: Any Person, firm or entity regularly engaged in any material
-----------
Business of the Company or any Affiliate of such Person, firm or entity, as
determined in good faith by the Board of Directors.
Confidential Information: Any confidential, proprietary or secret
------------------------
information which an Investor may obtain from the Company, and which is
prominently marked "confidential," "proprietary" or "secret," including but
not limited to financial statements, reports and other materials submitted
by the Company prior to the date hereof or as required hereunder, or
pursuant to visitation or inspection rights granted hereunder.
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Co-sale Notice: As defined in Section 9.
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Demand Registration: As defined in Section 5.l(a).
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Environmental Laws: Any Laws (including, without limitation, the
------------------
Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans, other criteria, or guidelines promulgated pursuant to
such Laws, now or hereafter in effect relating to Hazardous Materials
generation, production, use, storage, treatment, transportation or
disposal, or noise control, or the protection of human health or the
environment.
Exchange Act: The Securities Exchange Act of 1934, as amended, or any
------------
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar federal statute.
Fair Market Value: With respect to the Company, the price which a willing
-----------------
buyer would pay to a willing seller for (a) all of the assets and
liabilities of the Company, or (b) all of the outstanding stock of the
Company, with both the buyer and seller being fully informed and neither
being under a compulsion to buy or sell, as the case may be.
Founder: Xxxxx X. XxxXxxxxx, XX.
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Founder Shares: Shares of capital stock of the Company held by the Founder
--------------
or his Authorized Transferees.
Founder Observers: As defined in Section 3.2.
----------------- ------------
GEPT: General Electric Pension Trust, a _______________.
GEPT Observer: As defined in Section 3.2.
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Hazardous Materials: Any wastes, substances or materials (whether solids,
-------------------
liquids or gases) that are deemed hazardous, toxic, pollutants or
contaminants, including, without limitation, substances defined as
"hazardous wastes," "hazardous substances," "toxic substances,"
"radioactive materials," or other similar designations in, or otherwise
subject to regulation under, any Environmental Laws, "Hazardous Materials"
includes polychlorinated biphenyls (PCBs), asbestos, lead-based paints, and
petroleum and petroleum products (including, without limitation, crude oil
or any fraction thereof).
Immediate Family: A parent, spouse, and natural or lawfully adopted
----------------
children.
Information: As defined in Section 5.3(j).
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Initial Investors: As defined in the Series C Preferred Stock Purchase
-----------------
Agreement and as set forth in the "Schedule of Investors" attached hereto.
Inspectors: As defined in Section 5.3(j).
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Intellectual Property: All franchises, patents, patent applications,
---------------------
trademarks, service marks, trade names, trade styles, brands, private
labels, copyrights, know-how, computer software, industrial designs and
drawings and general intangibles of a like nature, trade secrets, licenses,
and rights and filings with respect to the foregoing, and all reissues,
extensions and renewals thereof.
Investors' Counsel: As defined in Section 5.3(b).
------------------ ---------------
Investors: BWSF, SG, RRH, the Initial Investors, the Additional Investors
---------
and their respective Authorized Transferees.
Investor Indemnified Persons: Each Investor and its Affiliates, employees,
----------------------------
representatives, agents, members, partners, officers and directors.
Laws: All foreign, federal, state and local statutes, laws, ordinances,
----
regulations, rules, resolutions, orders, determinations, writs,
injunctions, awards (including, without limitation, awards of any
arbitrator), judgments and decrees applicable to the specified persons or
entities and to the businesses and assets thereof (including, without
limitation, laws relating to securities registration and regulation; the
sale, leasing, ownership or management of real property; employment
practices, terms and conditions, and wages and hours; building standards,
land use and zoning; safety, health and fire prevention; and environmental
protection, including Environmental Laws).
Limited Securities: The securities of the Company required to bear the
------------------
legend set forth in Section 7.1.
------------
Long-form Registration: As defined in Section 5.1(a).
---------------------- ---------------
Material Adverse Effect: A material adverse effect on the business,
-----------------------
operations, assets, liabilities, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries, taken as a whole.
NASD: The National Association of Securities Dealers, Inc. or any similar
----
successor organization.
Nasdaq: The Nasdaq Stock Market or the Nasdaq National Market System.
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New Securities: As defined in Section 8.2.
-------------- ------------
Non-affiliated Director: A member of the Board of Directors of the Company
-----------------------
who is neither an officer nor an employee of the Company, nor an Affiliate
of any officer or employee of the Company.
Offered Shares: As defined in Section 10.2(a).
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Other Shares: At any time those shares of Common Stock which do not
------------
constitute Primary Shares or Registrable Securities.
4
Participation Notice: As defined in Section 9.
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Person: A corporation, limited liability company, association,
------
partnership, organization, business, natural person, estate, governmental
or political subdivision or governmental agency.
Piggyback Registration: As defined in Section 5.2(a).
---------------------- ---------------
Preferred Directors: As defined in Section 3.1 of this Agreement.
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Primary Shares: Authorized but unissued shares of Common Stock.
--------------
Proposed Transferee: Any Person, firm or entity to which a holder of
-------------------
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock intends to transfer some or all of such shares, except as
part of an Underwritten Offering or an Authorized Transfer.
Pro Rata Share: As defined in Section 8.1.
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Qualified Public Offering: As defined in Section 8.5.
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QuestMark: QuestMark Partners, L.P., a Delaware limited partnership.
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QuestMark Observer: As defined in Section 3.2.
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QuestMark Preferred Director: As defined in Section 3.1.
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Records: As defined in Section 5.3(j).
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Register, Registered, and Registration: The terms "register", "registered"
--------------------------------------
and "registration" refer to a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of
such registration statement.
Registrable Securities: At any time, with respect to any Investor or the
----------------------
Founder, the shares of Common Stock held (or to be held upon conversion of
any Preferred Stock) by such Investor or the Founder, its or his heirs,
legatees, successors or assigns, that constitute Restricted Securities.
Registration Expenses: As defined in Section 5.7 of this Agreement.
--------------------- -----------
Restricted Securities: At any time, with respect to any Investor or the
---------------------
Founder, the shares of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock of the Company held by such Investor or the
Founder from time to time, any shares of Common Stock issued or issuable
upon conversion thereof, any shares or other securities received in respect
thereof, and any other shares of Common Stock held by such Investor or the
Founder, which are held by such Investor or the Founder, its or his
successors or assigns, and which have not previously been sold to the
public pursuant to a registration statement under the Securities Act or
pursuant to Rule 144.
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RRH: Rader Reinfrank Holdings No. 2, a California general partnership.
---
RRH Observer: As defined in Section 3.2.
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RRH Preferred Director: As defined in Section 3.1.
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Xxxxx: Xxxxx Capital Partners, a _____________ partnership.
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Rule 144: Rule 144 under the Securities Act, as such rule may be amended
--------
from time to time, or any similar rule or regulation hereafter adopted by
the Commission.
SBA: The United States Small Business Administration and any successor
---
agency thereto.
SBIA: The Small Business Investment Act of 1958 and the regulations
----
thereunder.
SBIC: A Small Business Investment Company licensed by the SBA under the
----
SBIA.
Securities: As defined in Section 9.
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Securities Act: The Securities Act of 1933, as amended, or any similar
--------------
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar federal statute.
Series A Preferred Stock: The authorized Series A Convertible Preferred
------------------------
Stock, having a par value of $.001 per share, of the Company.
Series B Preferred Stock: The authorized Series B Convertible Preferred
------------------------
Stock, having a par value of $.001 per share, of the Company.
Series C Preferred Stock: The authorized Series C Convertible Preferred
------------------------
Stock, having a par value of $.001 per share, of the Company.
Series A Preferred Stock Purchase Agreement: As defined in Section 1.
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Series B Preferred Stock Purchase Agreement: As defined in Section 1.
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Series C Preferred Stock Purchase Agreement: As defined in Section 1
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SG: SGC Partners II LLC, a Delaware limited liability company.
--
SG Observer: As defined in Section 3.2.
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SG Preferred Director: As defined in Section 3.1.
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SGC: XX Xxxxx & Company, Inc.
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Short-form Registration: As defined in Section 5.1(a).
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Stock Purchase Agreement or Stock Purchase Agreements: collectively, the
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BWSF Stock Purchase Agreement, the Series A Preferred Stock Purchase
Agreement, the Series B Preferred Stock Purchase Agreement and the Series C
Preferred Stock Purchase Agreement.
Stockholders Agreement: That certain Amended and Restated Stockholders'
----------------------
and Voting Agreement dated as of January 6, 1997, and amended and restated
as of April 3, 1997, among the Company and the other signatories thereto.
Subscription Price: The amount payable to the Company in consideration of
------------------
the initial issuance of the Registrable Securities or the securities from
which the Registrable Securities were issued, whether by way of conversion,
exercise, stock dividend, stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other reorganization
or otherwise.
Subsidiaries: The subsidiaries of the Company all of which are listed in
------------
Exhibit B of the Series C Preferred Stock Purchase Agreement.
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Substantial Holder: (i) Any holder of any Series A Preferred Stock, Series
------------------
B Preferred Stock or Series C Preferred Stock which, when added to Common
Stock held by each such holder and such holder's Authorized Transferees and
Affiliates, is convertible into at least three percent (3%) of the
outstanding Common Stock on a fully-converted and fully-diluted basis or
any holder of any Common Stock which, when added to Preferred Stock held by
each such holder, constitutes at least three percent (3%) of the
outstanding Common Stock on a fully-converted and fully-diluted basis;
provided, however, that in the cases BWSF, SG, RRH, QuestMark and GEPT,
each of them shall also be deemed to be a Substantial Holder if and so long
as it, together with its Authorized Transferees and Affiliates, continues
to hold capital stock of the Company which, on a fully-converted and fully-
diluted basis, is at least equal to one-half (1/2) of the capital stock
which such holder and its Authorized Transferees and Affiliates held on the
date hereof, inclusive of any Series C Preferred Stock being acquired by it
under the Series C Preferred Stock Purchase Agreement; (ii) BTIP and Xxxxx,
solely for the purposes of Sections 6, 8, 9 and 10 of this Agreement, so
long as each holder, together with its Authorized Transferees and
Affiliates, continues to hold capital stock of the Company which, on a
fully-converted and fully-diluted basis, is at least equal to one-half
(1/2) of the capital stock which each holder and its Authorized Transferees
and Affiliates held on the date hereof, inclusive of any Series C Preferred
Stock being acquired by each holder under the Series C Preferred Stock
Purchase Agreement; and (iii) the Founder, so long as the Common Stock or
options to purchase Common Stock held by him or his Authorized Transferees
and Affiliates constitutes at least three percent (3%) of the outstanding
Common Stock on a fully-converted and fully-diluted basis.
Underwriters: As defined in Section 5.4.
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Underwritten Registration or Underwritten Offering: A registration in
------------------------- ---------------------
which securities of the Company are sold pursuant to a firm commitment
underwriting.
3. BOARD REPRESENTATION
3.1. Representation on the Board of Directors.
----------------------------------------
7
The Company shall cause the Board of Directors of the Company to consist of
nine (9) members, as follows: (a) two (2) members, one (1) of each of whom shall
be nominated by BWSF and SG for so long as each such holder is a Substantial
Holder (and who initially shall be Xxxxx Xxxxxxx for BWSF and Xxxxxx Xxxx-
Tipping for SG) or, if BWSF or SG is not a Substantial Holder, as the case may
be, then such director shall be nominated by the holders of the Series A
Preferred Stock and elected by a majority vote of the holders of Series A
Preferred Stock, voting separately as a class (the "BWSF Preferred Director" and
the "SG Preferred Director", respectively); (b) one (1) member who shall be
nominated by RRH (and who shall initially be Xxxxxxx Xxxxx) or, if RRH is not a
Substantial Holder, then such director shall be nominated by the holders of
Series B Preferred Stock and elected by a majority vote of the holders of Series
B Preferred Stock, voting separately as a class (the "RRH Preferred Director");
(c) one (1) member who shall be nominated by QuestMark (and who shall initially
be Xxxxxx X. Xxxxxxxx) or, if QuestMark is not a Substantial Holder, then such
director shall be nominated by the holders of Series C Preferred Stock and
elected by a majority vote of the holders of Series C Preferred Stock, voting
separately as a class (the "QuestMark Preferred Director", together with the
BWSF Preferred Director, the SG Preferred Director and the RRH Preferred
Director, the "Preferred Directors"); (d) four (4) members who shall be
nominated by the Founder and elected by a majority vote of the holders of Common
Stock, voting separately as a class, one (1) of whom shall be a Non-Affiliated
Director (three (3) of whom initially shall be the Founder and Xxxxxxx
XxxXxxxxx, each an employee of the Company, and Xxxxxx Xxxxxxxx, as the Non-
Affiliated Director) (collectively, the "Common Directors"); and (e) one
director who shall be a Non-affiliated Director and who shall be nominated by
the Board of Directors other than such director and shall be elected by a
majority vote of the stockholders entitled to vote for the election of directors
(and who initially shall be A. Xxxxxxx Xxxxxxx). In the event of the death,
resignation, or removal of any BWSF Preferred Director or SG Preferred Director,
the successor thereto as a director shall be nominated and elected in the manner
set forth above; provided that, in the case the BWSF Director, if there is only
one Substantial Holder or no Substantial Holders of Series A Preferred Stock,
or, in the case of the SG Preferred Director, if there is only one Substantial
Holder or no Substantial Holders of Series A Preferred Stock, or, in the case of
the RRH Director, if there are no Substantial Holders of Series B Preferred
Stock, or, in the case of the QuestMark Director, if there are no Substantial
Holders of Series C Preferred Stock, then such director shall be subject to
removal by the Founder, if the Founder at such time is associated with the
Company as an officer, director or Substantial Holder or, if not, such removal
may be effected by a majority of the directors then serving other than the
director who is subject to such removal, and such director's successor shall be
nominated and elected as an additional Non-affiliated Director pursuant to
clause (e) above. The Stockholders Agreement is hereby amended by deleting
Section 6 thereof in its entirety.
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3.2. Observers.
---------
BWSF, for so long as it is a Substantial Holder and holds any Series A
Preferred Stock, SG, for so long as it is a Substantial Holder and holds any
Series A Preferred Stock or Series B Preferred Stock, RRH, for so long as RRH is
a Substantial Holder and holds any Series B Preferred Stock, QuestMark, for so
long as QuestMark is a Substantial Holder and holds any Series C Preferred
Stock, and GEPT, for so long as GEPT is a Substantial Holder and holds any
Series C Preferred Stock, may each from time to time appoint a representative to
attend meetings of the Board of Directors of the Company or any committee
thereof as an observer (the "BWSF Observer", the "SG Observer", the "RRH
Observer", the "QuestMark Observer" and the "GEPT Observer", respectively).
Neither the holders of the Series A Preferred Stock, the holders of Series B
Preferred Stock, the holders of Series C Preferred Stock, the BWSF Observer, the
SG Observer, the RRH Observer, the QuestMark Observer nor the GEPT Observer,
however, shall have any duties, responsibilities or liability by virtue of
attendance at such meetings or the failure to attend the same. The parties
agree that the Founder shall be entitled to appoint observers to attend meetings
of the Board of Directors of the Company or any committee thereof as he deems
appropriate (the "Founder Observers") which Founder Observers shall not have any
duties, responsibilities or liability by virtue of attendance at such meetings
or the failure to attend the same.
3.3. Expenses.
--------
The Company shall reimburse all directors for all reasonable expenses
incurred in connection with their attendance at meetings of the Board of
Directors, including without limitation reasonable and necessary travel and
living expenses. The Preferred Directors and Non-affiliated Director(s)
additionally shall be entitled to receive such compensation as shall be paid to
the directors of the Company who are not also officers of the Company for their
attendance at meetings of the Board of Directors.
3.4. Confidentiality.
---------------
The BWSF Observer, the SG Observer, the RRH Observer, the QuestMark
Observer, the GEPT Observer and the Founder Observers shall be bound, as
representatives of the Company, by all existing nondisclosure agreements, a list
of which is attached hereto as Schedule C and all future nondisclosure
----------
agreements entered into by the Company in good faith, provided that such
agreements are not entered into for the purpose of limiting the Investors in the
exercise of their rights granted pursuant to this Agreement, the SG Series A
Preferred Stock Purchase Agreement, the Series B Preferred Stock Purchase
Agreement, the Series C Preferred Stock Purchase Agreement or the BWSF Stock
Purchase Agreement.
4. ADDITIONAL UNDERTAKINGS AND COVENANTS.
The Investors and the Company hereby covenant and agree with each other as
follows:
4.1. Maintenance of Corporate Status.
-------------------------------
The Company shall maintain, and shall cause its Subsidiaries to maintain,
their corporate existence in good standing in the jurisdictions where they are
respectively incorporated and shall remain, and cause its Subsidiaries to
remain, qualified as foreign corporations in good standing in all
9
other jurisdictions where they are respectively required to be qualified, except
where any failure so to maintain or remain will not have a Material Adverse
Effect.
4.2. Accounts and Records.
--------------------
The Company shall establish and maintain, and shall cause its Subsidiaries
to establish and maintain, true, correct and complete financial accounts and
records in conformity with generally accepted accounting principles furnished
pursuant to Section 6 of this Agreement.
---------
4.3. Litigation.
----------
The Company shall promptly notify the Investors in writing of all
litigation and all proceedings before any governmental or regulatory body to
which it or any of its Subsidiaries is a party as a result of which (i) damages
are sought against the Company or any of its Subsidiaries at law of $50,000 or
more, or (ii) an equitable remedy is sought against the Company or any of its
Subsidiaries, the impact of which would have a Material Adverse Effect.
4.4. Compliance with Law: No Infringement.
------------------------------------
The Company shall comply, and shall cause its Subsidiaries to comply, with
the provisions of all applicable Laws, except where the failure to comply will
not have a Material Adverse Effect, and shall not engage in any activities which
to the Company's knowledge, after the exercise of reasonable diligence, infringe
upon the Intellectual Property rights of any other person, corporation,
partnership or other entity.
4.5. Disclosure of Information by the Investors.
------------------------------------------
The Company consents to disclosure by the Investors of any information with
respect to the Company and any of its Subsidiaries which is not Confidential
Information or a trade secret of the Company or any of its Subsidiaries,
including financial information, to the members, partners, advisory board
members, stockholders or advisers of the Investors, and to any permitted
transferee of the Restricted Securities; provided that the Investors use
reasonable efforts to avoid disclosure of financial or other information (other
than in a summary format) to anyone other than such persons, including but not
limited to Competitors or customers of the Company.
4.6. Maintenance of Properties.
-------------------------
(a) The Company shall maintain, and shall cause its Subsidiaries to
maintain, all real and tangible personal property owned and used in the business
of the Company in good condition excepting ordinary wear and tear, and shall
make all such repairs, renewals, replacements, additions, and improvements to
such properties as are necessary or appropriate and in the case of leased
property, shall maintain such property in substantial compliance with the terms
of the lease.
(b) The Company shall use its reasonable best efforts to maintain, and
shall cause its Subsidiaries to use their reasonable best efforts to maintain,
all Intellectual Property owned or held by the Company or its Subsidiaries or
thereafter owned or held by the Company or its Subsidiaries in full force and
effect in the United States of America and in such other countries in which the
Company or its Subsidiaries shall engage in business, the maintenance of which
is necessary for the
10
Company to conduct its Business or the failure to maintain which would have a
Material Adverse Effect, including but not limited to: (i) the execution by
future employees, officers, and independent contractors materially engaged in
providing services related to the Business of the Company or its Subsidiaries of
confidentiality and nondisclosure agreements or acknowledgments, and
Intellectual Property assignment agreements; (ii) the prosecution of
applications to register or perfect rights or claims in and to any such
Intellectual Property; (iii) the registration of license agreements; (iv) the
timely filing of affidavits of use, renewals or other maintenance filings; and
(v) the timely payment of filing and maintenance fees. The Company shall use its
reasonable best efforts not, and shall use its reasonable best efforts to cause
its Subsidiaries not, to: (i) abandon or let lapse or pass to the public domain
any of the Intellectual Property owned or held by the Company or any Subsidiary
or hereafter owned or held by the Company or its Subsidiaries except where such
abandonment or lapsing or passing to public domain would not have a Material
Adverse Effect; (ii) encumber or license others to use the Intellectual Property
rights owned by it except in the ordinary course of business or except where
such encumbrance or license would not have a Material Adverse Effect; and (iii)
fail to maintain the confidentiality and trade secret status of all Intellectual
Property except to the extent that such disclosure is necessary to obtain
copyright or trademark or patents or except under the protection of a
confidentiality and nondisclosure agreement in the exercise of prudent business
judgment.
4.7. Insurance.
---------
The Company shall maintain, and shall cause its Subsidiaries to maintain,
with financially sound and reputable insurers having a Best rating of "B" or
better, insurance with respect to its assets, properties and business against
such casualties and contingencies and in such types and amounts as would be
deemed necessary or advisable by prudent persons engaged in similar businesses.
A schedule of insurance specifying risks covered, the amounts of coverage, the
names of insurers, and the costs of such insurance is set forth in Section 5.22
------------
of the Schedule of Exceptions of the Series C Preferred Stock Purchase
Agreement. Upon the request of the Investors from time to time, the Company
shall promptly supplement such schedule to reflect any change in insurance
coverage.
4.8. Change in Operations.
--------------------
Except as authorized by the Board of Directors, the Company shall not, and
shall not permit the Subsidiaries to, substantially change the type of
operations currently contemplated by the Company and its Subsidiaries or enter
into, by internal expansion or by any form of acquisition, any line of business
not directly related to the type of operations currently contemplated by the
Company and its Subsidiaries.
4.9. Defaults and Breaches Under Other Contracts.
-------------------------------------------
With respect to each contract listed in Section 5.17 of the Schedule of
------------
Exceptions of the Series C Preferred Stock Purchase Agreement, the Company shall
not permit to exist any material default or breach by the Company or any of its
Subsidiaries of any contract provision beyond any reasonable period of grace
provided for in such contract if such breach or default would, insofar as can be
reasonably foreseen, result in an amount in excess of $25,000 becoming due and
payable by
11
the Company prior to its stated maturity; provided, however, that the existence
of any default or breach may be contested in good faith by the Company by
appropriate proceedings.
4.10. Investments.
-----------
The Company shall not, and shall not permit its Subsidiaries to, invest in
or otherwise divert any of the funds of the Company or any Subsidiary to any
individual, corporation, or business entity, except in the ordinary course of
business and consistent with prudent business practices which includes, but is
not limited to, investment in joint venture opportunities and the creation and
maintenance of new subsidiaries; provided, however, that any investment in joint
venture opportunities or creation of new subsidiaries shall be subject to prior
approval of the Board of Directors.
4.11. Liens and Encumbrances.
----------------------
Except as approved by the Board of Directors, the Company shall not create,
incur, assume, or suffer to exist, and shall cause its Subsidiaries not to
create, incur, assume or suffer to exist, any material encumbrance of any kind
on the Company's or its Subsidiaries' assets or properties now owned or
hereafter acquired, other than those encumbrances incurred in the ordinary
course of business or otherwise identified in this Agreement or the Stock
Purchase Agreements; provided further that under no circumstances shall the
Board of Directors, without the approval of the Preferred Directors approve a
material encumbrance of any kind on the Company's or its Subsidiaries' assets or
properties now owned or hereafter acquired, unless such encumbrance secures a
loan from an unrelated third party institutional lender, which loan shall not
have any attached warrants or other equity features.
4.12. Guarantees and Loans.
--------------------
Except as approved by the Board of Directors, the Company shall not, and
shall cause its Subsidiaries not to, guarantee or endorse an obligation of, or
make an advance or loan to, any individual, corporation, or other business
entity, or assume any contingent liability, except for (a) the endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business, (b) the advancement of travel expenses and relocation costs, (c)
intercompany transactions (e.g., loans to Subsidiaries) or (d) payments or other
obligations in the ordinary course of business and consistent with prudent
business practices, which shall include, but is not limited to obligations of
joint ventures in which the Company has an interest.
4.13. Affiliate Transactions.
----------------------
Except as unanimously approved by the Board of Directors, the Company shall
not, and shall cause its Subsidiaries not to, purchase, rent or lease property
or assets from, or sell, transfer or dispose of any assets, including, but not
limited to, Intellectual Property, or properties (regardless of whether in the
ordinary course of business or not) to any Affiliate of the Company (other than
any Subsidiary) or any current or former officer, director, or employee of the
Company or any Subsidiary, or any Affiliate of any of them.
4.14. SBA Forms.
---------
12
The Company will, upon the request of SG, complete, execute (where
applicable) and deliver to SG, SBA Forms 480, 652 and 1031.
5. REGISTRATION UNDER SECURITIES ACT, ETC.
5.1. Registration on Request.
-----------------------
(a) Request.
Upon the written request of the holders of at least the applicable
minimum aggregate amount of Registrable Securities as provided in Section
-------
5.1(e), requesting that the Company effect the registration under the Securities
------
Act of the public offering and sale thereof, on Form S-l or any similar long-
form registration (a "Long-form Registration") or on Form S-3 or any successor
form thereto (a "Short-form Registration"), if available, the Company shall
promptly give written notice of such requested registration to all holders of
record of Registrable Securities and shall promptly use its reasonable best
efforts to effect, as promptly as practicable, such registration under the
Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such holders, and
(ii) all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request
given to the Company within thirty (30) days after the giving of
such written notice by the Company, all to the extent requisite
to permit the disposition of the Registrable Securities so to be
registered.
All registrations requested pursuant to this Section 5.1(a) are referred to
--------------
herein as "Demand Registrations".
(b) Long-form Registrations.
The holders of Registrable Securities are entitled to request two (2)
Long-form Registrations, which shall be an underwritten registration. A
requested Short-form Registration on Form S-3 or any successor form in
compliance with Section 5.l(c) shall not be deemed to be a registration
-------------
statement requested pursuant to this Section 5.1(b), but shall otherwise be
--------------
treated as a registration initiated pursuant to and shall, except as otherwise
expressly provided in Section 5.1(c), be subject to this Section 5.1.
-------------- -----------
(c) Short-form Registrations.
In addition to the Long-form Registrations provided for in Section
-------
5.1(b), the holders of Registrable Securities are entitled to request four (4)
------
(or, if the holders of Registrable Securities, after all such four (4)
registrations have been requested and effected, have not yet requested a Long-
form Registration, five (5) Short-form Registrations) if and at such times as
the Company qualifies for the use of such form. Demand Registrations shall be
Short-form Registrations whenever the Company is eligible to use any applicable
short form for registrations. The Company shall use its
13
reasonable best efforts to be and remain eligible to use Short-form
Registrations for registered sales of Registrable Securities.
(d) Registration of Other Securities.
Subject to the provisions of Section 5.2, whenever the Company shall
-----------
effect a registration pursuant to this Section 5.1 in connection with an
-----------
offering by one or more holders of Registrable Securities, no securities other
than Registrable Securities shall be included among the securities covered by
such registration, unless (i) in the case of an underwritten offering, the
managing underwriter of such offering shall have advised such holders of such
Registrable Securities in writing that the inclusion of such other securities
would not adversely affect such offering, or (ii) such holders of such
Registrable Securities shall have consented in writing to the inclusion of such
other securities. Any persons other than holders of Registrable Securities who
participate in Demand Registrations which are not at the Company's expense shall
pay their proportionate shares of the Registration Expenses, as provided in
Section 5.7.
-----------
(e) Restrictions on Demand Registrations.
The Company shall not be obligated to effect any Demand Registration
(i) within one hundred eighty (180) days after the effective date of a previous
registration, if the gross proceeds to the Company from such previous
registration were at least twenty million dollars ($20,000,000), (ii) within
ninety (90) days after the effective date of any prior Demand Registration or
Piggyback Registration (as hereinafter defined), or (iii) prior to the earlier
of (x) December 31, 2001, and (y) one hundred eighty (180) days after the
effective date of the Company's initial public offering of Common Stock pursuant
to an effective registration statement under the Securities Act. The Company
shall not be obligated to effect any Demand Registration unless the holders of a
majority of the shares of Common Stock issuable upon conversion of Registrable
Securities request such Demand Registration. The Company may delay the filing
or effectiveness of any Demand Registration statement for a period of not less
than ninety (90) days and not to exceed one hundred eighty (180) days after the
date of a request for registration pursuant to this Section 5.1 if (i) at the
-----------
time of such request the Company is engaged, or has fixed plans to engage within
sixty (60) days after the time of such request, in a firm commitment
underwritten public offering in which the holders of Registrable Securities may
include Registrable Securities pursuant to Section 5.2 below, or (ii) the
-----------
Company shall furnish to the holders requesting registration pursuant to this
Section 5.1 a certificate signed by the President of the Company stating that,
-----------
in the good faith judgment of the Board of Directors of the Company, and with
the concurrence of the investment banking firm acting as financial advisor to
the Company, if any, that is currently being retained by the Company, it would
be materially detrimental to the Company and the Stockholders for such
registration statement to be filed and it is therefore essential to defer the
filing of such registration statement (provided that the Company may not utilize
the rights set forth in this Section 5.1(e) more than once in any twelve (12)
-------------
month period and in the event the Company does utilize such right, the holders
of Registrable Securities requesting such registration shall be entitled to
withdraw such request and, if such request is withdrawn, such registration shall
not count as a registration pursuant to this Section 5.1 and the holders of
-----------
Registrable Securities requesting such registration shall have no obligation to
reimburse the Company for the Company's expenses in connection with such
rescinded registration). The Company shall not be required to effect any Demand
Registration after the seventh (7th) anniversary of the Initial Closing Date
under the Stock Purchase Agreement and the Demand Registration rights
14
of any holder of Registrable Securities shall terminate at such time as such
holder is able to sell all of such Registrable Securities under Rule 144 within
a period of ninety (90) days.
(f) Restrictions on Long-form Registrations.
The Company shall not be obligated to effect any Long-form
Registration under the Securities Act except in accordance with the following
provisions:
(A) the Company shall not be obligated to file (1) more than two
(2) Long-form Registrations initiated pursuant to Section 5.1(b) which becomes
--------------
effective, or (2) any registration statement during any period in which any
other registration statement pursuant to which Primary Shares are to be or were
sold has been filed and not withdrawn or has been declared effective within the
prior one hundred eighty (180) days; and
(B) the Company shall not be obligated to effect any Long-form
Registration if the anticipated gross proceeds are expected to be less than
twenty-five million dollars ($25,000,000).
(g). Restrictions on Short-form Registrations.
The Company shall not be obligated to effect any Short-form
Registration under the Securities Act if the anticipated gross proceeds with
respect to the Registrable Securities included in such registration statement
are expected to be less than five million dollars ($5,000,000).
(h) Other Registration Rights.
Except as provided in this Agreement, the Company shall not grant to
any Persons the right to request the Company to register any equity securities
of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, without the written consent of the holders of a
majority of the shares of Common Stock into which the shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are
convertible and the shares of Common Stock held by the Founder, acting together
as a single class; provided that the Company may grant rights to other Persons
so long as such rights are junior to the rights of the holders of Registrable
Securities.
(i) Effective Registration Statement; Rescission.
A Demand Registration pursuant to this Section 5.1 shall not be deemed
-----------
to have been effected (i) unless a registration statement with respect thereto
has become effective, (ii) if after it has become effective, such registration
is precluded from effectiveness by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason, or (iii) if the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied, other than by reason of some act or omission by
the holders requesting such registration. A requested Demand Registration under
this Section 5.1 may be rescinded by written notice to the Company by the
-----------
holders requesting such registration and such rescinded registration shall not
count as a registration statement initiated pursuant to this Section 5.1, but if
-----------
no event has occurred following the exercise of such Demand Registration right
(and prior to such written notice of rescission) which may cause a material
15
reduction in the Fair Market Value of the Company and the demanded registration
was a Long-form Registration, then in order for such rescinded registration not
to count as a registration statement initiated pursuant to this Section 5.1 the
-----------
holders who requested such rescission must reimburse the Company for fifty
percent (50%) of all Registration Expenses incurred by the Company in connection
with such withdrawn Demand Registration. Notwithstanding the foregoing, any
requested Demand Registration under this Section 5.1 which is rescinded after
-----------
the receipt by the Company of comments from the Commission on the applicable
registration statement shall count as a registration statement initiated
pursuant to this Section 5.1.
-----------
(j) Priority in Demand Registrations.
With respect to any registration pursuant to this Section 5.1, the
-----------
Company may include in such registration any Primary Shares and/or Other Shares;
provided that, in the event the registration is for an underwritten public
--------
offering, if the underwriter (or the managing underwriter on behalf of the
underwriters, if there are more than a single underwriter) advises the Company
that the inclusion of all Registrable Securities, Primary Shares and/or Other
Shares proposed to be included in such registration would interfere with the
successful marketing (including pricing) of all such securities, then the
numbers of Registrable Securities, Primary Shares and/or Other Shares proposed
to be included in such registration shall be included in the following order:
(i) first, Registrable Securities, other than Founder Shares,
-----
and securities having registration rights on a par with Registrable Securities;
(ii) second, securities with registration rights junior to
------
Registrable Securities but senior to Founder Shares, Primary Shares and Other
Shares;
(iii) third, Founder Shares;
-----
(iv) fourth, other Common Stock; and
------
(v) fifth, Primary Shares.
-----
(k) Additional Demand Registration.
Notwithstanding any other provision of this Section 5.1, at any time
-----------
or from time to time, if the Company effects the registration of less than all
of the Registrable Securities requested to be registered pursuant to Section
-------
5.1(a), the parties entitled to request a registration under Section 5.1(a)
------ -------------
shall be entitled to request an additional registration pursuant to Section
-------
5.1(a). Any such registration which shall be requested, shall be effected in
------
all other respects in accordance with the terms of Section 5.1(a), and the
--------------
Company shall pay all customary Registration Expenses in connection with any
such registration subject to the limitations set forth in Section 5.1(g) and
-------------
Section 5.7. This provision shall apply successively in the event that any
-----------
holder of Registrable Securities shall continue to hold Registrable Securities
solely as a result of Section 5.1(h).
--------------
5.2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback.
16
If the Company at any time proposes to register any of its securities
under the Securities Act (other than registrations solely for the registration
of shares in connection with an employee benefit plan or a merger or share
exchange or consolidation and other than pursuant to Section 5.1), whether or
------------
not for sale for its own account, and the registration form to be used may be
used for the registration of Registrable Securities (a "Piggyback
Registration"), the Company will at each such time give prompt written notice to
all holders of Registrable Securities and all other holders of Common Stock not
constituting Registrable Securities of its intention to do so and of such
holders' rights under this Section 5.2. Upon the written request of any such
-----------
holder made within thirty (30) days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holder), the Company shall use its reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities and/or other
Common Stock which the Company has been so requested to register by the holders
thereof on the same terms and conditions as the securities otherwise being sold
in such registration, to the extent requisite to permit the disposition of the
Registrable Securities and/or other Common Stock so to be registered. No
registration effected under this Section 5.2 shall relieve the Company of its
-----------
obligation to effect any registration upon request under Section 5.1 above. The
-----------
Piggyback Registration rights under this Section 5.2 shall terminate at such
-----------
time as the Demand Registration rights shall terminate under Section 5.1 above.
-----------
(b) Priority in Piggyback Registrations.
If (i) a registration pursuant to this Section 5.2 involves an
-----------
underwritten offering of the securities so being registered, whether or not for
sale for the account of the Company, to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized standing under
underwriting terms appropriate for such a transaction, (ii) the Registrable
Securities and/or other Common Stock so requested to be registered for sale for
the account of holders of Registrable Securities and/or other Common Stock are
not also to be included in such underwritten offering (because the Company has
not been requested so to include such Registrable Securities and/or other Common
Stock pursuant to Section 5.4(b)) and (iii) the managing underwriter of such
-------------
underwritten offering shall inform the Company in writing of its belief that the
number of securities requested to be included in such registration exceeds the
number which can be sold in (or during the time of) such offering without
adversely affecting the price to be received thereon, then the Company will
include in such registration, to the extent of the number which the Company is
so advised can be sold in (or during the time of) such offering, first, all
securities proposed by the Company to be sold for its own account or all
securities (other than Registrable Securities) proposed by the Company to be
sold for the account of the holders thereof who requested and were entitled to
have the Company use its reasonable best efforts to effect such registration, as
the case may be; second, such Registrable Securities other than Founder Shares,
and any securities having registration rights on a par with the Registrable
Securities requested to be included in such registration pro rata on the basis
--------
of the number of shares of such Registrable Securities and other securities on a
par with the Registrable Securities so proposed to be sold and so requested to
be included; third, Founder Shares requested to be included in such
registration; fourth, other Common Stock requested to be included in such
registration; and, fifth, Primary Shares, if the Company has not undertaken such
registration to sell securities for its own account in the first instance.
(c) Other Registrations.
17
If the Company has previously filed a registration statement with
respect to Registrable Securities pursuant to Section 5.1 or with respect to
-----------
Registrable Securities and/or other Common Stock pursuant to this Section 5.2
-----------
and, if such previous registration has not been withdrawn or abandoned, the
Company will not file or cause to be effected any other registration of any of
its equity securities or securities convertible into or exercisable for its
equity securities under the Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders of
such securities, until a period of at least three (3) months has elapsed from
the effective date of such previous registration.
5.3. Registration Procedures.
-----------------------
If and whenever the Company is required to use its reasonable best
efforts to effect the registration of any Registrable Securities and/or other
Common Stock under the Securities Act as provided in Sections 5.1 or Section
------------
5.2, the Company shall as expeditiously as possible:
---
(a) prepare and file with the Commission the requisite registration
statement to effect such registration and thereafter use its best efforts to
cause such registration statement to become and remain effective for a period of
one hundred eighty (180) days or until all of such Registrable Securities and/
or other Common Stock have been disposed of (if earlier), provided that the
Company may discontinue any registration of its securities which are not
Registrable Securities at any time prior to the effective date of the
registration statement relating thereto;
(b) furnish, at least five (5) business days before filing a
registration statement that registers such Registrable Securities and/or other
Common Stock, a prospectus relating thereto or any amendments or supplements
relating to such a registration statement or prospectus, to one counsel selected
by a majority of the Substantial Holders who hold Registrable Securities to be
included in such registration (the "Investors' Counsel"), copies of all such
documents proposed to be filed, and shall not file any thereof to which such
counsel shall have reasonably objected on the grounds that such registration
statement, prospectus, amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or the rules or regulations
thereunder (it being understood that such five (5) business day period need not
apply to successive drafts of the same document proposed to be filed so long as
such successive drafts are supplied to such counsel in advance of the proposed
filing by a period of time that is customary and reasonable under the
circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than one hundred eighty (180) days and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(d) notify in writing the Investors' Counsel promptly of the receipt
by the Company of any notification with respect to (i) any comments by the
Commission with respect to such registration statement or prospectus or any
amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with
18
respect thereto, (ii) the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or prospectus or any
amendment or supplement thereto or the initiation or threatening of any
proceeding for that purpose, and (iii) the suspension of the qualification of
such Registrable Securities and/ or other Common Stock for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purposes;
(e) furnish to each seller of Registrable Securities and/or other
common Stock covered by such registration statement such number of conformed
copies of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents as such seller may reasonably request;
(f) use its reasonable best efforts to register or qualify all
Registrable Securities and/or other Common Stock covered by such registration
statement under such other securities or blue sky laws of such United States
jurisdictions as each seller thereof shall reasonably request, to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and to take any other action which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by such seller, except
that the Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this Section 5.3(f) be obligated to be so qualified,
--------------
to subject itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction;
(g) use its reasonable best efforts to cause all Registrable
Securities and/or other Common Stock covered by such registration statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of the
Company to enable the seller or sellers thereof to consummate the disposition of
such Registrable Securities and/or other Common Stock;
(h) furnish to each seller of Registrable Securities and/or other
Common Stock a signed counterpart, addressed to such seller (and the
underwriters, if any) of:
(i) an opinion of counsel for the Company dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance to such
seller, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the independent certified public accountants who have
certified the Company's financial statements included in such registration
statement, covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
the accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
19
offerings of securities and, in the case of the accountants' letter, such other
financial matters, and, in the case of the legal opinion, such other legal
matters, as such seller or such holder (or the underwriters, if any) may
reasonably request;
(i) notify each seller of Registrable Securities and/or other Common
Stock covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon 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 any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, and at
the request of any such seller promptly prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(j) make available for inspection by any seller of such Registrable
Securities and/or other Common Stock, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information (together with the Records, the "Information") reasonably
requested by any such Inspector in connection with such registration statement.
Any of the Information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, shall
not be disclosed by the Inspectors unless (i) the disclosure of such Information
is necessary to avoid or correct a misstatement or omission in the registration
statement, (ii) the release of such Information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or (iii) such
Information has been made generally available to the public. The seller of
Registrable Securities and/or other Common Stock agrees that he, she or it will,
upon learning that disclosure of such Information is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent disclosure of the
Information deemed confidential;
(k) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than eighteen
(18) months, beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement shall satisfy the
provisions of the Securities Act;
(l) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities and/or other Common Stock covered by such
registration statement from and after a date not later than the effective date
of such registration statement;
20
(m) list such Registrable Securities and/or other Common Stock on any
national securities exchange or Nasdaq on which any shares of Common Stock are
listed or quoted or, if shares of Common Stock are not listed on a national
securities exchange or quoted on Nasdaq, use its reasonable best efforts to
qualify such Registrable Securities and/or other Common Stock for inclusion on
such national securities exchange as the holders of a majority of such
Registrable Securities shall request;
(n) issue to any underwriter to which any seller of Registrable
Securities and/or other Common Stock may sell shares in such offering
certificates evidencing such Registrable Securities and/or other Common Stock;
and
(o) use its reasonable best efforts to take all other steps necessary
to effect the registration of such Registrable Securities and/or other Common
Stock contemplated hereby.
The Company may require each seller of Registrable Securities and/or other
Common Stock as to which any registration is being effected to furnish to the
Company such information regarding such seller and the distribution of such
securities as the Company may from time to time reasonably request in writing.
In connection with the preparation and filing of each registration statement
under the Securities Act pursuant to this Agreement, the Company shall give the
holder of Registrable Securities and/or other Common Stock covered by such
registration statement a reasonable opportunity to review and comment upon such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, all prior to
finalization.
Each holder of Registrable Securities and/or other Common Stock covered by
any such registration statement agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 5.3(i),
-------------
such holder will forthwith discontinue such holder's disposition of Registrable
Securities and/or other Common Stock pursuant to such registration statement
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 5.3(i) and, if so directed by the Company,
-------------
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
included in such registration statement which is current at the time of receipt
of such notice.
5.4. Selection of Underwriters.
-------------------------
(a) Demand Registrations.
In connection with any Demand Registration by the holders of
Registrable Securities pursuant to Section 5.1(a), the Company shall select the
--------------
investment banker(s) and manager(s) which will administer the offering (the
"Underwriters"). The Company shall enter into an underwriting agreement with
the Underwriters, such agreement to be reasonably satisfactory in substance and
form to the holders of Registrable Securities being underwritten who are
Substantial Holders, and the Underwriters and to contain such representations
and warranties by the Company and such other terms as are generally prevailing
in agreements of such type, including, without limitation, indemnities to the
effect and to the extent provided in Section 5.6. Any Substantial Holder who
-----------
holds Registrable Securities to be distributed by such underwriters may, at his,
her or its option,
21
participate in the selection of the Underwriters and the negotiation of the
underwriting agreement, provided that, in the case of an underwritten Short-form
Registration, the holders of Registrable Securities requested to be included in
such registration may, at their option, through a single representative selected
by the holders of a majority of such Registrable Securities on a fully-converted
basis, participate in the selection of the Underwriters and the negotiation of
the underwriting agreement. The holders of Registrable Securities and/ or other
Common Stock being underwritten shall be parties to such underwriting agreement
and may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such Underwriters shall also be made to and for the benefit of
such holders and that any or all of the conditions precedent to the obligations
of such Underwriters under such underwriting agreement be conditions precedent
to the obligations of such holders. Any such holder shall not be required to
make any representations or warranties to or agreements with the Company or the
Underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and/or other Common Stock and such
holder's intended method of distribution and any other representation required
by law.
(b) Piggyback Registrations.
If the Company at any time proposes to register any of its securities
under the Securities Act as contemplated by Section 5.2 and such securities are
-----------
to be distributed by or through one or more underwriters, the Company shall, if
requested by any holder of Registrable Securities as provided in Section 5.2 and
-----------
subject to the provisions of Section 5.2(b), use its reasonable best efforts to
--------------
arrange for such underwriters to include all the Registrable Securities and/or
other Common Stock requested to be offered and sold by such holder among the
securities to be distributed by such underwriters. The holders of Registrable
Securities and/or other common Stock to be distributed by such underwriters
shall be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders and that any or all of the conditions precedent
to the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders to the extent that such
representations, warranties, other agreements, and conditions precedent bear on
such holders' liability or otherwise impose obligations on such holders. Any
such holder of shall not be required to make any representations or warranties
to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities and/or other common Stock and such holder's intended
method of distribution and any other representation required by law.
(c) Holdback Agreements.
(i) If, in connection with the initial public offering of shares
of Common Stock of the Company registered pursuant to the Securities Act, the
managing underwriter for such registration shall so request, the holders of
Registrable Securities shall not sell, make any short sale of, grant any option
for the purchase of, or otherwise dispose of any Restricted Securities (other
than those shares of Common Stock included in such registration) without the
prior written consent of the Company for a period designated by the Company in
writing to the holders of Registrable Securities, which period shall begin not
more than fourteen (14) days prior to the effectiveness of the registration
statement pursuant to which such public offering shall be made and shall not
last more
22
than one hundred eighty (180) days (or such other period as the officers and
directors of the Company and all holders of greater than three percent (3%) of
all Registrable Securities mutually agree) after the effective date of such
registration statement.
(ii) The Company agrees (x) not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the fourteen (14)
days prior to and the one hundred twenty (120) days after any underwritten
Demand Registration or any underwritten Piggyback Registration pursuant to
Section 5.1 or 5.2 has become effective, except as part of such underwritten
------------------
registration and except pursuant to registrations on Form X-0, X-0 or any
successor or similar forms thereto, and (y) to use its best efforts to cause
each holder of at least five percent (5%) (on a fully-diluted basis) of its
equity securities or any securities convertible into or exchangeable or
exercisable for any such securities, in each case purchased from the Company at
any time after the date of this Agreement (other than in a public offering), to
agree not to effect any such public sale or distribution of such securities,
during such period, unless the managing underwriter otherwise agrees to such
sale or distribution.
5.5. Preparation: Reasonable Investigation.
-------------------------------------
In connection with the preparation and filing of each registration
statement under the Securities Act pursuant to this Agreement, the Company shall
give the Substantial Holders who hold Registrable Securities registered under
such registration statement, their underwriters, if any, and the Investor
Counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and shall give
each of them such access to its books and records and such opportunities to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such holder's and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
5.6. Indemnification.
---------------
(a) Indemnification by the Company.
In the event of any registration of any securities of the Company
under the Securities Act, the Company shall indemnify and hold harmless each
holder of Registrable Securities and/or other Common Stock selling such
Registrable Securities and/or other common Stock, its officers and directors,
each underwriter, broker or any other person acting on behalf of such seller and
each other person, if any, who controls any of the foregoing persons within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which such seller or any such director or
officer or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Securities and/or other Common
Stock or arise out of or are based upon the omission or alleged
23
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or, with respect to any
prospectus, necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or any violation by the
Company of the Securities Act or state securities or blue sky laws applicable to
the Company and relating to action or inaction required of the Company in
connection with such registration or qualification under such state securities
or blue sky laws; and the Company will reimburse such seller and each such
director, officer, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such seller,
specifically stating that it is for use in the preparation thereof and, provided
further, that the Company shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities and/or other
Common Stock or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities and/or the Common Stock to such Person if such statement or omission
was corrected in such final prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
seller or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such seller.
(b) Indemnification by the Sellers.
The Company may require, as a condition to including any
Registrable Securities and/or other common Stock in any registration statement
filed pursuant to Sections 5.1 or 5.2, that the Company shall have received an
-------------------
undertaking satisfactory to it from the prospective sellers of such securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 5.6(a)) the Company, each director of the Company, each officer
-------------
of the Company and each other Person, if any, who controls the Company within
the meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such sellers specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement, provided that the
obligation to indemnify shall be several, and not joint and several, among such
sellers of and the liability of each such seller shall be in proportion to and
limited to the net amount received by such seller from the sale of Registrable
Securities and/or other Common Stock pursuant to such registration statement.
Such indemnity shall remain in full force and effect, regardless of any
24
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of such securities by such
seller.
(c) Notices of Claims, etc.
Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding subdivisions of this Section 5.6, such indemnified party will, if a
-----------
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 5.6, except to the extent that the indemnifying
-----------
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and alter
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable for
any settlement made by the indemnified party without its consent (which consent
will not be unreasonably withheld) or for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
(d) Other Indemnification.
Indemnification similar to that specified in the preceding
subdivisions of this Section 5.6 (with appropriate modifications) shall be given
-----------
by the Company and each seller of Registrable Securities and/or other Common
Stock with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act.
(e) Indemnification Payments.
The indemnification required by this Section 5.6 shall be made by periodic
-----------
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred.
(f) Contribution.
If the indemnification provided for in this Agreement shall for
any reason be unavailable or insufficient to an indemnified party under Sections
--------
5.6(a), 5.6(b) or 5.6(d) hereof in respect of any loss, claim, damage or
-----------------------
liability, or any action in respect thereof, or referred to therein, then each
indemnifying party shall, in lieu of indemnifying such party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, in such proportion as
shall be appropriate to reflect (i) the relative benefits received
25
by the Company, on the one hand, and the holders of the Registrable Securities
and/or other Common Stock included in the offering, on the other hand, from the
offering of the Registrable Securities and/or other Common Stock and (ii) the
relative fault of the Company, on the one hand, and the holders of the
Registrable Securities and/or other Common Stock included in the offering, on
the other hand, with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits received by
the Company, on the one hand and the holders of the Registrable Securities
and/or other Common Stock, on the other hand, with respect to such offering
shall be deemed to be in the same proportion as the sum of the total
Subscription Price paid to the Company in respect of the Registrable Securities
and/or other Common Stock plus the total net proceeds from the offering of the
securities (before deducting expenses) received by the Company bears to the
amount by which the total net proceeds from the offering of the securities
(before deducting expenses) received by the holders of the Registrable
Securities and/or other common Stock with respect to such offering exceeds the
Subscription Price paid to the Company in respect of the Registrable Securities
and/or other common Stock and in each case the net proceeds received from such
offering shall be determined as set forth on the table of the cover page of the
prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or the holders of the Registrable Securities and/or
other Common Stock, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the holders of the Registrable Securities and/or other
Common Stock agree that it would not be just and equitable if contribution
pursuant to this Section 5.6 were to be determined by pro rata allocation or by
----------- --- ----
any other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to in this Section 5.6 shall be deemed to include, for
-----------
purposes of this Section 5.6, any legal or other expenses reasonably incurred by
-----------
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
-------------
contribution from any person who was not guilty of such fraudulent
misrepresentation.
5.7. Registration Expenses.
---------------------
(a) Subject to the limitations in Section 5.1 and this Section 5.7,
----------- -----------
all customary expenses incident to the Company's performance of or compliance
with the registration provisions of this Agreement, including without limitation
all registration, filing and NASD fees, all fees and expenses of compliance with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for the Company and its independent certified public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, the reasonable fees and disbursements,
including without limitation, out-of-pocket expenses of any single counsel and
accountants retained by the holder or holders of a majority of the Registrable
Securities being registered and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (including fees paid to a
"qualified independent underwriter" required by the rules of the NASD in
connection with a distribution, but excluding discounts and commissions and
transfer taxes, if any) and other Persons retained by the Company (all such
26
expenses being herein called "Registration Expenses"), shall be borne by the
Company and, in addition, the Company shall pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance, and the
expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed or
other expenses for the preparation of financial statements or other data
normally prepared by the Company in the ordinary course of its business or which
the Company would have incurred in any event.
(b) In connection with each Demand Registration, the Company shall
reimburse the holders of Registrable Securities covered by such registration for
the reasonable fees and disbursements of one counsel chosen by the holders of a
majority of such Registrable Securities, subject to the dollar limitation set
forth in Section 5.7(d); provided that, in connection with a Short-form
-------------
Registration, the Company shall not be obligated to pay expenses for such Demand
Registration in excess of thirty thousand dollars ($30,000).
(c) To the extent Registration Expenses are not required to be paid
by the Company, each holder of securities other than the Company included in any
registration hereunder shall pay those Registration Expenses allocable to the
registration of such holder's securities so included, and any Registration
Expenses not so allocable shall be borne by all sellers of securities included
in such registration in proportion to the aggregate selling price of the
securities to be so registered.
(d) In addition to any expenses payable or reimbursable by the
Company pursuant to this Section 5.7, the Company shall pay all reasonable fees
-----------
and disbursements, including out-of-pocket expenses, arising in connection with
this Agreement or otherwise in connection with the ownership of Registrable
Securities and/or other Common Stock included in such registration, of any
single counsel retained by the holder or holders of a majority of such
Registrable Securities, up to a maximum of fifteen thousand dollars ($15,000)
per twelve (12) month period.
5.8. Adjustments Effecting Registrable Securities.
--------------------------------------------
The Company shall not effect or permit to occur any combination or
subdivision of shares which would adversely affect the ability of the holders of
Registrable Securities and/or other Common Stock to include such Registrable
Securities and/or other Common Stock in any registration of its securities
contemplated by this Section 5 or the marketability of such Registrable
---------
Securities and/or other Common Stock under any such registration.
5.9. Participation in Underwritten Registrations.
-------------------------------------------
No Person may participate in any registration hereunder which is
underwritten unless such Person (a) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements .
5.10. Rule 144.
--------
27
If the Company shall have filed a registration statement pursuant to
the requirements of Section 12 of the Exchange Act or a registration statement
pursuant to the requirements of the Securities Act, the Company shall file the
reports required to be filed by it under the Securities Act and the Exchange Act
(or, if the Company is not required to file such reports, shall, upon the
request of any holder of Registrable Securities and/or other Common Stock, make
publicly available other information) and shall take such further action as any
holder of Registrable Securities and/or other Common Stock may reasonably
request, all to the extent required from time to time to enable such holder to
sell such holder's securities without registration under the Securities Act but
within the limitations of the exemptions provided by (a) Rule 144, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company shall deliver to
such holder a written statement as to whether it has complied with such
requirements.
6. BASIC FINANCIAL INFORMATION OF THE COMPANY
Notwithstanding any provision of the Bylaws of the Company regarding
delivery or non-delivery of financial information to shareholders of the
Company, until the Company becomes a reporting company under the Exchange Act,
the Company shall, (x) allow Substantial Holders to visit the Company and
inspect any of the property of the Company, to examine the books and records of
the Company, and to make copies, notes and abstracts therefrom; provided that
such visits are at reasonable times, are by appointment with management (which
shall not be unreasonably withheld, conditioned or delayed), and the Substantial
Holders agree to maintain the confidentiality of the Company's information which
is identified to them as confidential during such visits; provided, however,
that each Substantial Holder may disclose such confidential information to its
senior officers and managers, provided that such senior officers and managers
agree to be bound by the same confidentiality restrictions as apply hereunder,
(y) from time to time upon request of any authorized officer or representative
of the Substantial Holders, furnish to any such authorized officer or
representative such information regarding the business, operations, assets,
liabilities, condition (financial or otherwise) or prospects (including
materials furnished to the directors of the Company at or in connection with
board meetings) as such officer or representative may reasonably request and (z)
furnish the following reports to each Substantial Holder:
6.1. Annual Report.
-------------
The Company will use its reasonable best efforts to deliver within
ninety (90) days after the end of each fiscal year, a consolidated balance sheet
of the Company and its Subsidiaries, if any, as of the end of such fiscal year,
and a consolidated statement of income and a consolidated statement of cash
flows of the Company and its Subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in comparative form the figures for the previous fiscal year, all in
reasonable detail and audited by independent certified public accountants of
recognized national standing selected by the Company.
6.2. Quarterly Report.
----------------
Within forty-five (45) days after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, a
consolidated balance sheet of the Company and its Subsidiaries, if any, as of
the end of each such quarterly period, and a consolidated statement of income
and a consolidated statement of cash flows for such period and for the current
fiscal year
28
to date, prepared in accordance with generally accepted accounting principles,
with the exception that no notes need be attached to such statements and interim
and year-end adjustments may not have been made. Said financial statements shall
be signed by an officer of the Company who shall state that such financial
statements are in accordance with generally accepted accounting principles, with
the exception that no notes need be attached to such statements and interim and
year-end adjustments may not have been made.
6.3. Monthly Report.
--------------
Within thirty (30) days after the end of each month, a consolidated
balance sheet of the Company and its Subsidiaries, if any, as of the end of each
such month, and a consolidated statement of income and a consolidated statement
of cash flows for such month and for the current fiscal year to date, prepared
in accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and interim and year-end
adjustments may not have been made. Said financial statements shall be signed
by an officer of the Company who shall state that such financial statements are
in accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and interim and year-end
adjustments may not have been made.
6.4. Business Plan and Operating Budget.
----------------------------------
At least thirty (30) days prior to the commencement of each fiscal
year, a business plan and annual operating budget in detail for such fiscal
year, monthly operating expenses and profit and loss projections, quarterly cash
flow projections and a capital expenditure budget for the fiscal year.
29
7. TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES ACT
7.1. Transferability.
---------------
As set forth below in this Section 7.1 and subject to the restrictions
-----------
set forth in the last sentence of this Section 7.1 and in Section 10, any
----------- ----------
stockholder may transfer his, her or its securities ("Limited Securities");
provided, however, that the Company is given written notice at the time of such
transfer, stating the names and addresses of the transferee and identifying the
Limited Securities to be transferred, and such transferee expressly agrees in
writing with the Company to be bound by and to comply with all applicable
provisions of this Agreement, whereupon such person or entity shall have the
benefit of, and shall be subject to the restrictions contained in, this
Agreement with respect to such Limited Securities. Notwithstanding the
provisions of this Section 7.1, Section 10 and the Stockholders Agreement, a
----------- ----------
stockholder may transfer on any public securities market or in any public
offering pursuant to Section 5, without being required to comply with the
---------
provisions of this Section 7.1, Section 10 or the Stockholders Agreement, any of
----------- ----------
its Common Stock and following such transfer the Common Stock so transferred
shall be free of the requirements of this Section 7, Section 10 and the
--------- ----------
Stockholders Agreement; provided that nothing in this sentence shall be deemed
to increase the number of Demand Registrations to which the holders of
Registrable Securities are entitled pursuant to Section 5.1.
-----------
7.2. Restrictive Legend.
------------------
(a) Each certificate representing (i) the shares of Series C Preferred
Stock, (ii) the shares of Series B Preferred Stock, (iii) the shares of Series A
Preferred Stock, or (iv) any securities (other than Common Stock) issued in
respect of the shares of Series C Preferred Stock, Series B Preferred Stock,
Series A Preferred Stock or the Common Stock issuable upon conversion thereof,
shall (unless otherwise permitted by the provisions of Section 7.1 or Section
----------- -------
7.3) be stamped or otherwise imprinted with a legend substantially in the
----
following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SHARES MAY
NOT BE OFFERED, PLEDGED, SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM AS DETERMINED IN
ACCORDANCE WITH THE THIRD AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT DATED AUGUST 13, 1999 RESTRICTING THEIR TRANSFER.
COPIES OF THE THIRD AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE CORPORATION'S PRINCIPAL PLACE OF BUSINESS.
FURTHER, THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF EACH CLASS OF STOCK OF THE CORPORATION AND THE
VARIATIONS IN THE RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED
FOR
30
EACH SERIES OF STOCK (AND THE AUTHORITY OF THE BOARD OF
DIRECTORS OF THE CORPORATION TO DETERMINE VARIATIONS FOR FUTURE
SERIES), ARE SET FORTH IN THE CORPORATION'S CERTIFICATE OF
INCORPORATION, AS AMENDED, A COPY OF WHICH WILL BE FURNISHED BY
THE CORPORATION TO THE HOLDER OF THIS CERTIFICATE, WITHOUT
CHARGE, UPON THE WRITTEN REQUEST OF SUCH HOLDER.
(b) Each certificate representing shares of Common Stock issued (i)
upon conversion of the shares of Series C Preferred Stock, (ii) upon conversion
of the shares of Series B Preferred Stock, (iii) upon conversion of the shares
of Series A Preferred Stock, or (iv) in respect of the shares of Series C
Preferred Stock, Series B Preferred Stock, Series A Preferred Stock or the
Common Stock issuable upon conversion thereof shall (unless otherwise permitted
by the provisions of Section 7.1 or Section 7.3) be stamped or otherwise
----------- -----------
imprinted with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SHARES MAY
NOT BE OFFERED, PLEDGED, SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM AS DETERMINED IN
ACCORDANCE WITH THE THIRD AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT DATED AUGUST 13, 1999, AND, IF APPLICABLE, THE AMENDED
AND RESTATED STOCKHOLDERS' AND VOTING AGREEMENT DATED AS OF
JANUARY 6, 1997, AND AMENDED AS OF APRIL 3, 1997, RESTRICTING
THEIR TRANSFER. COPIES OF THE THIRD AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT AND THE AMENDED AND RESTATED
STOCKHOLDERS' AND VOTING AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF THE CORPORATION AT THE CORPORATION'S
PRINCIPAL PLACE OF BUSINESS. FURTHER, THE DESIGNATIONS, RELATIVE
RIGHTS, PREFERENCES AND LIMITATIONS OF EACH CLASS OF STOCK OF THE
CORPORATION AND THE VARIATIONS IN THE RIGHTS, PREFERENCES AND
LIMITATIONS DETERMINED FOR EACH SERIES OF STOCK (AND THE
AUTHORITY OF THE BOARD OF DIRECTORS OF THE CORPORATION TO
DETERMINE VARIATIONS FOR FUTURE SERIES), ARE SET FORTH IN THE
CORPORATION'S CERTIFICATE OF INCORPORATION, AS AMENDED, A COPY OF
WHICH WILL BE FURNISHED BY THE CORPORATION TO THE HOLDER OF THIS
CERTIFICATE, WITHOUT CHARGE, UPON THE WRITTEN REQUEST OF SUCH
HOLDER.
7.3. Notice of Proposed Transfers.
----------------------------
31
The holder of each certificate representing Limited Securities by
acceptance thereof agrees in writing to comply with the provisions of this
Section 7.3. Prior to any proposed transfer of any Limited Securities, unless
-----------
there is in effect a registration statement under the Securities Act covering
the proposed transfer, the holder thereof shall give written notice to the
Company of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer (including
the names of the transferees, if known) in sufficient detail, and shall be
accompanied (except in the following cases, with respect to which the
requirements set forth in the balance of this sentence need not be complied
with: if the transferee agrees in writing to be bound by the then applicable
provisions of this Section 7; transactions in compliance with Rule 144 so long
---------
as the Company is furnished with satisfactory evidence of compliance with such
Rule; transactions involving the distribution of Limited Securities in
accordance with the beneficial ownership thereof by any Investor to any
Authorized Transferee, so long as such transaction does not involve the
disposition of such Limited Securities for value; and transactions involving the
transfer of Limited Securities by any holder who is an individual to any
Authorized Transferee) by either (i) an unqualified written opinion of legal
counsel who shall be reasonably satisfactory to the Company addressed to the
Company and reasonably satisfactory in form and substance to the Company's
counsel, to the effect that the proposed transfer of the Limited Securities may
be effected without registration under the Securities Act, or (ii) a "no action"
letter from the Commission to the effect that the distribution of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
holder of such Limited Securities shall be entitled to transfer such Limited
Securities in accordance with the terms of the notice delivered by the holder to
the Company. Each certificate evidencing the Limited Securities transferred as
above provided shall bear the appropriate restrictive legend set forth in
Section 7.2, except that such certificate shall not bear such restrictive legend
-----------
if in the reasonable opinion of counsel for the Company such legend is not
required in order to establish compliance with any provisions of the Securities
Act.
32
8. PREEMPTIVE RIGHTS.
8.1. Pro Rata Right.
--------------
The Company hereby grants to each holder of Preferred Stock, for so
long as such holder is a Substantial Holder, and hereby also grants to the
Founder, so long as he is a Substantial Holder, the right of first refusal to
purchase, pro rata, all New Securities (as defined in Section 8.2) which the
-------- -----------
Company may, from time to time, propose to sell and/or issue. An Investor's or
the Founder's pro rata share, for purposes of this right of first refusal, is a
--- ----
ratio (A) the numerator of which is the aggregate of the number of shares of
Common Stock (i) issued or issuable upon conversion of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock held by such Investor, or
the Founder, as the case may be, on the date of the Company's written notice
pursuant to Section 8.3; or (ii) otherwise held by such Investor or the Founder,
-----------
as the case may be, on the date of the Company's written notice pursuant to
Section 8.3, and (B) the denominator of which is the total number of shares of
-----------
Common Stock outstanding immediately prior to the issuance of the New
Securities, assuming the conversion or exercise of all then outstanding
convertible securities, options, warrants or similar rights to acquire Common
Stock (including without limitation to Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock) and assuming the issuance of all
then unissued permitted employee shares (consistent with Article FOURTH 4.5(b)
of the Restated Certificate of Incorporation of the Company, as in effect on the
date hereof) ("Pro Rata Share"). For purposes of this Section 8.1, the number
-----------
of shares of Series C Preferred Stock, Series B Preferred Stock, Series A
Preferred Stock and Common Stock held by such Investor or the Founder, as the
case may be, shall be determined as of the date of the Company's written notice
pursuant to Section 8.3. Each Investor or the Founder, as the case may be,
-----------
shall have a right of over-allotment such that if any other Investor or the
Founder rights with respect to New Securities fails to exercise its or his right
hereunder to purchase its or his Pro Rata Share of New Securities, the other
such holders may purchase each non-purchasing holder's portion on a pro rata
--- ----
basis within fifteen (15) days from the date such non-purchasing holder fails to
exercise its right. This pre-emptive right shall be subject to all of the
provisions of this Section 8.
---------
8.2. Definition of "New Securities".
------------------------------
"New Securities" shall mean any capital stock (including without
limitation Common Stock, Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock) of the Company whether or not now authorized or not,
and rights, options or warrants to purchase capital stock, and securities of any
type whatsoever that are, or may become, convertible into capital stock;
provided that the term "New Securities" does not include (i) Common Stock or
other securities issuable upon conversion of or with respect to any Series C
Preferred Stock, (ii) Common Stock or other securities issuable upon conversion
of or with respect to any Series B Preferred Stock, (iii) Common Stock or other
securities issuable upon conversion of or with respect to any Series A Preferred
Stock; (iv) Common Stock or other securities issued, or issuable, pursuant to
the 1997 Employee, Director and Consultant Stock Option Plan, if any (consistent
with Article FOURTH 4.2(d)(D)(iii) of the Restated Certificate of
Incorporation), and the specific options listed in Section 5.4 of the Schedule
of Exceptions of the Series C Preferred Stock Purchase Agreement; (v) warrants
issued to Deutsche Bank Securities, Inc. by the Company in connection with the
offering of Series C Preferred Stock, (vi) securities covered by a registration
statement filed under the Securities Act and offered to the public pursuant to a
firm underwriting; (vii) securities issued pursuant to the
33
acquisition of another corporation by the Company by merger or purchase of all
or substantially all the assets of such corporation; (viii) any borrowings,
direct or indirect, from financial institutions or other persons by the Company,
whether or not presently authorized, including any type of loan or payment
evidenced by any type of debt instrument, provided such borrowings do not have
any equity features, including warrants, options or other rights to purchase
capital stock, and are not convertible into capital stock of the Company; or
(ix) securities issued pursuant to any stock dividend, stock split, combination
or other reclassification by the Company of any of its capital stock.
8.3. Required Notice.
---------------
In the event that the Company proposes to undertake an issuance or
sale of New Securities, it shall give each Investor and the Founder written
notice of its intention, describing the type of New Securities, the price and
the general terms upon which the Company proposes to issue or sell the same.
Each Investor and the Founder shall have thirty (30) days from the date of
receipt of any such notice to agree to purchase such Investor's or the Founder's
Pro Rata Share of such New Securities for the price and upon the general terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased.
8.4. Company's Right to Sell.
-----------------------
In the event an Investor or the Founder fails within the thirty (30)
day period set forth above to agree to purchase its or his full Pro Rata Share
to which such Investor or the Founder is entitled pursuant to this Section 8
---------
entitled to purchase, and after the expiration of the fifteen (15) day period
for the exercise of the over-allotment rights under Section 8.1, if applicable,
-----------
the Company shall have ninety (90) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within ninety (90) days after the date of said agreement) to
sell all such New Securities respecting which such Investor's or the Founder's
pre-emptive right to purchase was not exercised, at a price and upon general
terms no more favorable to the purchasers thereof than specified in the
Company's notice delivered to each Investor or the Founder pursuant to Section
-------
8.3. In the event the Company has not sold, or entered into an agreement to
---
sell, all such New Securities within such ninety (90) day period (or sold and/or
issued all such New Securities in accordance with the foregoing within ninety
(90) days after the date of such agreement), the Company shall not thereafter
issue or sell any New Securities without first offering such New Securities to
each Investor and the Founder in the manner provided above.
8.5. Expiration of Right.
-------------------
The pre-emptive right granted under Section 8.1 shall expire upon the
-----------
closing of an underwritten public offering of the Company's Common Stock
pursuant to an effective registration statement under the Securities Act, or
under other applicable securities regulations covering the offer and sale of
capital stock of the Company, in which (a) the Company is valued on a pre-money
basis at greater than $100,000,000, (b) the gross proceeds received by the
Company exceed $25,000,000, and (c) the Company uses a nationally recognized
underwriter to underwrite the offering on a firm-commitment basis (a "Qualified
Public Offering").
9. RIGHT OF CO-SALE.
34
Except for an Underwritten Offering or Authorized Transfers of any
securities of the Company ("Securities"), for so long as an Investor is a
Substantial Holder, if any holder of Common Stock other than an Investor and
other than Bakersville Holdings Ltd. intends to sell any Securities in an amount
which, together with all other Securities previously sold by such holder exceeds
ten percent (10%) of the largest number of shares of Common Stock, on a fully-
converted basis, inclusive of Securities purchasable by such holder upon the
exercise of then-exercisable options, held by such holder and its Authorized
Transferees and Affiliates in the aggregate at any time (adjusted for stock
splits, reverse stock splits, recapitalizations and the like) ("Excess
Securities"), such holder of Common Stock shall deliver a written notice (the
"Co-sale Notice") to such Investor, at least thirty (30) days prior to the
proposed sale, which notice shall specify the terms and conditions upon which
the proposed sale of Excess Securities is intended to be consummated. Such
Investor shall have the right to participate in such sale of Excess Securities
in the manner hereinafter set forth. To exercise such right, an Investor shall
give written notice (the "Participation Notice") of such election to such holder
of Common Stock within twenty (20) days after receipt of the Co-sale Notice.
Thereupon, such Investor shall have the right to sell Securities to the proposed
purchaser upon the same terms and conditions specified in the Co-sale Notice
(which terms and conditions shall include the types and class of Securities then
held by such holder of Common Stock and proposed to be sold), pro rata with its
--- ----
then current holding of Common Stock, on a fully-converted basis, vis-a-vis the
holding of Common Stock, on a fully-converted basis, inclusive of Securities
purchasable upon the exercise of then-exercisable options, of the selling holder
immediately prior to such sale. The amount of Excess Securities to be sold by
such holder of Common Stock shall be reduced by the number of Securities such
Investor elects to sell. If such Investor exercises such right, it shall bear
its pro rata portion of expenses incident to such sale. Failure by such
--- ----
Investor to exercise such right within such twenty (20) day period shall be
deemed a declination of any right to participate in such sale, provided that
such sale is completed within ninety (90) days after expiration of such twenty
(20) day period at a price and on terms and conditions substantially similar to
those set forth in the Co-sale Notice. Failure to meet the conditions in the
proviso in the immediately preceding sentence shall require a new Co-sale Notice
and a new opportunity to exercise the rights of co-sale with respect to such
sale. The co-sale rights granted under this Section 9 shall expire upon
---------
consummation of a Qualified Public Offering.
10. RIGHTS OF SUBSEQUENT REFUSAL.
10.1. Investors and Founder.
---------------------
(a) Except for an Underwritten Offering or an Authorized Transfer of
any Securities of the Company, for so long as an Investor or the Founder, as the
case may be, is a Substantial Holder, if any holder of Common Stock who or which
is a Schedule I or Schedule O Stockholder (as defined in the Stockholders
Agreement) but not an Investor (as defined therein, including but not limited to
Bakersville Holdings Ltd. and Blue Water Capital Fund I, L.L.C.), intends to
sell any Securities, such holder of Common Stock shall deliver a written notice
(the "Subsequent Refusal Notice") to such Investor or the Founder, as the case
may be, at least twenty-one (21) days prior to the proposed sale, which such
notice shall specify the terms and conditions upon which the proposed sale is
intended to be consummated (which terms and conditions shall be the same as
those offered to the Company and Company stockholders pursuant to their rights
of first and second refusal under Sections 2.3 and 2.4 of the Stockholders
------------ ---
Agreement). If the Company and the Company stockholders who have such rights of
first and second refusal have declined to exercise
35
such rights with respect to such Securities so intended to be sold, such
Investor or the Founder, as the case may be, shall have the right to purchase,
pro rata, the Securities so proposed to be sold on the same terms and conditions
--- ----
as specified in the Subsequent Refusal Notice in the manner hereinafter set
forth. An Investor's or the Founder's pro rata share, for purposes of this right
--- ----
of subsequent refusal, is a ratio (A) the numerator of which shall be the
aggregate of the number of shares of Common Stock (i) issued or issuable upon
conversion of the Series C Preferred Stock, Series B Preferred Stock and/or
Series A Preferred Stock held by such Investor on the date of the Subsequent
Refusal Notice, or (ii) otherwise held by such Investor or the Founder, as the
case may be, on the date of the Subsequent Refusal Notice, inclusive of
Securities purchasable upon the exercise of then-exercisable options, and (B)
the denominator of which is the total number of shares of Common Stock
outstanding assuming the conversion or exercise of all then outstanding
convertible securities (including the Series C Preferred Stock, Series B
Preferred Stock and Series A Preferred Stock), options, warrants or similar
rights to acquire Common Stock and assuming the issuance of all then unissued
permitted employee shares consistent with Article FOURTH 4.2(d)(D)(iii) of the
Restated Certificate of Incorporation, in effect on the date hereof. An Investor
or the Founder, as the case may be, shall give written notice (the "Purchase
Notice") of the exercise of such right to such holder of Common Stock proposing
to sell Securities within the later of (i) twenty (20) days after delivery of
the Subsequent Refusal Notice and (ii) five (5) days after receipt by the
Investor or the Founder, as the case may be, of written notice of the Company's
and Company stockholders' decisions not to exercise their rights of first and
second refusal under the Stockholders Agreement. The Purchase Notice shall
indicate the number of Securities proposed to be sold which such Investor or the
Founder is willing to purchase. If any Investor or the Founder exercises the
right provided for in this Section 10.1, such Investor or the Founder shall
------------
within thirty (30) days after exercising such option deliver to the holder of
Common Stock selling Securities a check in the amount of the purchase price for
the Securities to be sold, and such selling holder shall simultaneously deliver
the certificate or other instrument evidencing the Securities being sold. Each
Investor and the Founder shall have a right of over-allotment such that, if any
Investor or the Founder fails to exercise its or his right hereunder to purchase
its or his pro rata share of the Securities being sold, the other Investors and
--- ----
the Founder, as the case may be, may purchase each non-purchasing Investor's or
the non-purchasing Founder's pro rata share within fifteen (15) days after the
--- ----
date such non-purchasing Investor or the non-purchasing Founder fails to
exercise its or his right. If the selling holder has not received a Purchase
Notice from an Investor or the Founder within the later of (i) twenty (20) days
after delivery of the Subsequent Refusal Notice and (ii) five (5) days after
receipt by the Investor or the Founder of written notice of the Company's and
the Company stockholders' decisions not to exercise their rights of first and
second refusal, the right of such Investor or the Founder to purchase Securities
provided for in this Section 10.1 shall expire unexercised, and the selling
------------
holder shall thereafter have sixty (60) days to close the proposed sale
specified in the Subsequent Refusal Notice; provided that the right provided for
in this Section 10.1 shall again be applicable following such sixty (60) day
------------
period. Each party to a purchase and sale pursuant to the exercise of a right
pursuant to this Section 10.1 shall bear such party's own expenses. The rights
------------
of subsequent refusal granted under this Section 10.1 shall expire upon
------------
consummation of a Qualified Public Offering. The Company and the other parties
hereto who are parties to the Stockholders Agreement hereby agree that the
Stockholders Agreement shall not be terminated or amended in any manner or to
any extent adverse to the interests of the Investors without the prior written
consent of the Investors. The parties hereto who are holders of Common Stock,
other than the Founder, acknowledge that they are parties to the Stockholders
Agreement as Schedule I Stockholders or Schedule O
36
Stockholders, that they are bound thereby and that, to their best knowledge,
there are no other Schedule I Stockholders or Schedule O Stockholders. The
Company represents and warrants that there are no Schedule I Stockholders or
Schedule O Stockholders who are not parties hereto.
10.2. Company and Other Stockholders.
------------------------------
(a) Except for an Underwritten Offering or an Authorized Transfer of
any Securities of the Company or as set forth in the penultimate sentence of
Section 7.1, if any Investor intends to transfer any shares of Series C
-----------
Preferred Stock, Series B Preferred Stock, Series A Preferred Stock or Common
Stock (the "Selling Investor") to a Competitor (as determined in accordance with
Section 10.2(d) below), the Selling Investor shall, prior to any such transfer,
--------------
deliver a written notice (the "Selling Investor's Notice") of such intention to
the Company, which notice shall specify the terms and conditions upon which the
proposed sale is intended to be consummated. The Company shall have the right
to purchase the shares of Series C Preferred Stock, Series B Preferred Stock,
Series A Preferred Stock or Common Stock proposed to be sold (the "Offered
Shares") on the same terms and conditions as specified in the Selling Investor's
Notice, other than the Purchase Price for the Company's right, as defined below,
shall be determined in accordance with Section 10.2(c)). The Company shall give
---------------
written notice (the "Company's Notice") of its election to exercise such rights
to the Selling Investor within twenty (20) days after receipt of the Selling
Investor's Notice by the Company. The Company may only elect to purchase the
amount of the Offered Shares as a whole, but not in part. If the Company
exercises the right provided for in this Section 10.2, the Company shall pay
------------
within forty (40) days after exercising such right deliver to the Selling
Investor, in immediately available funds, the amount of the Purchase Price, and
the Selling Investor shall simultaneously deliver the certificate or other
instrument evidencing the Offered Shares. Failure by the Company to exercise
such right within such twenty (20) day period shall be deemed a declination of
its right to purchase the Offered Shares.
(b) If the Company does not exercise or gives written notice to the
Selling Investor within the time period provided in Section 10.2(a) of its
--------------
intention not to exercise its right to purchase, then the other Investors and
the holders of Common Stock (if and to the extent any of them exercises such
right to purchase, hereinafter referred to as the "Buying Stockholders") shall
have the option to purchase, pro rata among them based on their relative
--- ----
holdings of Common Stock on a fully-converted and fully-diluted basis, the
Offered Shares on the same terms and conditions as designated in the Selling
Investor's Notice, other than the purchase price (with the Purchase Price for
their exercise of such right to be determined in accordance with Section
-------
10.2(c). Within thirty (30) days after the Company's failure to exercise its
right within the time period required therefor or delivery of the Company's
written notice of its intention not to exercise its right within the time period
provided in Section 10.2(a), the Buying Stockholders shall deliver to the
---------------
Selling Investor a written notice (the "Buying Stockholders' Notice") of such
election. The Buying Stockholders may only elect to purchase the amount of the
Offered Shares as a whole but not in part. If the Buying Stockholders exercise
the right provided for in this Section 10.2(b), the Buying Stockholders shall
---------------
pay within thirty (30) days after exercising such right deliver to the Selling
Investor, in immediately available funds, the amount of the Purchase Price, and
the Selling Investor shall simultaneously deliver the certificate or other
instrument evidencing the Offered Shares. Each Buying Stockholder shall have a
right of over-allotment such that, if any such other Investor or holder of
Common Stock fails to exercise, his, her or its right hereunder to purchase his,
her or its pro rata share of the Offered Shares, the others of them may purchase
--- ----
each such non-purchasing Investor's or holder's share, pro
---
37
rata among them based on their relative holdings of Common Stock on a
----
fully-converted and fully-diluted basis, within fifteen (15) days after the date
such non-purchasing Investor or holder fails to exercise his, her or its right.
Failure by any such Investor or other holder to exercise his, her or its right
within the twenty (20) day period shall be deemed a declination of any right to
participate in such purchase; and, if there are no Buying Stockholders, the
Selling Investor shall thereafter have sixty (60) days to close the proposed
sale specified in the Selling Investor's Notice; provided that the rights
provided for in this Section 10.2 shall again be applicable following such sixty
------------
(60) day period. Each party to a purchase and sale pursuant to this Section 10.2
------------
shall bear such party's own expenses. The rights granted under this Section 10.2
------------
shall expire upon consummation of a Qualified Public Offering.
(c) The purchase price for the Offered Shares (the "Purchase Price")
shall be the lesser of (i) the price offered to the Selling Investor by the
proposed buyer or (ii) the Fair Market Value of the Company as determined by a
single appraiser selected from a nationally-recognized independent public
accounting firm (an "Appraiser"), if the Selling Investor and the Company are
able to agree upon a single Appraiser, or, if not, the average of the two
closest Fair Market Values as calculated by three Appraisers, one of whom shall
be appointed by the Selling Investor, one by the Company, and one by the two so-
appointed Appraisers. Each Appraiser shall determine the Fair Market Value of
the Company within thirty (30) days after appointment of the Appraiser or; if
there are three, the appointment of Appraisers, and report its determination to
the Company and the Selling Investor in writing. All reasonable and customary
costs and expenses of the Appraisers shall be paid by the Company.
(d) In the event that a holder of Registrable Securities intends to
transfer its or his shares of Series C Preferred Stock, Series B Preferred
Stock, Series A Preferred Stock or Common Stock to a Proposed Transferee other
than as set forth in the penultimate sentence of Section 7.1, such holder shall
-----------
notify the Company in writing of such holder's intention to so transfer such
shares of Series C Preferred Stock, Series B Preferred Stock, Series A Preferred
Stock or Common Stock. Within twenty (20) days after receipt of such written
notice (which twenty (20) day period shall run concurrently with the twenty (20)
day period set forth in Section 10.2(a)), the Board of Directors shall determine
---------------
in good faith in its commercially reasonable judgment whether or not the
Proposed Transferee is a Competitor, and the Company shall convey such
determination to the holder in writing. Failure by the Company to make and
convey any determination as to whether or not the Proposed Transferee is a
Competitor within such twenty (20) day period shall be deemed a denial by the
Company to exercise its right provided for in Section 10.2(a). Notwithstanding
---------------
the foregoing, no transfer on a public securities market or in any public
offering pursuant to Section 5 shall be subject to the provisions of this
---------
Section 10.2(d).
---------------
11. INDEMNIFICATION; REMEDIES.
11.1. Agreement of the Company to Indemnify.
-------------------------------------
Subject to the conditions and provisions of this Section 11, and
----------
except to the extent of gross negligence or willful misconduct on the part of
any of the Investor Indemnified Persons, the Company hereby agrees to indemnify,
defend and hold harmless the Investor Indemnified Persons from and against and
in any respect of all Claims asserted against, imposed upon or incurred by the
Investor Indemnified Persons (whether such Claims are by, against or relate to
the Company, its
38
Subsidiaries or any other party, including a governmental entity), directly or
indirectly, by reason of or resulting from any material misrepresentation or
material breach of any covenant, or material noncompliance with any conditions
or other agreements, given or made by the Company in this Agreement or in any
document furnished by or on behalf of the Company pursuant to this Agreement.
11.2. Conditions of Indemnification.
-----------------------------
The obligations and liabilities of the Company hereunder with respect
to its indemnities pursuant to this Section 11.2, resulting from any Claim shall
------------
be subject to the following terms and conditions:
(a) The Investor Indemnified Persons shall give prompt written notice
to the Company of any Claim which is asserted against, imposed upon or incurred
by such indemnified party and which may give rise to liability of the Company
pursuant to this Section 11, stating (to the extent known or reasonably
----------
anticipated) the nature and basis of such Claim and the amount thereof.
(b) The Company shall be entitled to assume the defense with respect
to any such Claim, including the employment of counsel and the payment of
expenses in connection with such defense. Each Investor Indemnified Person
shall have the right to employ its own counsel at Company expense if (i) the
Company authorizes the employment of such counsel, (ii) the Company has failed
in its obligation to employ counsel to take charge of such defense, or (iii) in
the opinion of such Investor Indemnified Person's counsel, the use of joint
counsel presents a conflict of interest or prevents adequate representation of
the interests of both such Investor Indemnified Person and the Company.
11.3. Specific Performance.
--------------------
In addition to any other remedies which any party may have at law or
in equity, each party hereby acknowledges that the Restricted Securities and the
Company and the Subsidiaries are unique, and that the harm to the Investors or
the Company, as the case may be, resulting from breaches by the Company or any
Investor, as the case may be, of its obligations cannot be adequately
compensated by damages. Accordingly, each party (the "Performing Party") agrees
that each other party (the "Benefiting Party") shall have the right to have all
obligations, undertakings, agreements, covenants and other provisions of this
Agreement specifically performed by the Performing Party, and that the
Benefiting Party shall have the right to obtain an order or decree of such
specific performance in any of the courts of the United States of America or of
any state or other political subdivision thereof.
11.4. Remedies Cumulative.
-------------------
The remedies provided herein shall be cumulative and shall not
preclude the assertion by any party of any other rights or the seeking of any
other remedies against any other party, or his, her or its heirs, legatees,-
successors or assigns.
12. LIMITATION OF LIABILITY.
39
EXCEPT FOR THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INVESTOR, SUCH
INVESTOR SHALL NOT BE LIABLE FOR INDIRECT OR CONSEQUENTIAL, EXEMPLARY, PUNITIVE
OR SPECIAL DAMAGES (WHETHER IN CONTRACT OR IN TORT), EVEN IF SUCH INVESTOR HAD
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE. IN NO EVENT SHALL
ANY INVESTOR BE LIABLE FOR THE ACTUAL DAMAGES IN EXCESS OF SUCH INVESTOR'S
INVESTMENT UNDER ITS STOCK PURCHASE AGREEMENT OR AGREEMENTS PLUS ANY INCREASE IN
VALUE ON THE INVESTOR'S INVESTMENT AND ANY DIVIDENDS, STOCK DIVIDENDS, OR
SIMILAR ECONOMIC BENEFIT RECEIVED BY THE INVESTOR ON SUCH INVESTMENT AS A
STOCKHOLDER OF THE COMPANY (IF ANY) TO THE EXTENT THAT SERIES C PREFERRED STOCK,
SERIES B PREFERRED STOCK, SERIES A PREFERRED STOCK, COMMON STOCK INTO WHICH
SERIES C PREFERRED STOCK, SERIES B PREFERRED STOCK AND SERIES A PREFERRED STOCK
IS CONVERTIBLE, OR PROCEEDS FROM THE SALE OF SUCH SERIES C PREFERRED STOCK,
SERIES B PREFERRED STOCK, SERIES A PREFERRED STOCK OR COMMON STOCK, AS THE CASE
MAY BE, ARE IN SUCH INVESTOR'S POSSESSION AS OF THE TIME SUCH INVESTOR RECEIVES
WRITTEN NOTICE OF THE CLAIM.
13. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS.
This Agreement, the Stock Purchase Agreements and the Stockholders
Agreement contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior arrangements or understandings
with respect hereto. The terms and provisions of this Agreement may not be
modified or amended, except pursuant to a writing signed by the parties.
14. NOMINEES FOR BENEFICIAL OWNERS.
In the event that any Registrable Securities and/or other Common Stock are
held by a nominee for the beneficial owner thereof, the beneficial owner thereof
may, at its election, be treated as the holder of such Registrable Securities
and/or other Common Stock for purposes of any request or other action by any
holder or holders of Registrable Securities and/or other Common Stock pursuant
to this Agreement. If the beneficial owner of any Registrable Securities and/or
other Common Stock so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities and/or other Common Stock.
15. NOTICES.
All notices, demands, requests, or other communications which may be or are
required to be given, served, or sent by any party to any other party pursuant
to this Agreement shall be in writing and shall be hand delivered, sent by
nationally recognized overnight courier, sent by facsimile transmission, or
mailed by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(i) If to any holder of Registrable Securities and/or other Common Stock,
at the address that such holder shall have furnished to the Company in writing,
(ii) If to the Company:
40
OneSoft Corporation
0000 Xxxxxx Xxxxx Xxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn.: Xxxxx X. XxxXxxxxx, XX
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent or mailed, in the manner described above, shall be deemed given for all
purposes at such time as it is hand delivered to the addressee (with the return
receipt or the delivery receipt being deemed conclusive, but not exclusive,
evidence of such delivery); if sent by the courier, on next business day; if
made by facsimile transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise or; if so mailed, on the
fifth day after deposited in the U.S. mail.
16. ASSIGNMENT.
16.1. Assignment of Registration Rights.
---------------------------------
Except as set forth in Section 16.2, the rights of each Investor
------------
under this Agreement shall be assignable; provided, however, that the Company is
given written notice at the time of such assignment stating the name and address
of the assignee and identifying the securities with respect to which the rights
and benefits hereunder are being assigned and such assignee expressly agrees in
writing with the Company and the other holders of Registrable Securities to be
bound by and to comply with all applicable provisions of this Agreement,
whereupon such person or entity shall have the benefits of, and shall be subject
to the restrictions contained in, this Agreement with respect to such
securities. Any assignment pursuant to this Section 16.1 shall not relieve,
------------
release or otherwise discharge the holder effecting such assignment from its
obligations under this Agreement.
16.2. Assignment of Preemptive Rights, Rights of Subsequent Refusal and Co-
--------------------------------------------------------------------
Sale.
----
Notwithstanding Section 16.1 or any other provision hereof,
------------
(a) The preemptive rights, rights of subsequent refusal and right of
co-sale of the Investors set forth in Sections 8, 9 and 10 are nonassignable,
--------------------
except that (i) such rights are assignable by each Investor and the Founder to
any wholly-owned subsidiary or parent of the Assigning Investor, or to any
Affiliate in the case of the assigning Investor or Founder, (ii) such rights are
assignable between and among any of the Investors and the Founder, (iii) such
rights are assignable by any Investor to its partners, shareholders or members,
or the managing directors thereof, in connection with distributions of shares of
Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock
and/or Common Stock to such partners, shareholders or members, or the managing
directors thereof and (iv) such rights are assignable by any Investor or the
Founder to its or his Authorized Transferees other than those set forth above in
any of clauses (i), (ii) or (iii); provided that the Company is given written
notice at the time of such assignment, stating the name and address of the
assignee and identifying the securities with respect to which the rights and
benefits hereunder are being assigned and such assignee expressly agrees in
writing with the Company and the other holders of Registrable Securities to be
bound by and to comply with all applicable provisions of Sections 8, 9 and 10,
--------------------
whereupon such person or entity shall have the
41
benefits of, and shall be subject to the restrictions contained in Sections 8, 9
-------------
and 10 with respect to such securities. Any assignment pursuant to this Section
------ -------
16.2 shall not relieve, release or otherwise discharge the holder effecting such
----
assignment from its obligations under this Agreement.; and
(b) The Board of Directors nomination, separate class voting and
service rights set forth in Section 3 and the informational and the other rights
---------
set forth in Section 6 are nonassignable to a Competitor.
---------
16.3. Assignment of Rights by Company.
-------------------------------
The Company may not assign this Agreement in whole or in part to any
other person without the prior written consent of the other parties hereto.
17. CONVERSION OF STOCK AT SG'S OPTION.
Each share of Preferred Stock or Common Stock held by SG shall be
convertible, at the option of SG (exercised by written notice from SG to the
Company), at any time and from time to time, into or from a share of non-voting
preferred stock or non-voting common stock, respectively, which share shall have
the same rights, preferences and privileges as the applicable series of
Preferred Stock or Common Stock, as the case may be, except that such share
shall have no voting rights. The Company agrees, at the request of SG and to
take such action as is necessary, to create a class of preferred stock or common
stock as required to satisfy the Company's obligations under the preceding
sentence, and each Investor and the Founder hereby agrees to consent to such a
conversion.
18. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective permitted successors and
assigns, heirs and legal representatives and, in the case of Section 24, SGC
----------
and, in the case of Section 10, the Investor Indemnified Persons. In addition,
----------
and whether or not any express assignment shall have been made, the provisions
of this Agreement which are for the benefit of the parties hereto other than the
Company shall also be for the benefit of and enforceable by any subsequent
holder of any Registrable Securities and/or other Common Stock.
19. DESCRIPTIVE HEADING.
The descriptive headings of the several sections and paragraphs of this
Agreement are inserted for reference only and shall not limit or otherwise
affect the meaning hereof
20. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of Delaware
(but not including the choice of law rules thereof).
21. TERMINATION; RULE 144(K).
42
This Agreement shall terminate and be of no further force or effect when
there shall not be any Registrable Securities outstanding; provided that the
rights of the holders of Registrable Securities and obligations of the Company
under Section 5 hereof shall terminate and be of no further force and effect at
---------
such earlier time as to any holder of Registrable Securities as the provision of
Rule 144(k) are applicable to the Restricted Securities then held by such
holder.
22. SEVERABILITY.
If any part of any provision of this Agreement or any other agreement or
document given pursuant to or in connection with this Agreement shall be invalid
or unenforceable in any respect, such part shall be ineffective to the extent of
such invalidity or unenforceability only, without in any way affecting the
remaining parts of such provision or the remaining provisions of this Agreement.
23. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all such counterparts shall together constitute
one and the same instrument.
24. UNDERWRITING RIGHT OF FIRST OFFER.
24.1. Right of First Offer.
--------------------
The Company hereby grants to SGC the right of first offer to lead
underwrite any offering of Securities which the Company may, from time to time,
propose to sell and/or issue in an offering registered under the Securities Act
or offered pursuant to an exemption from registration under Rule 144A under the
Securities Act (collectively, an "Underwriting").
24.2. Right to Co-Manage.
------------------
In the event that the Company proposes to enter into an underwriting
agreement with a lead underwriter other than SGC pursuant to Section 24.1, the
-------------
Company shall deliver notice thereof and a copy of the proposed underwriting
agreement to SGC, and SGC shall have seven (7) business days thereafter to elect
by written notice to the Company to co-manage the Underwriting on terms and
conditions at least as favorable to SGC as the economic terms and conditions
offered to the lead underwriter.
24.3. Ownership.
---------
The Company shall only be obligated to comply with the terms of this
Section 24 if a majority of the outstanding voting securities of SGC is, at the
----------
time the Company is obligated to comply with this Section 24, owned, directly or
----------
indirectly, by SGC or its Affiliates.
[REST OF PAGE INTENTIONALLY LEFT BLANK.]
43
IN WITNESS WHEREOF, each of the undersigned has executed and delivered this
Agreement, or caused this Agreement to be duly executed and delivered on its
behalf, as of the date first above written.
ONESOFT CORPORATION
By: /s/ Xxxxx X. XxxXxxxxx, XX
---------------------------------------------
Name: Xxxxx X. XxxXxxxxx, XX
-------------------------------------------
Title: President
------------------------------------------
QUESTMARK PARTNERS, L.P.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
-------------------------------------------
Title: General Partner
------------------------------------------
GENERAL ELECTRIC PENSION TRUST
By: General Electric Investment Corporation,
its Investment Manager
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
-------------------------------------------
Title: Vice President
------------------------------------------
BT INVESTMENT PARTNERS, INC.
By: /s/ Xxxxx Xxxxxx
---------------------------------------------
Name: Xxxxx Xxxxxx
-------------------------------------------
Title: Managing Director
------------------------------------------
US DEVELOPMENT CAPITAL INVESTMENT COMPANY
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxx
-------------------------------------------
Title: Secretary
------------------------------------------
XXXXX CAPITAL PARTNERS
By: /s/ J. Xxxxxx Xxxxx, Xx.
---------------------------------------------
Name: J. Xxxxxx Xxxxx, Xx.
-------------------------------------------
Title: President
------------------------------------------
44
SGC PARTNERS II LLC
By: /s/ Xxxxxx Xxxx-Tipping
---------------------------------------
Name: Xxxxxx Xxxx-Tipping
-------------------------------------
Title: Vice President
------------------------------------
RADER REINFRANK HOLDINGS NO. 2
By: Rader Reinfrank Investors, L.P.
Its General Partner
By: Rader Reinfrank & Co., LLC
Its General Partner
By: /s/ Xxxxxxx Radar
--------------------------
Name: Xxxxxxx Radar
------------------------
Title:
-----------------------
XXXXXXX CAPITAL, LLC
By: /s/ Xxxxx X. Xxxxxx Xx.
---------------------------------------
Name: Xxxxx X. Xxxxxx Xx.
-------------------------------------
Title:
------------------------------------
USA FUND, LLP
By: /s/ Xxxx X. Xxxx
---------------------------------------
Name: Xxxx X. Xxxx
-------------------------------------
Title: President, World Total Return, Inc.
------------------------------------
(sole general partner)
/s/ Xxxxx Xxxx
------------------------------------------
Xxxxx Xxxx
/s/ Xxxxxx Xxxxxxx de Callejon
------------------------------------------
Xxxxxx Xxxxxxx de Callejon
/s/ Xxxxxx Xxxx
------------------------------------------
Xxxxxx Xxxx
45
/s/ Xxxxxxx Xxxxx
-----------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxx Xxxxxxx
-----------------------------------------
Xxxxx Xxxxxxx
RT PARTNERS, L.P.
By: /s/ Xxxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
------------------------------------
Title: Managing Director of the Gen. Ptr.
-----------------------------------
46
The undersigned Common Stockholders hereby agree to be bound by all
restrictions, terms and conditions applicable to them pursuant to Sections 5, 8
-------------
and 10 of this Agreement:
------
/s/ Xxxxx X. XxxXxxxxx, XX
----------------------------------- ----------------------------
Xxxxx X. XxxXxxxxx, XX Date
/s/ Xxxxxxx X. XxxXxxxxx
----------------------------------- ----------------------------
Xxxxxxx XxxXxxxxx Date
/s/ Xxxxxxxxx Xxxxxxx III 8/12/99
----------------------------------- ----------------------------
Xxxxxxxxx Xxxxxxx Date
BLUE WATER STRATEGIC FUND I, L.L.C.
By: Blue Water Capital, L.L.C.,
Managing Member
By: /s/ Xxxxx X. Xxxxxxx Xx. August 11, 1999
-------------------------------- ----------------------------
Name: Xxxxx X. Xxxxxxx Xx. Date
------------------------------
Title: Managing Director
-----------------------------
BAKERSVILLE HOLDINGS LTD.
By: /s/ Xxxxx X. Xxxxxxx 8/12/99
-------------------------------- ----------------------------
Date
/s/ Xxxxxx Xxxx
----------------------------------- ----------------------------
Xxxxxx Xxxx Date
/s/ Xxxxx Xxxx 8/12/99
----------------------------------- ----------------------------
Xxxxx Xxxx Date
/s/ Xxxxxxx X. Xxxxx 8/12/99
----------------------------------- ----------------------------
Xxxxxxx Xxxxx Date
/s/ Xxxxxxx Xxxxxxx
----------------------------------- ----------------------------
Xxxxxxx Xxxxxxx Date
/s/ A. Xxxxxxx Xxxxxxx August 13, 1999
----------------------------------- ----------------------------
A. Xxxxxxx Xxxxxxx Date
47
The undersigned Series A Preferred Stockholders hereby agree to be bound by
all restrictions, terms and conditions applicable to each of them under this
Agreement:
BLUE WATER STRATEGIC FUND I, L.L.C.
By: Blue Water Capital, L.L.C.,
Managing Member
By: /s/ Xxxxx X. Xxxxxxx Xx.
------------------------------------
Name: Xxxxx X. Xxxxxxx Xx.
----------------------------------
Title: Managing Director
---------------------------------
SGC PARTNERS II LLC
By: /s/ Xxxxxx Xxxx-Tipping
-----------------------------------
Name: Xxxxxx Xxxx-Tipping
----------------------------------
Title:
---------------------------------
48
The undersigned Series B Preferred Stockholders hereby agree to be bound by
all restrictions, terms and conditions applicable to each of them under this
Agreement:
SGC PARTNERS II LLC
By: /s/ Xxxxxx Xxxx-Tipping
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
RADER REINFRANK HOLDINGS NO. 2
By: Rader Reinfrank Investors, L.P.
Its General Partner
By: Rader Reinfrank & Co., LLC
Its General Partner
By: /s/ Xxxxxxx Radar
-----------------------
Name:
---------------------
Title:
--------------------
49
Exhibit A (as amended)
----------------------
Name and Address of Investor Number of Shares of Series C Aggregate Purchase Price
Preferred Stock Purchased
QuestMark Partners, L.P.
Xxxxx 000
Xxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000 1,517,451 $10,000,002.09
General Electric Pension Trust 758,725 4,999,997.75
BT Investment Partners, Inc. 379,370 2,500,048.30
US Development Capital Investment 227,700 1,500,543.00
Company
SGC Partners II LLC 379,363 2,500,002.17
Xxxxx Capital Partners 437,026 2,880,001.34
Rader Reinfrank Holdings No. 2 465,858 3,070,004.22
Xxxxx Xxxx 75,872 500,000.00
Xxxxxx Xxxxxxx de Callejon 2,276 14,998.84
Xxxxxx Xxxx 18,000 118,620.00
Xxxxxxx Xxxxx 18,000 118,620.00
Xxxxxxx Capital, LLC 15,175 100,003.25
Xxxxx Xxxxxxx 18,209 119,997.31
USA Fund, LLP 75,873 500,003.07
RT Partners, L.P. 75,873 500,003.07
Exhibit A (cont.)
-----------------
Name and Address of Additional Number of Shares of Series C Aggregate Purchase Price
Investor Preferred Stock Purchased
Xxxxxx Xxxxxx 75,873 $ 500,000.00
Xxxxxxxx Xxxxx 3,794 25,000.00
South Street LLC 37,936 249,998.24
Tennyson Private Placement Fund 182,094 1,199,999.46
ABS Employees Venture Fund 126,785 835,513.15
Exhibit B
---------
Series B Preferred Stockholders
SGC Partners II LLC
Rader Reinfrank Holdings No. 2
Series A Preferred Stockholders
Blue Water Strategic Fund I., L.L.C.
SGC Partners II LLC
Common Stockholders
Xxxxx X. XxxXxxxxx, XX
Xxxxxxx XxxXxxxxx
Xxxxxxxxx Xxxxxxx
Blue Water Strategic Fund, I, L.L.C.
Bakersville Holdings Ltd.
Xxxxxx Xxxx
Xxxxx Xxxx
Xxxxxxx Xxxxx
Xxxxxxx Xxxxxxx
A. Xxxxxxx Xxxxxxx
Xxxxxxx Xxxx (became common stockholder between Initial Closing and Additional
Closing)
Xxxxxxxxxx Xxxxxxxxx (became common stockholder between Initial Closing and
Additional Closing)
Exhibit C
---------
ADDITIONAL INVESTOR SIGNATURE PAGE TO THE
THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
----------------------------------------------------
By executing and delivering this Additional Investor Signature Page, the
undersigned agrees (i) that it is an Additional Investor as defined in the
Series C Convertible Preferred Stock Purchase Agreement among OneSoft
Corporation (the "Company") and the Investors (as defined therein) dated as of
August 13, 1999 and (ii) that it is a party as an Investor to the Third Amended
and Restated Investor Rights Agreement among the Company and the Investors (as
defined therein) dated as of August 13, 1999 and is bound by all the terms and
conditions thereof.
Dated: ________________ ____________________________
Print Name:
By: ________________________
Name:
Title:
Address: ___________________
____________________________
Exhibit D
---------
COUNTERPART SIGNATURE PAGE TO THE
THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
----------------------------------------------------
By executing and delivering this Counterpart Signature Page , the
undersigned agrees that it is a party as a Common Stockholder to the Third
Amended and Restated Investor Rights Agreement among OneSoft Corporation and the
Investors (as defined therein) dated as of August 13, 1999 and is bound by all
the terms and conditions thereof.
Dated: ________________ ____________________________
Print Name:
By: ________________________
Name:
Title:
Address: ___________________
____________________________
