Exhibit 10.5
INVESTORS RIGHTS AGREEMENT
This INVESTORS RIGHTS AGREEMENT (this "Agreement") is dated as of March
28, 2000 by and between RTS Wireless, Inc. a Delaware corporation (the
"Company"), (ii) the founders of the Company who are listed on Schedule A hereto
(each, a "Founder" and collectively, the "Founders"), and (iii) America Online,
Inc., a Delaware corporation (the "Investor"). The Founders and the Investor are
collectively referred to herein as the "Stockholders" and individually as a
"Stockholder". Certain terms used in this Agreement are defined in Exhibit A
hereto.
R E C I T A L S
A. The Investor has made an investment in the Company by acquiring 5,000
shares (the "Preferred Shares") of the Company's Series A Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock").
B. In connection with such purchase of the Preferred Shares, and to induce
the Investor to consummate such purchase of the Preferred Shares, the Founders
and the Company have agreed to enter into this Agreement and to grant to the
Investor the rights set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the Stockholders and the Company
(collectively, the "Parties") agree as follows:
1. REGISTRATION RIGHTS
1.1. Definitions. For purposes of this Statement:
"Commencement Date" means the 180th day after the date on which the
Company consummates its initial public offering of securities under the
Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
"Holder" means (i) the Investor and (ii) any person or entity to
whom the Investor sells, transfers or assigns any of its Registrable Securities,
other than in a sale pursuant to Rule 144 under the Securities Act or a
registration effected pursuant to this Agreement.
"Register," "registered," and "registration" refer to an
underwritten registration effected by preparing and filing with the Securities
and Exchange Commission (the "Commission") a registration statement or similar
document in compliance with the Securities Act, and the declaration or ordering
by the Commission of effectiveness of such registration statement or document.
"Registration Expenses" means all expenses in connection with the
Company's performance of or compliance with its obligations under this Section
1, including, without limitation, all (i) registration, qualification and filing
fees; (ii) fees, costs and expenses of compliance with securities or blue sky
laws (including reasonable fees, expenses and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities under the laws of such jurisdictions as the managing underwriter or
underwriters in a registration may designate, subject to the limitation as set
forth in subsection (h) of Section 1.5 hereof); (iii) printing expenses; (iv)
messenger, telephone and delivery expenses; (v) fees, expenses and disbursements
of counsel for the Company and of all independent certified public accountants
retained by the Company (including the expenses of any special audit and "cold
comfort" letters required by or incident to such performance); (vi) Securities
Act liability insurance if the Company so desires; (vii) fees, expenses and
disbursements of any other individuals or entities retained by the Company in
connection with the registration of the Registrable Securities; (viii) fees,
costs and expenses incurred in connection with the listing of the Registrable
Securities on each national securities exchange or automated quotation system on
which the Company has made application for the listing of its Common Stock; and
(ix) internal expenses of the Company (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties and expenses of any annual audit). Registration Expenses shall
not include selling commissions, discounts or other compensation paid to
underwriters or other agents or brokers to effect the sale of Registrable
Securities, or counsel fees and any other expenses incurred by Holders in
connection with any registration that are not specified in the immediately
preceding sentence.
"Registrable Securities" means any shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), issued or issuable upon
conversion of the Preferred Shares, but only to the extent such shares
constitute "restricted securities" under Rule 144 under the Securities Act.
"Requestor" means the Holder or Holders requesting the registration
in question. Actions taken by the Requestor shall be taken by those Holders
making such request who hold a majority of the Registrable Securities held by
such Holders.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor statute.
1.2. Demand Registrations.
(a) Request for Registration. If at any time after the Commencement
Date one or more Holders of the Registrable Securities submits a written request
(a
2
"Demand Notice") to the Company that the Company register Registrable Securities
under and in accordance with the Securities Act (a "Demand Registration"), then
the Company shall:
(i) within five (5) days after receipt of such Demand Notice,
give written notice of the proposed registration to all other Holders; and
(ii) as soon as practicable, use diligent efforts to effect
such registration as may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such Registrable Securities as
are specified in such request, together with all or such portion of the
Registrable Securities of any Holders joining in such request as are specified
in written requests received by the Company within twenty (20) days after the
date the Company mails the written notice referred to in clause (i) above.
Notwithstanding the foregoing, if the Company shall furnish to the
Holders a certificate signed by the president of the Company stating that in the
good faith judgment of the board of directors of the Company, it would be
seriously detrimental to the Company or its stockholders for a registration
statement to be filed on or before the date of filing would be required in
connection with any Demand Registration and it is therefore essential to defer
the filing of such registration statement, the Company shall have the right to
defer such filing or delay its effectiveness for a reasonable period not to
exceed 60 days provided that such right shall not be exercised more than once
with respect to a request for registration hereunder during any period of twelve
consecutive months. The Company will pay all Registration Expenses in connection
with such withdrawn request for registration.
Notwithstanding the foregoing, the Company shall not be required to
effect more than one (1) registration pursuant to this Section 1.
(b) Underwriting. In connection with any registration under
this Section 1.2, if so requested by the Requestor, the Company shall use all
commercially reasonable efforts to enter into an underwriting agreement with one
or more underwriters having terms and conditions customary for such agreements.
The lead underwriter or underwriters for such offering shall be selected by the
Company and shall be reasonably acceptable to the Requestor, provided that the
parties hereby agree in advance that Xxxxxxx Xxxxx Xxxxxx is acceptable for this
purpose.
1.3. Company Registration.
(a) Notice of Registration. If at any time or from time to time the
Company shall determine to register any of its Capital Stock, whether or not for
its own account, other than the Company's initial public offering and other than
a registration relating to employee benefit plans or a registration effected on
Form S-4, the Company shall:
3
(i) provide to each Holder written notice thereof at least ten
(10) days prior to the filing of the registration statement by the Company in
connection with such registration; and
(ii) include in such registration, and in any underwriting
involved therein, all those Registrable Securities specified in a written
request by each Holder received by the Company within five (5) days after the
Company mails the written notice referred to above, subject to the provisions of
Section 1.3(b) below.
(b) Underwriting. The right of any Holder to registration pursuant
to this Section 1.3 shall be conditioned upon the participation by such Holder
in the underwriting arrangements specified by the Company in connection with
such registration and the inclusion of the Registrable Securities of such Holder
in such underwriting to the extent provided herein. All Holders proposing to
distribute their Registrable Securities through such underwriting shall
(together with the Company) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the Company
and take all other actions, and deliver such opinions and certifications, as may
be reasonably requested by such managing underwriter. Notwithstanding any other
provision of this Section 1.3, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in such registration. The Company shall so advise all
Holders distributing Registrable Securities through such underwriting, and there
shall be excluded from such registration and underwriting, to the extent
necessary to satisfy such limitation, first shares held by any stockholder of
the Company other than the Holders, second shares held by the Holders and,
thereafter, to the extent necessary, shares which the Company wishes to register
for its own account. As among the Holders as a group, the number of Registrable
Securities that may be included in the registration and underwriting shall be
allocated in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities required to be included (determined without regard to any
requirement of a request to be included in such registration) in such
registration held by all Holders at the time of filing the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder
to the nearest 100 shares.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include Registrable Securities in such registration.
1.4. Expense of Registration. All Registration Expenses incurred in
connection with the registration and other obligations of the Company pursuant
to Sections 1.2, 1.3 and 1.5 shall be borne by the Company.
1.5. Registration Procedures. If and whenever the Company is required by
the provisions of this Section 1 to effect the registration of Registrable
Securities, the Company shall:
4
(a) promptly prepare and file with the Commission a registration
statement with respect to such Registrable Securities on any form that may be
utilized by the Company and that shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods of disposition
thereof, and use its reasonable diligent efforts to cause such registration
statement to become effective as promptly as practicable and remain effective
thereafter as provided herein, provided that prior to filing a registration
statement or prospectus or any amendments or supplements thereto, including
documents incorporated by reference after the initial filing of any registration
statement, the Company will furnish to each of the Investors whose Registrable
Securities are covered by such registration statement, their counsel and the
underwriters copies of all such documents proposed to be filed sufficiently in
advance of filing to provide them with a reasonable opportunity to review such
documents and comment thereon;
(b) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and current and to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
Registrable Securities covered by such registration statement, including such
amendments (including post-effective amendments) and supplements as may be
necessary to reflect the intended method of disposition by the prospective
seller or sellers of such Registrable Securities, provided that such
registration statement need not be kept effective and current for longer than
120 days subsequent to the effective date of such registration statement;
(c) provide customary indemnity and contribution arrangements to any
qualified independent underwriter or qualified independent pricer as defined in
Schedule E of the Bylaws of the National Association of Securities Dealers, Inc.
(a "Qualified Independent Underwriter/Pricer"), if requested by such Qualified
Independent Underwriter/Pricer, on such reasonable terms as such Qualified
Independent Underwriter/Pricer customarily requires;
(d) subject to receiving reasonable assurances of confidentiality,
for a reasonable period after the filing of such registration statement, and
throughout each period during which the Company is required to keep a
registration effective, make available for inspection by the selling holders of
Registrable Securities being offered, and any underwriters, and their respective
counsel, such financial and other information and books and records of the
Company, and cause the officers, directors, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries as
shall be reasonably necessary, in the judgment of such counsel, to conduct a
reasonable investigation within the meaning of Section 11 of the Securities Act;
(e) promptly notify the selling holders of Registrable Securities
and any underwriters and confirm such advice in writing, (i) when such
registration statement or the prospectus included therein or any prospectus
amendment or supplement or post-effective amendment has been filed, and, with
respect to such registration statement or any post-effective amendment, when the
same has become effective, (ii) of any
5
comments by the Commission, by the National Association of Securities Dealers
Inc. ("NASD"), and by the blue sky or securities commissioner or regulator of
any state with respect thereto or any request by any such entity for amendments
or supplements to such registration statement or prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company cease to be true and correct in
all material respects, (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, or (vi) at any time when a prospectus is required
to be delivered under the Securities Act, that such registration statement,
prospectus, prospectus amendment or supplement or post-effective amendment, or
any document incorporated by reference in any of the foregoing, contains 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, in light of
the circumstances under which they are made, not misleading;
(f) furnish to each selling holder of Registrable Securities being
offered, and any underwriters, prospectuses or amendments or supplements
thereto, in such quantities as they may reasonably request and as soon as
practicable, that update previous prospectuses or amendments or supplements
thereto;
(g) permit selling holders of Registrable Securities to rely on any
representations and warranties made to any underwriter of the Company or any
opinion of counsel or "cold comfort" letter delivered to any such underwriter,
and indemnify each such holder to the same extent that it indemnifies any such
underwriter;
(h) use reasonable diligent efforts to (i) register or qualify the
Registrable Securities to be included in a registration statement hereunder
under such other securities laws or blue sky laws of such jurisdictions within
the United States of America as any selling holder of such Registrable
Securities or any underwriter of the securities being sold shall reasonably
request, (ii) keep such registrations or qualifications in effect for so long as
the registration statement remains in effect and (iii) take any and all such
actions as may be reasonably necessary or advisable to enable such holder or
underwriter to consummate the disposition in such jurisdictions of such
Registrable Securities owned by such holder; provided, however, that the Company
shall not be required for any such purpose to (x) qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify but for the requirements of this Section
1.5(h), (y) subject itself to taxation in any such jurisdiction or (z) consent
to general service of process in any such jurisdiction;
(i) cause all such Registrable Securities to be listed or accepted
for quotation on each securities exchange or automated quotation system on which
the Company's Common Stock then trades; and
(j) otherwise use reasonable diligent efforts to comply with all
applicable provisions of the Securities Act, and rules and regulations of the
Commission,
6
and make available to its security holders, as soon as reasonably practicable,
an earnings statement covering a period of at least twelve months which shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
1.6. Indemnification. In the event any of the Registrable Securities are
included in a registration statement under this Section 1:
(a) the Company will indemnify each Holder who participates in such
registration, each of its officers and directors and partners and such Holder's
separate legal counsel and independent accountants, and each person controlling
such Holder within the meaning of Section 15 of the Securities Act, and each
underwriter, if any, and each person who controls any underwriter within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors and partners and such Holder's separate legal counsel and independent
accountants and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder or underwriter and stated to be
specially for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will reimburse the
7
Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein.
(c) Each party entitled to indemnification under this Section 1.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought provided
that failure to give such prompt notice shall not relieve the Indemnifying Party
of its obligations hereunder unless it is materially prejudiced thereby, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). Such Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be paid by such Indemnified Party unless
(i) the Indemnifying Party has agreed to pay such fees and expenses or (ii) the
Indemnifying Party shall have failed to assume the defense of such action or
proceeding and employ counsel reasonably satisfactory to such Indemnified Party
in any such action or proceeding or (iii) the named parties to any such action
or proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party and such Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses available to
such Indemnified Party which are different from or additional to those available
to the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing of an election to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Party
then shall have the right to employ separate counsel at its own expense and to
participate in the defense thereof, and shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all Indemnified
Parties, which firm shall be designated in writing by a majority of the
Indemnified Parties who are eligible to select such counsel). No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement 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. No Indemnified Party may
consent to entry of any judgment or enter into any settlement without the prior
written consent of the Indemnifying Party.
8
(d) If the indemnification provided for in this Section 1.6 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying the Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
with respect to such loss, liability, claim, damage or expenses in the
proportion that is appropriate to reflect the relative fault of the Indemnifying
Party and the Indemnified Party in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense, as well as any
other relevant equitable considerations. The relative fault of the Indemnifying
Party and the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
1.7. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock, the Company shall use
reasonably diligent efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, beginning ninety
(90) days after the Company registers a class of securities under Section 12 of
the Exchange Act or completes a registered offering under the Securities Act; or
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements);
(c) Furnish to any Holder promptly upon request a written statement
as to its compliance with the reporting requirements of Rule 144 (at any time
after ninety (90) days after the Company completes a registered offering under
the Securities Act), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as a Holder may reasonably request for the
purpose of availing itself of any rule or regulation of the Commission allowing
a Holder to sell Registrable Securities without registration.
1.8. Termination of Registration Rights. No Holder shall be entitled to
exercise any right provided for in this Section 1 after the earlier of (a) ten
years following the Commencement Date and (b) the date all Registrable
Securities held by such Holder may be sold in a single three-month period under
Rule 144 under the Securities Act.
1.9. Information To Be Provided by the Holders. Each Holder whose
Registrable Securities are included in any registration pursuant to this
Agreement shall
9
furnish the Company such information regarding such Holder and the distribution
proposed by such Holder as may be reasonably requested in writing by the Company
and as shall be required in connection with such registration or the
registration or qualification of such securities under any applicable state
securities law.
1.10. "Stand-Off" Agreement. Each Holder, if requested by the managing
underwriter of the initial registered public offering of securities by the
Company, shall agree not to sell or otherwise transfer or dispose of any
Registrable Securities or other securities of the Company then held by such
Holder for a specified period of time that is customary under the
circumstances (not to exceed one hundred eighty (180) days) following the
effective date of the registration statement for such offering, provided that
(a) no such agreement shall be required unless the officers, directors and
other principal stockholders of the Company enter into, and not be released
from, a similar agreement covering the same period of time and (b) such
agreement shall contain terms customary for such agreements. The Company may
impose stop transfer instructions to enforce any required agreement of the
Holders under this Section 1.10.
2. PURCHASE RIGHTS REGARDING FUTURE SALES OF CAPITAL SECURITIES BY THE
COMPANY
2.1 Participation Right. Subject to the terms and conditions specified in
this Section 2.1, the Company hereby grants to the Investor a purchase right
with respect to future sales by the Company of its Capital Securities (as
hereinafter defined) occurring prior to a Qualified Initial Public Offering. The
Investor shall be entitled to apportion the purchase right hereby granted it
among itself and its affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any Capital Securities, the Company
shall first make an offering of 50% of such Capital Securities to the Investor
in accordance with the following provisions:
(a) The Company shall give the Investor written notice (a "Company
Sales Notice") stating (i) the Company's bona fide intention to offer such
Capital Securities, (ii) the number of such Capital Securities to be offered,
and (iii) the price and terms, if any, upon which it proposes to offer such
Capital Securities.
(b) Within ten (10) Business Days after receipt of a Company Sales
Notice, the Investor shall give the Company a written notice (an "Investor
Purchase Notice") setting forth the number of such Capital Securities the
Investor is willing to purchase. The Capital Securities purchased by the
Investor under this subsection (b) shall be purchased at the price and on the
terms specified in the Company Sales Notice at a closing to be held within forty
(40) Business Days after the delivery of the Company Sales Notice. Such date
shall be specified by the Company in a written notice delivered to the Investor
at least ten (10) Business Days prior thereto. The price and other terms upon
which the Capital Securities shall be purchased shall include the purchase of
any other debt or equity securities proposed to be sold by the Company in the
same transaction. Without prejudice to the Investor's rights to purchase 50% of
such Capital Securities pursuant to this provision, the Company may consummate
the sale of the Capital Securities proposed to be sold to the third party on the
terms set forth in the
10
Company Sales Notice at any time after delievering the Company Sales Notice to
the Investor.
(c) If the Investor does not elect, in accordance with Section
2.1(b), to obtain all the Capital Securities that the Investor is entitled to
obtain pursuant to this Section 2.1, the Company may, during the one hundred
twenty (120) day period following the expiration of the period provided in
Section 2.1(b) hereof, offer the remaining unsubscribed portion of such Capital
Securities to any Person or Persons at a price not less than, and upon terms no
more favorable to the offeree than, those specified in the Company Sales Notice
with respect thereto. If the Company does not enter into an agreement for the
sale of such Capital Securities within such period, or if such agreement is not
consummated within thirty (30) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Capital Securities shall not be
offered unless first reoffered to the Investor in accordance herewith.
(d) "Capital Securities" shall mean shares of, or any securities
convertible into or exercisable or exchangeable for any shares of, any class of
the capital stock of the Company other than (i) securities sold by the Company
in its initial public offering; (ii) securities (or options therefor) issued to
consultants, officers, directors and employees for the primary purpose of
soliciting or retaining their employment or services in a transaction or
pursuant to a plan approved by the Company's Board of Directors, (iii)
securities issued or sold as part of the Company's initial public offering,
whether or not such offering qualifies as a Qualified Initial Public Offering;
(iv) securities issued or sold as part of or after a Qualified Initial Public
Offering, (v) securities issued pursuant to the conversion or exercise of
outstanding convertible securities or warrants, options or other rights
representing the right to acquire capital stock of the Company, or (vi)
securities issued in connection with a bona fide business acquisition by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise.
2.2 Maintenance Right.
(a) Except for Excluded Issuances (as defined below), if after a
Qualified Public Offering the Company proposes to sell or issue to any person or
entity (the "Offeree") any Capital Securities (the "Offered Securities"), the
Company shall also offer (a "Preemptive Offer") the Investor the right to
purchase, at the same price and upon the other terms as the Offered Securities
are proposed to be sold or issued to the Offeree, subject to the proviso at the
end of this paragraph (a), either (at the Company's option): (x) up to such
number of the Offered Securities as shall be equal to the total number of
Offered Securities mulitplied by the Applicable Percentage (as defined below);
or (y) up to such number of the same class of securities as the Offered
Securities as would enable the Investor to maintain its Applicable Percentage.
The Investor shall be entitled to apportion the purchase right hereby granted it
among itself and its affiliates in such proportions as it deems appropriate.
Without prejudice to the Investor's rights to purchase the Applicable Percentage
of the Offered Securities pursuant to this provision, the Company may consummate
the sale of the the Offered Securities proposed to be sold to the third party on
the terms set forth in the Company Sales Notice at any time after
11
delivering the Company Sales Notice to the Investor. "Excluded Issuances" shall
mean (a) the issuance of shares of Common Stock upon the exercise of options to
employees, officers, directors and consultants pursuant to any stock options or
the grant of any stock options to employees, officers, directors and consultants
of the Company pursuant to stock option plans approved by the board of directors
of the Company; (b) the issuance of shares of Common Stock pursuant to other
options, warrants and convertible securities outstanding on the date hereof; and
(c) the issuance of shares of Common Stock in connection with bona fide
equipment lease financings, licensing agreements, research and development
transactions, acquisitions of businesses or technology, or similar transactions.
(b) As used herein, (i) the "Applicable Percentage" shall mean the
percentage of the fully diluted outstanding shares of Common Stock (as defined
below) deemed to be owned by the Investor immediately prior to the date on which
the Offered Securities are proposed to be issued (the "Applicable Percentage");
and (ii) the "fully diluted outstanding shares of Common Stock" shall mean, at
any time, the sum of the number of shares of Common Stock then outstanding and
the number of shares of Common Stock issuable pursuant to any outstanding
options, warrants or other securities but only to the extent such options,
warrants or other securities are then, or will by their terms within 180 days
become, exercisable, convertible or exchangeable for shares of Common Stock.
(c) The Company shall give the Investor written notice of the
Pre-emptive Offer (a "Company Pre-emptive Rights Notice") stating (i) its bona
fide intention to offer such Capital Securities, (ii) the number of such Capital
Securities to be offered, and (iii) the price and terms, if any, upon which it
proposes to offer such Capital Securities.
(d) To exercise its right to purchase any Capital Securities in the
Pre-emptive Offer, within ten (10) Business Days after receipt of a Company
Pre-emptive Rights Notice, the Investor shall give the Company written notice (a
"Pre-emptive Rights Exercise Notice") setting forth the number of such Capital
Securities such Investor wishes to purchase. The Capital Securities purchased by
the Investor under this subsection (b) shall be purchased at the price and on
the terms specified in the Company Pre-emptive Rights Notice at a closing to be
held within forty (40) Business Days after the delivery of the Pre-emptive
Rights Exercise Notice. Such date shall be specified by the Company in a written
notice given to each Investor participating in such sale at least ten (10)
Business Days prior thereto. The price and other terms upon which the Capital
Securities shall be purchased shall include the purchase of any other debt or
equity securities proposed to be sold by the Company in the same transaction.
12
3. INFORMATION AND INSPECTION RIGHTS
3.1 Information. The Company shall deliver to the Investor for so long as
such Investor (together with any Persons whose securities are aggregated with
those of such Investor pursuant to Section 9.9 hereof for purposes of the
Agreement) holds shares of Series A Preferred Stock:
(a) as soon as practicable, but in any event within one hundred
twenty (120) days after the end of each fiscal year of the Company, an income
statement of the Company for such fiscal year, a cash flow statement of the
Company for such fiscal year, and a balance sheet of the Company as of the end
of such fiscal year, with each such financial statement to be in reasonable
detail, prepared in accordance with GAAP, and audited and certified by a firm of
independent public accountants of nationally recognized standing selected by the
Company;
(b) as soon as practicable, but in any event within sixty (60) days
after the end of each of the first three quarters of each fiscal year of the
Company, unaudited statements of income and cash flows of the Company for such
fiscal quarter and an unaudited balance sheet of the Company as of the end of
such fiscal quarter;
(c) within thirty days of the end of each calendar month, unaudited
statements of income and cash flows and balance sheet of the Company for and as
of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event at least thirty days
prior to the end of each fiscal year, a budget and business plan of the Company
for the next fiscal year, prepared on a monthly basis, including balance sheets
and statements of cash flows for such months and, as soon as prepared, any other
budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 3.1, an instrument executed by the Chief
Financial Officer or President of the Company certifying that such financial
statements were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation, cash flows and changes in shareholders' equity for the
period specified, subject to year-end audit adjustments and the absence of
footnotes that may be required by GAAP; and
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as such Investor may
from time to time reasonably request.
3.2. Inspection. During any period in which the Investor is entitled to
receive the materials specified in Section 3.1 hereof, the Company shall permit
the Investor, at the Investor's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and
13
accounts with its officers, all at such reasonable times during business hours
and upon reasonable notice as may be requested by the Investor.
4. RIGHT OF FIRST REFUSAL AND RIGHT OF FIRST OFFER ON CHANGE IN CONTROL
4.1. Right of First Refusal. The Investor is hereby granted the right of
first refusal described in sections 4.1(a) through (c) below exercisable in
connection with any proposed Corporate Transaction (as defined below) prior to
the Company's initial public offering (regardless of whether such initial public
offering constitutes a "Qualified Initial Public Offering"). As used herein, the
term "Corporate Transaction" shall mean (a) any consolidation or merger of the
Company with or into any other corporation or other entity, other than any
merger or consolidation resulting in the holders of the capital stock of the
Company immediately prior to such transaction entitled to vote for the election
of directors holding two-thirds (2/3) or more of the capital stock of the
surviving or resulting corporation or other entity entitled to vote for the
election of directors, (b) any sale or other disposition by the Company of all
or substantially all of its assets or capital stock or (c) any other transaction
that results in any Person (including any affiliates thereof) other than the
Investor or a current stockholder of the Company as of the date hereof becoming
a holder of a majority of the capital stock of the Company entitled to vote for
the election of directors.
(a) Prior to the consummation of any Corporate Transaction with any
person other than the Investor, the Company shall give written notice (the
"Corporate Transaction Notice") of such transaction to the Investor. The
Corporate Transaction Notice shall include the name of the proposed transferee,
the proposed consideration per share, the terms of payment of such consideration
and all other material terms of such Corporate Transaction and shall be
accompanied by a copy of a letter of intent, if any, executed by the proposed
party to such Corporate Transaction to consummate such transaction. The
Corporate Transaction Notice shall constitute a binding offer by the Company to
enter into the transaction described in the Corporate Transaction Notice with
the Investor, subject to the negotiation of definitive documentation referred to
below in this Section 4.1(a). If the Invesor wishes to accept the offer referred
to in the Corporate Transaction Notice, it shall, not later than ten (10)
business days after the giving of the Corporate Transaction Notice (the
"Acceptance Period"), give written notice (an "Investor Acceptance Notice") to
the Company stating that it has accepted the offer stated in the Corporate
Transaction Notice.
(b) If the Investor accepts the offer of the Company within the
Acceptance Period, the Company and the Investor shall use diligent efforts to
negotiate a binding definitive agreement for the Corporate Transaction, on the
terms offered by the proposed transferee in the Corporate Transaction Notice
(provided, however, that the Investor may make payment in cash in lieu of any
non-monetary terms of the proposed transfer, including, without limitation,
delivery of other securities in exchange for the property proposed to be sold),
within thirty (30) days after the giving of the Investor Acceptance Notice;
provided, however, that if the Company and the proposed transferee have reached
a definitive agreement (the "Third Party Agreement") with respect to the
14
Corporate Transaction, then a definitive agreement in the same form and with
substantially the same terms and conditions as the Third Party Agreement shall
be used as the definitive agreement for the Corporate Transaction with the
Investor.
(c) If the offer stated in the Corporate Transaction Notice has not
been accepted by the Investor within the Acceptance Period, or if the Company
and the Investor are unable to negotiate a binding agreement for a Corporate
Transaction within thirty (30) days after delivery of the Investor Acceptance
Notice, then the Company shall be free to consummate a Corporate Transaction
with another party at a price and on other terms not less favorable as to price,
and not materially less favorable as to other terms, to the Company than the
price and other terms described in the Corporate Transaction Notice; provided,
however, that such transaction must be consummated within one hundred eighty
(180) days after expiration of the latest applicable period specified in Section
4.2(b) above. If such transaction is not consummated within such one hundred
eighty (180) day period then the Company shall be required to comply with the
terms of this Section 4.1 again, prior to consummating any Corporate
Transaction.
4.2 Right of First Offer. The Investor is hereby granted the right of
first offer as described in Section 4.2(a) and (b) below exercisable in
connection with any proposed Corporate Transaction.
(a) If at any time the board of directors of the Company shall
determine to seek to locate a third party with which to consummate any Corporate
Transaction, then prior to initiating any negotiation with respect to any such
Corporate Transaction, the Company shall give written notice (the "Negotiation
Notice") of such determination to the Investor. If the Investor wishes to
propose a Corporate Transaction with the Company, then the Investor shall, not
later than ten (10) days after delivery of the Negotiation Notice (the "Decision
Period"), give written notice thereof (the "Acceptance Notice") to the Company
stating whether the Investor wishes to propose a Corporate Transaction. The
Acceptance Notice shall include the proposed consideration per share, the terms
of payment of such consideration and all other substantive economic terms of the
proposed Corporate Transaction.
(b) If the Company wishes to pursue the Corporate Transaction
proposed by the Investor, it shall so notify the Investor, and the Company and
the Investor shall then use diligent efforts to negotiate a Corporate
Transaction as proposed by the Investor within thirty (30) days after such
notice by the Company. If the Company does not wish to pursue the Corporate
Transaction proposed by the Investor, it shall so notify the Investor.
(c) If the Company and the Investor are unable to negotiate,
utilizing diligent efforts, a binding agreement for a Corporate Transaction
within the thirty (30) day period referred to in the first sentence of Section
4.2(b), or if the Company notifies the Investor (as contemplated in the second
sentence of Section 4.2(b) that it does not with to pursue the Corporate
Transaction proposed by the Investor, then the Company shall have the right to
pursue any Corporate Transaction, subject to Section 4.1 (with
15
respect to Corporate Transactions proposed to be pursued prior to the Company's
initial public offering).
(d) The provisions of this Section 4.2 shall not apply to any
discussions or transaction commenced at the initiative of a third party.
5. CO-SALE RIGHTS
5.1. Notice. In the event, at any time prior to a Qualified Initial Public
Offering, a Founder (a "Selling Founder") desires to accept a bona fide offer
from a financially capable acquiror for the sale, transfer or other disposition
of any or all of the shares of capital stock of the Company owned of record or
beneficially by such Selling Founder or any securities ultimately convertible
into or exercisable for any such shares of capital stock (collectively, the
"Sale Shares"), such Selling Founder shall promptly give the Company and the
Investor, written notice of such intended disposition (a "Sale Notice") setting
forth the terms and conditions thereof, including the number and type of
securities to be disposed of, any conditions to such disposition, the proposed
timing of such disposition, the consideration to be paid for such securities and
the identity of the proposed acquirer. Except as otherwise provided herein, a
Selling Founder may not sell, transfer or otherwise dispose of any shares of
capital stock of the Company or any securities ultimately convertible into or
exercisable for such shares of capital stock unless it delivers to the Company
and the Investor a Sales Notice and complies with the provisions of this Section
5 or unless the proposed sale, transfer or disposition is exempt under Section
5.6 hereof from the co-sale rights granted herein.
5.2. Grant of Co-Sale Rights. The Investor shall have the right,
exercisable upon written notice to the Selling Founder within thirty (30) days
after receipt of the Selling Founder's Sale Notice, to participate in such sale
of the Sale Shares on the same terms and conditions as those set forth in the
Sale Notice. The right of participation of the Investor shall be subject to the
terms and conditions set forth in this Section 5.2.
(a) The Investor and the Selling Founder shall each be deemed to own
the number of shares of Common Stock that it actually owns plus the number of
shares of Common Stock that are issuable upon conversion of any convertible
securities of the Company or upon the exercise of any warrants, options or
similar rights then owned by it at an exercise price less than the purchase
price specified in the Sale Notice.
(b) The Investor may sell all or any part of a number of Sale Shares
equal to the product obtained by multiplying (i) the aggregate number of Sale
Shares by (ii) a fraction, the numerator of which is the number of shares of
Common Stock of the Company deemed to be owned by the Investor and the
denominator of which is the sum of (X) the total number of outstanding shares of
Common Stock of the Company deemed to be owned by the Selling Founder and (Y)
the total number of outstanding shares of Common Stock of the Company deemed to
be owned by the Investor.
16
(c) The Investor may effect its participation in the sale by
delivering to the Selling Founder for transfer to the acquirer one or more
certificates, properly endorsed for transfer, which represent:
(i) the number of shares that it elects to sell pursuant to
this Section 5.2;
(ii) that number of shares of convertible securities of the
Company that is at such time convertible into the number of shares of Common
Stock that it has elected to sell pursuant to this Section 5.2; provided,
however, that if the acquirer objects to the delivery of convertible securities
of the Company in lieu of Common Stock, the Investor may, to the extent
permitted by the terms of such security, convert and deliver Common Stock as
provided in subparagraph (i) above; or
(iii) a combination of the foregoing that in the aggregate
represents the number of shares of Common Stock to be sold by the Investor.
5.3. Payment of Proceeds. The stock certificates that the Investor
delivers to the Selling Founder pursuant to Section 5.2 shall be transferred by
the Selling Founder to the acquirer in consummation of the sale of the Sale
Shares pursuant to the terms and conditions specified in the Sale Notice, and
the Selling Founder shall promptly thereafter remit to the Investor that portion
of the sale proceeds to which the Investor is entitled by reason of its
participation in such sale.
5.4. Non-Exercise. The exercise or non-exercise of the rights of the
Investor hereunder to participate in one or more sales of Sale Shares made by
the Selling Founder shall not adversely affect its right to participate in
subsequent sales by the Selling Founder. In the event the Investor elects not to
exercise its co-sale rights hereunder with respect to a disposition, the Selling
Founder that sent the Sale Notice regarding such disposition may consummate such
disposition in accordance with the terms specified in the Sale Notice but only
within 90 days after the expiration of the Investor's co-sale rights.
5.5. Prohibited Transfers. In the event a Founder should sell any Sale
Shares of the Company in contravention of the co-sale rights of the Investor
under this Agreement (a "Prohibited Transfer"), the Investor shall have the put
option provided in this Section 5.5. In the event of a Prohibited Transfer, the
Investor shall have the option to sell to the Selling Founder a number of shares
of Common Stock of the Company (either directly or through delivery of
convertible securities) equal to the number of shares that the Investor would
have been entitled to sell had such Prohibited Transfer been effected in
accordance with Section 5.2 hereof, on the following terms and conditions:
(a) The price per share at which the shares are to be sold to the
Selling Founder shall be equal to the price per share paid to the Selling
Founder by the third-party acquiror or acquirer of the Selling Founder's Sale
Shares in the disposition referenced in the Sale Notice.
17
(b) The Investor shall deliver to the Founder, within 30 days after
it has received notice from the Selling Founder or otherwise become aware of the
Prohibited Transfer, the certificate or certificates representing shares to be
sold, each certificate to be properly endorsed for transfer.
(c) The Selling Founder shall, upon receipt of the certificates for
the repurchased shares, pay the aggregate purchase price therefor, by certified
check or bank draft made payable to the order of the Investor, and shall
reimburse the Investor for any additional expenses reasonably incurred,
including reasonable legal fees and expenses, incurred in effecting such
purchase and resale.
5.6. Exempt Transfers. The provisions of this Section 5 shall not apply to
(i) transfers by the Founders of an aggregate of 20% of the capital stock held
by the Founders as of the date hereof, or (ii) any transfer by a Selling Founder
to the ancestors, descendants, siblings or spouse of the Selling Founder or to
trusts for the benefit of such persons or the Founder; provided that in each of
the foregoing cases the transferee shall furnish the Stockholders and the
Company with a written agreement to be bound by and comply with all provisions
of this Agreement. Such transferred stock shall remain subject to the provisions
of this Agreement, and such transferee shall be treated as a "Stockholder" (and
a transferee of a Founder shall be treated as a "Founder") for the purposes of
this Agreement.
6. LEGEND REQUIREMENTS
6.1. Legend. Each certificate representing the shares of capital stock (or
securities convertible into or exercisable for shares of capital stock) of the
Company owned by the Stockholders shall be endorsed with the following legend:
"THE SALE OR TRANSFER, THE VOTING AND CERTAIN OTHER RIGHTS RELATING TO THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND AMONG THE COMPANY
AND CERTAIN STOCKHOLDERS OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
6.2. Removal. The legend set forth in Section 6.1 hereof shall be removed
upon termination of this Agreement in accordance with the provisions of Section
9.1.
6.3. Securities Act Legend. For as long as appropriate under applicable
law, each certificate representing the shares of capital stock (or securities
convertible into or exercisable for shares of capital stock) of the Company
owned by the Investor shall be endorsed with the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"). THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT
18
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE ACT OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT."
7. DIRECTORS
7.1. Election. Until such time as the number of Common Share Equivalents
held by the Investor and its affiliates equals less than 2% of the fully diluted
outstanding shares of Common Stock, the Investor shall have the right to
designate one director of the Company (the "Series A Director") or, at its
option, one Board observer (the "Board Observer"); provided that the person so
designated shall be consented to by a majority of the Board (not including such
designee), which consent shall not be unreasonably withheld. Each of the
Founders shall vote his shares of Common Stock in favor of such designee.
7.2. Removal; Confidentiality Agreement. Any Series A Director may be
removed during his or her term of office, either with or without cause, by, and
only by, the affirmative vote or written consent of the holders of a majority of
the then-outstanding Series A Preferred Stock, voting or consenting as a
separate class. Any vacancy of a Series A Director position shall be filled only
by the affirmative vote or written consent of the Holders, voting as a separate
class. Each Series A Director shall execute and deliver a confidentiality
agreement relating to information obtained by such director in his or her
capacity as a director of the Company in the form of Exhibit B.
7.3. Board Observer. The Board Observer, if any, shall be entitled to
attend and participate in all meetings of the Board and to receive upon issuance
to the members of the Board any materials, including financial statements,
prepared for the members of the Board. The Board Observer shall have no duties,
responsibilities or liability by virtue of the Board Observer's attendance at
any Board meetings or committee meetings or the failure to attend such meetings.
Each Board Observer shall also execute and deliver a confidentiality agreement
relating to information obtained by such observer in his or her capacity as a
board observer in the form of Exhibit B.
8. CONFIDENTIALITY OF AGREEMENTS
(a) Neither party shall make any press release about or other public
statement or announcement concerning, or disclose to any third party the
existence or dislcose any of the terms and conditions of, this Agreement, the
Related Agreements or any commercial arrangement between the parties without the
prior written consent of the other party.
(b) The foregoing notwithstanding, however, (i) a party may make any
disclosure to its Affiliates and to its directors, officers, employees,
attorneys and accountants, and to the underwriters engaged by the Company in
connection with any offering of its securities, whose duties reasonably require
familiarity with such matters,
19
provided that such persons (including any such underwriters) are bound to
maintain the confidentiality of such matters, and (ii) a party may make such
disclosure as may be required by applicable law or regulation, in which case the
disclosing party shall give the other party prompt advance notice of such
disclosure so that the other party has the opportunity if it so desires to seek
a protective order or other appropriate remedy; provided that, in connection
with any offering of securities of the Company, the Company shall provide in
advance to the Investor for review the form and content of any disclosure of any
of such matters that may be required by law or regulation and, to the extent
consistent with its disclosure obligations under applicable law, the Company
shall include such modifications to such disclosure as may be reasonably
requested by the Investor (except that the Company may file any of the
Agreements as an exhibit to its registration statement if any of the Agreements
would constitute a "material agreement" under applicable law or regulation and
the Company shall use its best efforts to obtain confidential treatment of the
portions of any such Agreements that meet the Securities and Exchange Commission
qualifications for confidential treatment if so requested by Investor).
9. MISCELLANEOUS PROVISIONS
9.1. Termination. Except as otherwise provided herein, the rights and
obligations of the Company and the Stockholders under this Agreement shall
terminate as to any specific Stockholder at such time as such Stockholder shall
no longer own shares of Common Stock or securities of the Company convertible or
exercisable for shares of Common Stock.
9.2. Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed to have been duly given at the time of
receipt if delivered by hand or by facsimile transmission or three days after
being mailed, registered or certified mail, return receipt requested, with
postage prepaid, to the address or facsimile number (as the case may be) listed
below the signature of each Party on such Party's signature page hereto if any
Party shall have designated a different address or facsimile number by notice to
the other Parties given as provided above, then to the last address or facsimile
number so designated.
9.3. Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed and interpreted in such manner as to be effective and valid
under applicable law.
9.4. Waiver or Modification. Any amendment or modification of this
Agreement shall be effective only if evidenced by a written instrument executed
by the Company and by Investors that hold a majority of the total Common Share
Equivalents held by all of the Investors.
20
9.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia without regard to the
principles of conflicts of laws thereof.
9.6. Attorneys' Fees. In the event of any dispute involving the terms
hereof, the prevailing parties shall be entitled to collect legal fees and
expenses from the other party to the dispute.
9.7. Further Assurances. Each Party agrees to act in accordance herewith
and not to take any action that is designed to avoid the intention hereof.
9.8. Successors and Assigns. This Agreement and the rights and obligations
of the Parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives. Each Stockholder
may assign its rights hereunder to (i) any transferee of Shares held by such
Stockholder or (ii) the ancestors, descendants, siblings or spouse of such
Stockholder or to trusts for the benefit of such persons or such Stockholder;
provided that in each of the foregoing cases, the transferee shall furnish the
other Stockholders and the Company with a written agreement to be bound by and
comply with all provisions of this Agreement. Such transferee shall be treated
as a "Stockholder" (and a transferee of a Founder shall be treated as a
"Founder") for the purposes of this Agreement.
9.9. Aggregation of Stock. For purposes of determining the availability of
any rights under this Agreement, the number of shares of Common Stock or other
securities of the Company deemed to be owned by a Stockholder or other Person
shall include all such shares or other securities owned by such Stockholder or
other Person, such Stockholder's (or other Person's) Affiliates and their
respective partners, members, or shareholders, and any other person or entity
that acquires any such shares or other securities from any of the foregoing by
gift, will or intestate succession.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
21
[Company Signature page]
IN WITNESS WHEREOF, the undersigned Stockholder has executed this
Agreement as of the day and year first above written.
RTS WIRELESS, INC.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Executive VP and COO
Address for Notice:
RTS Wireless, Inc.
00 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
Attn: Xx. Xxxxx X. Ring,
Chief Executive Officer
With a copy to:
Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
Attn: Xxxxx Xxxxxxxxx, Esq.
22
[Investor Signature page]
IN WITNESS WHEREOF, the undersigned Investor has executed this Agreement
as of the day and year first above written.
AMERICA ONLINE, INC.
By: /s/ Xxxxx Clerizio
-------------------------------------
Name: Xxxxx Clerizio
Title: Vice President
Address for Notice:
0000 XXX Xxx
Xxxxxx, Xxxxxxxx 00000
Facsimile No.: 000-000-0000
Attn: General Counsel
With a copy to:
Xxxxxx & Xxxxxx
000 00xx Xxxxxx X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile No.: 202-942-5999
Attn: Xxxxxx X. Xxx
23
[Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned Stockholder has executed this
Agreement as of the day and year first above written.
/s/ Xxxxx X. Ring
----------------------------------------
Xxxxx X. Ring
Address for Notice:
c/o RTS Wireless, Inc.
00 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
24
[Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned Stockholder has executed this
Agreement as of the day and year first above written.
/s/ Xxxxxxx Xxxxxxx
----------------------------------------
Xxxxxxx Xxxxxxx
Address for Notice:
c/o RTS Wireless, Inc.
00 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
25
[Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned Stockholder has executed this
Agreement as of the day and year first above written.
/s/ Xxx Xxxxxxxxx
----------------------------------------
Xxx Xxxxxxxxx
Address for Notice:
c/o RTS Wireless, Inc.
00 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
26
[Stockholder Signature page]
IN WITNESS WHEREOF, the undersigned Stockholder has executed this
Agreement as of the day and year first above written.
/s/ Xxxxx Xxxxxx
----------------------------------------
Xxxxx Xxxxxx
Address for Notice:
c/o RTS Wireless, Inc.
00 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
27
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement to which this Exhibit A is attached, the
following terms have the following meanings:
"Affiliate" of any Person (the "Subject Person") means any Person that
Controls, is Controlled by or is under common Control with the Subject Person.
"Business Day" means any day other than a Saturday, Sunday or other day on
which the national or state banks located in the State of New York or the
Commonwealth of Virginia are authorized to be closed.
"Common Share Equivalents" means all shares of Common Stock that are
issued and outstanding or are issuable upon the exchange, exercise or conversion
of any other security of the Company. The number of Common Share Equivalents
owned by a Person shall equal the sum of the number of shares of Common Stock
owned by such Person plus the number of shares of Common Stock issuable upon the
exchange, exercise or conversion of any other security of the Company owned by
such Person.
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Control" and derivatives thereof mean the power to control the management
and policies of the Controlled Person whether by ownership of voting securities,
contract or otherwise.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Person" means any individual, entity or governmental body.
"Qualified Initial Public Offering" means a public offering of Common
Stock pursuant to an effective registration statement under the Securities Act
of 1933, as amended, that (a) has (x) a public offering price that, (y) when
mulitplied by the sum of the number of shares of Common Stock outstanding after
such offering and the number of shares of Common Stock issuable pursuant to all
outstanding options, warrants or other securities then outstanding (including
shares issuable pursuant to any underwriter's over-allotment option and any
options outstanding under any stock option plan or program of the Company), (z)
results in a product of not less than $350,000,000 and (b) is underwritten by
one or more nationally recognized investment banking firms or a syndicate
managed or co-managed by one or more nationally recognized investment banking
firms that results in (i) the Company receiving at least $25 million in gross
proceeds and (ii) the Common Stock being traded on the New York Stock Exchange
or
28
the Nasdaq National Market; provided, however, that, if the Company's initial
public offering does not qualify as a Qualified Initial Public Offering then a
Qualified Initial Public Offering shall be deemed to have occurred on the last
day of the first period of 20 consecutive trading days on which the Common Stock
is traded on the New York Stock Exchange or the Nasdaq National Market that
occurs after the Company's initial public offering on which the last trade in
the Common Stock occurred at (I) a price that, (II) when multiplied by the sum
of the number of shares of Common Stock outstanding on such day and the number
of shares of Common Stock issuable pursuant to all outstanding options, warrants
or other securities then outstanding (including shares issuable pursuant to any
underwriter's over-allotment option and any options outstanding under any stock
option plan or program of the Company), (III) results in a product of not less
than $450,000,000.
29
