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EXHIBIT 4.3
THE FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
FORMUS COMMUNICATIONS, INC.
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TABLE OF CONTENTS
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SECTION 1. GENERAL.......................................................1
1.1 Definitions...................................................1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER........................3
2.1 Restrictions on Transfer......................................3
2.2 Demand Registration...........................................5
2.3 Piggyback Registrations.......................................6
2.4 Form S-3 Registration.........................................7
2.5 Expenses of Registration......................................8
2.6 Obligations of the Company....................................9
2.7 Termination of Registration Rights...........................10
2.8 Delay of Registration; Furnishing Information................10
2.9 Indemnification..............................................10
2.10 Assignment of Registration Rights............................12
2.11 Amendment of Registration Rights.............................13
2.12 Limitation on Subsequent Registration Rights.................13
2.13 "Market Stand-Off" Agreement.................................13
2.14 Rule 144 Reporting...........................................14
SECTION 3. COVENANTS OF THE COMPANY.....................................14
3.1 Basic Financial Information and Reporting....................14
3.2 Inspection Rights............................................15
3.3 Confidentiality of Records...................................15
3.4 Stock Equivalent Vesting.....................................16
3.5 Proprietary Information and Inventions Agreement.............16
3.6 Real Property Holding Corporation............................16
3.7 Observer Rights..............................................16
3.8 Meetings of the Board of Directors...........................16
3.9 Nominating Committee.........................................16
3.10 Expenses; Compensation.......................................16
3.11 Compliance...................................................16
3.12 Business Practices...........................................17
3.13 Transactions with Affiliates.................................17
3.14 Indemnification..............................................18
3.15 Board of Director Approval...................................18
3.16 Assignment of Company's Rights...............................18
3.17 Restrictions on Future Issuances of Common Stock.............18
3.18 Compliance with Small Business Investment Act................18
3.19 Use of Proceeds..............................................18
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3.20 Non-Discrimination Compliance................................18
3.21 Termination of Covenants.....................................19
SECTION 4. RIGHTS OF FIRST OFFER........................................19
4.1 Subsequent Offerings.........................................19
4.2 Exercise of Rights...........................................19
4.3 Issuance of Equity Securities to Other Persons...............19
4.4 Termination of Rights of First Offer.........................20
4.5 Transfer of Rights of First Offer............................20
4.6 Excluded Securities..........................................20
SECTION 5. MISCELLANEOUS................................................21
5.1 Governing Law................................................21
5.2 Survival.....................................................21
5.3 Successors and Assigns.......................................21
5.4 Severability.................................................21
5.5 Amendment and Waiver.........................................21
5.6 Delays or Omissions..........................................21
5.7 Notices......................................................22
5.8 Entire Agreement.............................................22
5.9 Termination of Prior Agreement...............................22
5.10 Attorneys' Fees..............................................22
5.11 Titles and Subtitles.........................................22
5.12 Counterparts.................................................22
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INDEX OF SCHEDULES
SCHEDULE OF INVESTORS SCHEDULE A
SCHEDULE OF EMPLOYEE STOCKHOLDERS SCHEDULE B
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FOURTH AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is entered into as of the 3rd day of September, 1999, by and among
FORMUS COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and certain
holders of the Company's capital stock identified on Schedule A hereto (the
"Investors").
RECITALS
WHEREAS, certain of the Investors entered into the Third Amended and
Restated Investors' Rights Agreement, dated as of September 28, 1998, to provide
certain registration rights, information rights and other rights to such
Investors (the "Prior Agreement");
WHEREAS, the Company proposes to sell and issue shares of Series E and
Series F Preferred Stock pursuant to that certain Preferred Stock Purchase
Agreement dated as of even date herewith (the "Purchase Agreement"); and
WHEREAS, as a condition to entering into the Purchase Agreement, the
purchasers of the Series E and F Preferred Stock have requested that the Company
extend to them registration rights, information rights and other rights as set
forth below, and the Company and the parties to the Prior Agreement are willing
to terminate the rights given to them pursuant to the Prior Agreement and
replace their rights in their entirety with the rights set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" means any person owning of record Shares or Registrable
Securities that have not been sold to the public or any assignee of record (in
accordance with Section 2.10 hereof) of such
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Registrable Securities; provided, that a holder of Employee Shares shall be
deemed to be a "Holder" with respect to such Employee Shares only for the
purposes of Section 2 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"MAJOR INVESTOR" shall mean a holder of Registrable Securities
representing, together with the Registrable Securities held by any affiliated
entity of such holder, at least ten percent (10%) of the fully diluted Common
Stock of the Company.
"PREFERRED STOCK" means the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock of the Company.
"QUALIFIED PUBLIC OFFERING" shall mean the Company's first firm
commitment underwritten public offering of its Common Stock registered under the
Securities Act in which (i) the per share price is at least (A) $13.50 per share
(as adjusted for stock splits, combinations and the like) if the offering occurs
on or prior to 6 months of the closing under the Purchase Agreement (the
"Closing"), (B) $16.00 per share (as adjusted for stock splits, combinations and
the like) if the offering occurs after 6 months and on or prior to 12 months of
the Closing, and (C) $20.00 per share (as adjusted for stock splits,
combinations and the like) if the offering occurs after 12 months from the
Closing, and (ii) the gross cash proceeds to the Company (before deducting
underwriting, discounts, commissions, and fees) are at least $100,000,000.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; (ii) the November Shares (as defined
below); (iii) for the purposes of Section 2 hereof, the Employee Shares (as
defined below); and (iv) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security that is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities. Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person to the public either pursuant to a registration statement or Rule 144
under the Securities Act or sold in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities and either (i) are then issued and
outstanding or (ii) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees,
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printing expenses, fees and disbursements of counsel for the Company, reasonable
fees and disbursements of a single special counsel for the Holders, blue sky
fees and expenses and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company that shall be paid in any event by the Company).
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean (i) the shares of the Company's Series E and Series
F Preferred Stock issued pursuant to the Purchase Agreement; (ii) the shares of
Series C Stock and Series D Stock issued pursuant to that certain Preferred
Stock Purchase Agreement, dated September 28, 1998; (iii) the shares of the
Company's Series A Preferred Stock and Series B Preferred Stock issued pursuant
to that certain Preferred Stock Purchase Agreement, dated August 13, 1997, as
amended; (iv) the shares of the Company's Common Stock issued pursuant to that
certain Common Stock Purchase Agreement, dated as of November 20, 1996 as
amended and restated February 28, 1997 (the "November Shares"); and (v) for the
purposes of Section 2 hereof, the shares of the Company's Common Stock held as
of September 1, 1999, by the stockholders who are parties to that certain
Employee Stockholders Agreement dated as of August 1, 1997 (the "Employee
Stockholders Agreement"), such stockholders and the number of shares held by
them as of September 1, 1999 are set forth on Schedule B hereto (the "Employee
Shares").
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement if it is still in effect, (B) such Holder
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances surrounding
the proposed disposition, and (C) if reasonably requested by the Company, such
Holder shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, or such other evidence that the Company may
reasonably request, that such disposition will not result in a violation of the
Securities Act. Except in the case of unusual circumstances, the Company agrees
that it will not require opinions of counsel for transactions made
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pursuant to Rule 144 by the Investors initially party to this Agreement to the
extent that such Investors provide reasonable evidence of compliance with such
rule.
(iii) Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder (A) that is a partnership to its
partners or former partners in accordance with partnership interests, (B) that
is a corporation to its stockholders in accordance with their interest in the
corporation,(C) that is a limited liability company to its members or former
members in accordance with their interest in the limited liability company, (D)
to the Holder's family member or trust for the benefit of an individual Holder,
(E) to an affiliated investment fund managed or co-managed by a Holder (its
partners or managing members of the general partner) or (F) to any controlled
affiliate of a Holder (its partners or managing members of the general partner);
provided the transferee will be subject to the terms of this Agreement to the
same extent as if such transferee were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in this Agreement or any other agreement between
the Company and the holder of such certificate):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED. SUCH SECURITIES ARE SUBJECT TO
AN AGREEMENT, A COPY OF WHICH IS AVAILABLE UPON REQUEST FROM
THE COMPANY, WHICH GRANTS THE COMPANY AND THE HOLDER CERTAIN
RIGHTS AND SUBJECTS THE COMPANY AND THE HOLDER TO CERTAIN
OBLIGATIONS.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any Holder thereof if the Holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend. The Company shall bear the costs of any such
reissuance, including the reasonable legal fees and expenses incurred in
connection with the rendering of the aforementioned legal opinion.
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(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive at any time following the earlier of (i) August 1, 2003,
or (ii) the Initial Offering, a written request from the Holders of twenty-five
percent (25%) or more of the Registrable Securities (excluding for the purposes
of such calculation any of the Employee Shares) then outstanding (the
"Initiating Holders") that the Company file a registration statement under the
Securities Act on Form S-1 (or any successor to Form S-1) or a similar long-form
registration statement covering the registration of Registrable Securities
having an aggregate offering price to the public in excess of $2,500,000, then
the Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders. An Investor requesting to include
Registrable Securities held by it in the requested registration shall be
considered an Initiating Holder for purposes of this Section 2.2. Subject to the
limitations of this Section 2.2, the Company shall use its best efforts to
effect, as soon as practicable, the registration under the Securities Act of all
Registrable Securities that the Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information in the written
notice referred to in Section 2.2(a). In such event, the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by the Company and a majority in interest of the Initiating Holders and
such Holder) to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Board of
Directors of the Company). Notwithstanding any other provision of this
Agreement, if the underwriter advises the Company that marketing factors require
a limitation of the number of securities to be underwritten (including
Registrable Securities) then the Company shall so advise all Holders of
Registrable Securities that would otherwise be underwritten pursuant hereto, and
the number of Registrable Securities that may be included in the underwriting
shall be allocated to the Initiating Holders on a pro rata basis based on the
number of Registrable Securities held by all such Initiating Holders. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration. In no event will shares of any other selling
stockholder be included in such registration that would reduce the number of
shares that may be included by the Holders without the written consent of
Holders of not less than two-thirds (66-2/3%) of the Registrable Securities
proposed to be sold in the offering.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
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(i) after the Company has effected four (4)
registrations pursuant to this Section 2.2, and each such registration has been
declared or ordered effective, subject to Section 2.2(d) below; or
(ii) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 2.2, a certificate
signed by the Chairman of the Board stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such registration statement to be effected at
such time, in which event the Company shall have the right to defer commencing
to prepare such filing for a period of not more than one hundred eighty (180)
days after receipt of the request of the Initiating Holders; provided that if
the circumstances or event causing it to be detrimental to file a registration
statement ceases to exist, the right to defer such filing shall terminate, and
provided further such right to delay a request shall be exercised by the Company
not more than once in any twelve (12) month period and if the Company undertakes
a primary registration in connection with the issuance of its Common Stock
following such a delay, the Holders shall have "piggyback" rights under Section
2.3 hereof with respect to not less than one-third (1/3) of the number of shares
to be sold in such offering.
(d) Notwithstanding anything to the contrary contained in this
Section 2.2, Investors shall not be deemed to have used or forfeited their
rights to registration of their Registrable Securities under this Section 2.2,
if a registration of Registrable Securities is conducted pursuant to an
underwritten offering undertaken after the exercise of the Holders rights under
this Section 2.2 and the underwriters advise the Company and/or the Holders that
marketing factors require the Company to limit the number of Registrable
Securities to be sold in such offering to less than seventy-five percent (75%)
of the then outstanding Registrable Securities requested to be registered by the
persons exercising such demand right.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within twenty (20) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders
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of Registrable Securities. In such event, the right of any such Holder to be
included in a registration pursuant to this Section 2.3 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of the Agreement (except Section
2.2(b) above), if the underwriter determines in good faith that marketing
factors require a limitation of the number of shares to be underwritten, the
number of shares that may be included in the underwriting shall be allocated,
first, to the Company; second, to the Holders on a pro rata basis based on the
total number of Registrable Securities held by the Holders desiring inclusion in
such registration; and third, to any other stockholder of the Company (other
than a Holder) on a pro rata basis. No such reduction shall reduce the
securities being offered by the Company for its own account to be included in
the registration and underwriting, and in no event shall the amount of
securities of the selling Holders included in the registration be reduced below
twenty-five percent (25%) of the total amount of securities included in such
registration, unless such offering is the Initial Offering and such registration
does not include shares of any other selling stockholders (other than the
stockholder(s), if any, invoking the demand registration) in which event any or
all of the Registrable Securities of the Holders may be excluded in accordance
with the immediately preceding sentence. In no event will shares of any other
selling stockholder be included in such registration that would reduce the
number of shares that may be included by Holders without the written consent of
Holders of not less than two-thirds (66 2/3%) of the Registrable Securities
proposed to be sold in the offering.
(b) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders representing at least twenty-five percent (25%) of the then
outstanding Registrable Securities a written request or requests that the
Company effect a registration on Form S-3 (or any successor to Form S-3) or any
similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of
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such written notice from the Company; provided, however, that the Company shall
not be obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $2,500,000, or
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors 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 and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than one hundred eighty (180) days after
receipt of the request of the Holder or Holders under this Section 2.4;
provided, that such right to delay a request shall be exercised by the Company
not more than once, or
(iv) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with the first four (4)
registrations, qualifications or compliances pursuant to Section 2.2 and all
Registration Expenses incurred in connection with any registration under Section
2.3 or Section 2.4 herein shall be borne by the Company. All Selling Expenses
incurred in connection with any registrations hereunder, shall be borne by the
holders of the securities so registered pro rata on the basis of the number of
shares so registered. The Company shall not, however, be required to pay for
expenses of any registration proceeding begun pursuant to Section 2.2 or 2.4,
the request of which has been subsequently withdrawn by the Initiating Holders
unless (a) the withdrawal is based upon material adverse information concerning
the Company of which the Initiating Holders were not aware, or should not have
reasonably been aware, at the time of such request, or (b) the Holders of a
majority of Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2 or 2.4 as applicable, in which event such
right shall be forfeited by all Holders. If the Holders are required to pay the
Registration Expenses, such expenses shall be borne by the holders of securities
(including Registrable Securities) requesting such registration in proportion to
the number of shares for which registration was requested. If the Company is
required to pay the Registration Expenses of a withdrawn offering pursuant to
clause (a) above, then the Holders shall not forfeit their rights pursuant to
Section 2.2 or Section 2.4 to a demand registration.
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2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to one hundred eighty (180)
days or, if earlier, until the Holder or Holders have completed the distribution
related thereto; provided that if for any reason the Holders are prohibited from
selling their Registrable Securities during that time, the Company will extend
the effective date of the registration statement for the length of time of any
such prohibition.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the
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purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities and (ii) a letter dated as of such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the underwriters,
if any, and if permitted by applicable accounting standards, to the Holders
requesting registration of Registrable Securities.
2.7 TERMINATION OF REGISTRATION RIGHTS. All of a Holder's registration
rights shall expire on the fifth anniversary of the Qualified Public Offering.
In addition, the right of any particular Holder shall expire when (i) such
Holder (together with its affiliates, partners, members and former partners and
members) holds less than 1% of the Company's outstanding Common Stock; and (ii)
all Registrable Securities held by and issuable to such Holder (and its
affiliates, partners, members and former partners and members) may be sold under
Rule 144 during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2(b), the number of shares or the anticipated aggregate
offering price of the Registrable Securities to be included in the registration
does not equal or exceed the number of shares or the anticipated aggregate
offering price required to originally trigger the Company's obligation to
initiate such registration as specified in Section 2.2 or Section 2.4, whichever
is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers, directors and legal
counsel of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under
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the Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation") by the Company: (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the
offering covered by such registration statement; and the Company will reimburse
each such Holder, partner, officer or director, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 2.9(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld, nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the net proceeds from the offering received by such Holder.
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(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of liability to the
indemnified party under this Section 2.9 only to the extent it has been so
prejudiced, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds (net of commissions and discounts but not
of any other expenses) from the offering received by such Holder, and in no
event shall any contribution by a Holder hereunder exceed the amount such Holder
would have been obligated to pay pursuant to Section 2.9(b) had such clause been
enforceable.
(e) The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement. 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 that 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.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities that (i) is a
subsidiary, parent or affiliated entity or general partner,
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limited partner, member or retired partner or member of a Holder, (ii) is a
Holder's family member or trust for the benefit of an individual Holder, or
(iii) acquires at least ten thousand (10,000) shares of Registrable Securities
(as adjusted for stock splits, combinations an the like); provided, however, (A)
the transferor shall, within ten (10) days before such transfer, furnish to the
Company written notice of the name and address of such transferee or assignee
and the securities with respect to which such registration rights are being
assigned and (B) such transferee shall agree to be subject to all restrictions
set forth in this Agreement. Any such transferee or assignee shall be deemed an
"Investor" for purposes hereunder. In each case, such rights may only be
transferred together with the underlying Registrable Securities in a transfer
permitted by the Company's certificate of incorporation, this Agreement, the
Purchase Agreement and the Stockholders Agreement, as defined in the Purchase
Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least fifty percent (50%)
of the Registrable Securities then outstanding. Any amendment or waiver effected
in accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of at least two-thirds in interest of the Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company that would grant such holder registration rights that (i) are more
favorable than the registration rights granted hereunder or (ii) would reduce
the number of shares of Registrable Securities includable by the Holders in any
registration under Sections 2.1, 2.2 or 2.3.
2.13 "MARKET STAND-OFF" AGREEMENT. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than transfers permitted by Section 2.1(a)(iii) and, except in the case of a
Qualified Public Offering, other than sales by non-participating Holders under
Rule 144 that comply with the volume restrictions under Rule 144 even if the
limitations do not apply by the terms of the rule ) for a period specified by
the representative of the underwriters not to exceed one hundred eighty (180)
days following the effective date of a registration statement of the Company
filed under the Securities Act (the "Lock Up Period"), provided that:
(i) such agreement shall apply only to the Company's
Initial Offering and any other offering requested by the Holders pursuant to
Section 2.2 hereof; and
(ii) all officers and directors of the Company and
holders of at least one percent (1%) of the Company's voting securities at the
time of the Initial Offering enter into similar agreements.
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The obligations described in this Section 2.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The obligations in this Section
2.13 shall only apply during the Lock Up Period. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC that may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year
of the Company, and in any event within ninety (90) days thereafter, the Company
will furnish each Investor a consolidated balance sheet of the Company, as at
the end of such fiscal year, and a consolidated statement of income and a
consolidated statement of cash flows of the Company, for such year, all of which
shall be prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year,
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all in reasonable detail. Such financial statements shall be audited by
independent public accountants of national standing selected by the Company's
Board of Directors.
(c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a current capitalization table setting forth the issued
and outstanding capital stock and derivative securities of the Company, a
consolidated balance sheet of the Company as of the end of each such quarterly
period, a consolidated statement of income and a consolidated statement of cash
flows of the Company for such period and for the current fiscal year to date,
all of which shall be prepared in accordance with generally accepted accounting
principles consistently applied and certified by the chief financial officer of
the Company (or the chief accounting officer if no chief financial officer is in
place), with the exception that no notes need be attached to such statements and
year-end audit adjustments may not have been made.
(d) The Company will furnish each Investor (i) at least thirty
(30) days prior to the beginning of each fiscal year an annual budget and
operating plans for such fiscal year as well as an updated five-year strategic
plan for the Company, in such manner and form as approved by the Board of
Directors of the Company (and as soon as available, any subsequent revisions
thereto); and (ii) copies of all press releases and other statements made
available generally by the Company to the public concerning material
developments in the Company's business, including copies of any reports or
communications delivered to the financial community. The Company will furnish to
each Investor holding 2% or more of the Company's outstanding capital stock
copies of all reports and other written material submitted to the Board of
Directors of the Company that such Investor shall reasonably request, provided,
however, that the Company shall not be obligated to provide information that the
Board of Directors determines in good faith is confidential and should not,
therefore, be disclosed.
3.2 INSPECTION RIGHTS. Each Investor shall have the right to visit and
inspect any of the properties of the Company or any of its subsidiaries, and to
discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect
disclosure which the Board of Directors determines in good faith could adversely
affect the Company.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it that the Company identifies
as being confidential or proprietary (so long as such information is not in the
public domain), except that such Investor may disclose such proprietary or
confidential information to any partner, subsidiary, member or parent of such
Investor for the purpose of evaluating its investment in the Company as long as
such partner, subsidiary, member or parent is advised of the confidentiality
provisions of this Section 3.3 or to the extent required by law. All
confidential disclosures between Intel Corporation and the Company shall not be
governed by this Section 3.3 and instead shall be governed solely by the terms
of the Corporate Non-Disclosure Agreement No.
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0283540 dated June 17, 1999, executed between the Company and Intel Corporation
and any related Confidential Information Transmittal Records provided in
connection therewith.
3.4 STOCK EQUIVALENT VESTING. Unless otherwise approved by the Board of
Directors, all stock options and other similar stock equivalents issued after
the date of this Agreement to employees, directors, consultants and other
service providers shall be subject to vesting in accordance with the terms of
any stock option plan or similar plan approved by the Board of Directors.
3.5 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all officers, employees and consultants of the Company to execute and
deliver a Proprietary Information and Inventions Agreement in substantially the
form attached to the Purchase Agreement.
3.6 REAL PROPERTY HOLDING CORPORATION. The Company covenants that it
will operate in a manner such that it will not become a "United States real
property holding corporation" as that term is defined in Section 897(c)(2) of
the Internal Revenue Code of 1986, as amended, and the regulations thereunder
("FIRPTA") and shall, from time to time upon the request of any Purchaser,
confirm to such Purchaser that it is not a United States real property holding
corporation. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify each Investor of such change in status.
3.7 OBSERVER RIGHTS. The Company shall allow one representative
designated by each Investor (that is not otherwise represented by a director and
that holds 2% or more of the Company's outstanding capital stock) to attend all
meetings of the Company's Board of Directors in a nonvoting capacity, and in
connection therewith, the Company shall give each such representative copies of
all notices, minutes, consents and other materials, financial or otherwise,
which the Company provides to its Board of Directors concurrently with the
delivery of such information to the Board of Directors.
3.8 MEETINGS OF THE BOARD OF DIRECTORS. The Board of Directors shall
meet at least six (6) times each calendar year in accordance with an agreed upon
schedule.
3.9 NOMINATING COMMITTEE. If the Board of Directors establishes a
nominating committee, at least one director who is designated by a Major
Investor shall serve on such committee.
3.10 EXPENSES; COMPENSATION. The reasonable travel expenses of each
director (or observer) incurred to attend Board or committee meetings shall be
reimbursed by the Company. If the Company adopts a program to compensate its
"outside" or "independent" directors generally either with cash or with stock
options, then it shall also extend the same compensation to the directors who
are designated by an Investor (unless any such representative is also an officer
or employee of the Company), and in the case of stock options, such options
shall be transferable by the individual Board members to the Investors they
represent.
3.11 COMPLIANCE. The Company shall, and shall cause each of its
subsidiaries to:
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(a) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and all material licenses,
authorization and permits necessary to the conduct of its businesses;
(b) maintain and keep its properties in good repair, working
order and condition, and from time to time make all necessary and desirable
repairs, renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times;
(c) pay and discharge all taxes, assessments and governmental
charges imposed upon its properties or upon the income or profits therefrom (in
each case before the same becomes delinquent and before penalties accrue
thereon) and all claims for labor, materials or supplies to the extent to which
the failure to pay or discharge such obligations would reasonably be expected to
have a material adverse effect upon the financial condition, operating results,
assets, operations or business prospects of the Company and its subsidiaries
taken as a whole, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate reserves (as determined
in accordance with generally accepted accounting principles in the applicable
jurisdictions, consistently applied) have been established on its books with
respect thereto;
(d) comply with all other material obligations that it incurs
pursuant to any material contract or agreement, whether oral or written, express
or implied, as such obligations become due unless and to the extent that the
same are being contested in good faith and by appropriate proceedings and
adequate reserves (as determined in accordance with generally accepted
accounting principles, consistently applied) have been established on its books
with respect thereto;
(e) comply with all applicable laws, rules and regulations of
all governmental authorities, the violation of which would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company and
its subsidiaries taken as a whole; and
(f) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in such
amounts as are customary for corporations of similar size engaged in similar
lines of business.
3.12 BUSINESS PRACTICES. None of the Company, any Subsidiary (as
defined in the Purchase Agreement), any affiliate of the Company, or any person
acting on behalf of the Company, any Subsidiary or affiliate of the Company has
paid or delivered, or promised to pay or deliver, directly or indirectly through
any other person, any monies or anything of value to any government official or
employee of any political party, for the purpose of illegally or improperly
inducing or rewarding any action by the official favorable to the Company, any
Subsidiary or any affiliate of the Company.
3.13 TRANSACTIONS WITH AFFILIATES. The Company will not engage in any
transaction with any affiliate on terms more favorable to the affiliate than
would have been obtainable on an arm's-length basis in the ordinary course of
business unless approved by a majority of the unaffiliated members of the Board
of Directors.
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3.14 INDEMNIFICATION. The Company's Certificate of Incorporation and
Bylaws shall provide, to the maximum extent permitted by law, for elimination of
the liability of directors and for indemnification of directors and officers for
acts on behalf of the Company.
3.15 BOARD OF DIRECTOR APPROVAL. The Company shall not without the
approval of a majority of the Board of Directors, with all disinterested
Directors voting, incur debt, including without limitation, borrowings from any
bank or financial institution, in any twelve month period in excess of two
hundred fifty thousand dollars ($250,000.00).
3.16 ASSIGNMENT OF COMPANY'S RIGHTS. In the event the Company elects
not to exercise, in whole or in part, its right of first refusal set forth in
Section 1.3 of the Employee Stockholders Agreement, the Company shall assign to
the Investors the portion of such right that is not exercised. The Company shall
notify each Investor of such assignment promptly, but in no event later than ten
(10) days following the Company's receipt of a notice of proposed transfer from
a holder of Common Stock (a "Transferring Holder") pursuant to Section 1.2 of
the Employee Stockholders Agreement (the "Transfer Notice"). Each Investor shall
have the right and option to purchase its Pro Rata Share (as defined in Section
4.1 below) of the securities subject to such assigned right of first refusal.
Any purchases made by the Investors pursuant to the exercise of the foregoing
right shall be made in accordance with the terms set forth in Section 1.3 of the
Employee Stockholders Agreement.
3.17 RESTRICTIONS ON FUTURE ISSUANCES OF COMMON STOCK. With respect to
the issuance of any additional shares of Common Stock to employees of the
Company, the Company shall subject such shares to a right of first refusal
similar to that in Section 1 of the Employee Stockholders Agreement and a market
stand-off agreement similar to that set forth in Section 2.13 hereof.
3.18 COMPLIANCE WITH SMALL BUSINESS INVESTMENT ACT. The Company agrees
to provide each SBIC Purchaser with sufficient information to permit such
Purchasers to comply with their obligations under the Small Business Act. Within
90 days following the Closing (as defined in the Purchase Agreement) and within
90 days after the end of each calendar year during which the proceeds from the
sale of the Shares are being applied, the Company shall provide to each SBIC
Purchaser (as defined in the Purchase Agreement) a certificate of its chief
financial officer describing the use of such proceeds and verifying that the use
of such proceeds is in accordance with Section 3.18 below. The Company shall
provide each SBIC Purchaser and the Small Business Administration (the "SBA")
reasonable access to the Company's books and records for the purpose of
confirming the use of the proceeds received hereunder.
3.19 USE OF PROCEEDS. The Company agrees to use the investment proceeds
from each SBIC Purchaser for working capital purposes or to otherwise finance
the anticipated growth of the Company.
3.20 NON-DISCRIMINATION COMPLIANCE. So long as an SBIC Purchaser holds
any securities of the Company, the Company will at all times comply with the
non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117.
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3.21 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 3, other than Section 3.11, of this Agreement shall expire and
terminate as to each Investor on the earlier of (i) the consummation of the
Qualified Public Offering; and (ii) the first date on which no shares of
Preferred Stock are outstanding.
SECTION 4. RIGHTS OF FIRST OFFER.
4.1 SUBSEQUENT OFFERINGS. Each Investor shall have a right of first
offer to purchase its Pro Rata Share, as defined below, of eighty percent (80%)
of all Equity Securities, as defined below, that the Company may, from time to
time, propose to sell and issue after the date of this Agreement, other than the
Equity Securities excluded by Section 4.6 hereof. Each Investor's Pro Rata Share
is equal to the ratio of (A) the number of shares of Registrable Securities that
such Investor is deemed to be a holder immediately prior to the issuance of the
Equity Securities to (B) the total number of shares of Registrable Securities
held by all Investors immediately prior to the issuance of the Equity
Securities. The term "Equity Securities" shall mean (i) any Common Stock, Class
B Common Stock, Preferred Stock or other security of the Company, (ii) any
security convertible, with or without consideration, into any Common Stock,
Class B Common Stock, Preferred Stock or other security (including any option to
purchase such a convertible security), (iii) any security carrying any warrant
or right to subscribe to or purchase any Common Stock, Class B Common Stock,
Preferred Stock or other security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) business days from the giving of such notice to agree to purchase its Pro
Rata Share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Investor who would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Investors elect to purchase their Pro Rata Share of the Equity Securities, then
the Company shall promptly notify in writing the Investors who do so elect and
shall offer such Investors the right to acquire such unsubscribed shares. The
Investors shall have ten (10) business days after receipt of such notice to
notify the Company of its election to purchase all or a portion thereof of the
unsubscribed shares. If the Investors fail to exercise in full their respective
rights of first offer, the Company shall have ninety (90) days thereafter to
sell the Equity Securities in respect of which the Investors' rights were not
exercised, at a price and upon general terms and conditions materially no more
favorable to the purchasers thereof than specified in the Company's notice to
the Investors pursuant to Section 4.2 hereof. If the Company has not sold such
Equity Securities within ninety (90) days of the notice provided pursuant to
Section 4.2, the Company shall not thereafter issue or sell any Equity
Securities, without first offering such securities to the Investors in the
manner provided above.
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4.4 TERMINATION OF RIGHTS OF FIRST OFFER. The rights of first offer
established by this Section 4 shall not apply to, and shall terminate upon the
earlier to occur of (i) the effective date of the registration statement
pertaining to the Company's Qualified Public Offering; and (ii) the date on
which no shares of Preferred Stock are outstanding.
4.5 TRANSFER OF RIGHTS OF FIRST OFFER. The rights of first offer of
each Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions, as any transfer of registration rights
pursuant to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights of first offer established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement, provided that the rights
of first offer established by this Section 4 applied with respect to the initial
sale or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) shares of Common Stock or Class B Common Stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company;
(e) shares of Preferred Stock issued pursuant to the Purchase
Agreement;
(f) shares of (i) Common Stock issued upon conversion of the
Class B Common Stock, Series A Preferred Stock, Series C Preferred Stock and/or
Series E Preferred Stock, and (ii) Class B Common Stock, Series A Preferred
Stock, Series C Preferred Stock and Series E Preferred Stock issued upon
conversion of the Series B Preferred Stock, Series D Preferred Stock and/or the
Series F Preferred Stock.
(g) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act.
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25
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Colorado as applied to agreements among Colorado
residents entered into and to be performed entirely within Colorado, except that
the General Corporation Law of the State of Delaware shall govern as to matters
of corporate law.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Company and the
holders of a majority in interest of the Registrable Securities; provided that
any amendment or modification to Section 3.3 affecting the confidential
disclosures between Intel and the Company requires the prior written approval of
Intel Corporation.
(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of the holders of at least a majority in interest
of the Registrable Securities.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach,
21
26
default or noncompliance under the Agreement or any waiver on such Holder's part
of any provisions or conditions of this Agreement must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to Holders
shall be cumulative and not alternative.
5.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth on the signature
pages hereof or Exhibit A hereto or at such other address as such party may
designate by ten (10) days advance written notice to the other parties hereto.
5.8 ENTIRE AGREEMENT. This Agreement, the exhibits and schedules
hereto, the Purchase Agreement and the other documents delivered pursuant
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof.
5.9 TERMINATION OF PRIOR AGREEMENT. Certain of the undersigned
Investors, who together constitute the requisite parties to terminate the Prior
Agreement, hereby terminate the Prior Agreement in its entirety and the Prior
Agreement shall be of no further force and effect.
5.10 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
5.11 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.12 COUNTERPARTS. This Agreement may be delivered via facsimile and
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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27
IN WITNESS WHEREOF, the parties hereto have executed this FOURTH
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT as of the date set forth in the
first paragraph hereof.
COMPANY: INVESTORS:
FORMUS COMMUNICATIONS, INC. CENTENNIAL FUND V, L.P.
BY: CENTENNIAL HOLDINGS V, L.P.
ITS: GENERAL PARTNER
By: By:
-------------------------------- --------------------------------------
Xxxx Xxxxxxxx Xxxxxx X. Xxxxxxxx, A General Partner
Chief Executive Officer
CENTENNIAL ENTREPRENEURS FUND V, L.P.
BY: CENTENNIAL HOLDINGS V, L.P.
ITS: GENERAL PARTNER
By:
--------------------------------------
Xxxxxx X. Xxxxxxxx, A General Partner
CENTENNIAL FUND VI, L.P.
BY: CENTENNIAL HOLDINGS VI, LLC
ITS: GENERAL PARTNER
By:
--------------------------------------
Xxxxxx X. Xxxxxxxx, Managing Principal
CENTENNIAL ENTREPRENEURS FUND VI, L.P.
BY: CENTENNIAL HOLDINGS VI, LLC
ITS: GENERAL PARTNER
By:
--------------------------------------
Xxxxxx X. Xxxxxxxx, Managing Principal
CENTENNIAL HOLDINGS I, LLC
By:
--------------------------------------
Xxxxxx X. Xxxxxxxx, Chairman
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
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28
MILLENNIAL HOLDINGS LLC
By:
--------------------------------------
Xxxxx X. Xxxxxx
Managing Member
TELECOM PARTNERS, L.P.
BY: TELECOM MANAGEMENT, L.L.C.
ITS: GENERAL PARTNER
By:
--------------------------------------
Xxxx X. Xxxxxx
Chief Financial Officer
TELECOM PARTNERS II, L.P.
BY: TELECOM MANAGEMENT II, L.L.C.
ITS: GENERAL PARTNER
By:
--------------------------------------
Xxxx X. Xxxxxx
Chief Financial Officer
SPECTRUM EQUITY INVESTORS, L.P.
BY: SPECTRUM EQUITY ASSOCIATES, L.P.
ITS: GENERAL PARTNER
By:
--------------------------------------
Xxxxx X. Xxxxxx
Attorney-in-Fact
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
29
SPECTRUM EQUITY INVESTORS II, L.P.
BY: SPECTRUM EQUITY ASSOCIATES II, L.P.
ITS: GENERAL PARTNER
By:
--------------------------------------
Xxxxx X. Xxxxxx
A General Partner
MEDIA/COMMUNICATIONS PARTNERS III LIMITED
PARTNERSHIP
BY: M/C III L.L.C., ITS GENERAL PARTNER
By:
--------------------------------------
Xxxxx Xxxxxx
Manager
M/C INVESTORS L.L.C.
By:
--------------------------------------
Xxxxx Xxxxxx
Manager
BARING COMMUNICATIONS EQUITY LIMITED
By:
--------------------------------------
Xxxxxxxxxxx Xxxxxxxx
Director
NORTHWOOD VENTURES LLC
By:
--------------------------------------
Xxxxx X. Xxxxxx
President
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
30
NORTHWOOD CAPITAL PARTNERS LLC
By:
--------------------------------------
Xxxxx X. Xxxxxx
President
CRESCENDO WORLD FUND, LLC
BY: CRESCENDO VENTURES - WORLD FUND, LLC
ITS: MANAGING MEMBER
By:
--------------------------------------
EAGLE VENTURES WF, LLC
By:
--------------------------------------
BANCBOSTON INVESTMENTS, INC.
By:
--------------------------------------
Xxxx X. Xxxxxxx, Vice-President
CIBC WOOD GUNDY CAPITAL CORP.
By:
--------------------------------------
Xxx Xxxxxx, Managing Director
By:
--------------------------------------
Xxxx Xxxxxxxxxxx, Managing Director
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
31
DOEG HILL I, LLC
By:
--------------------------------------
Xxxxxx Xxxxxxx, Manager
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners
Its: General Partners
By:
--------------------------------------
Xxxxxxx X. Xxxxxx, General Partner
HARBOURVEST INTERNATIONAL PRIVATE EQUITY
PARTNERS III-DIRECT FUND L.P.
BY: HIPEP III-DIRECT ASSOCIATES L.L.C.
ITS: GENERAL PARTNER
BY: HABOURVEST PARTNERS, L.L.C.
ITS: MANAGING MEMBER
By:
--------------------------------------
--------------------------------------
Xxxxxxx X. Xxxxxx
--------------------------------------
Xxxxxxxxx Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxx
--------------------------------------
Xxxxxx Xxxxxx
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
32
PART'COM
By:
--------------------------------------
Xxxxxx xx Xxxxxxx
Managing Director
MEDIATEL CAPITAL FCP
BY: MEDIATEL MANAGEMENT S.A.
ITS: MANAGEMENT COMPANY
By:
--------------------------------------
Xxxxxxx Xxxxxxxxx
Senior Advisor
CRI MEDIA PARTNERS, L.P.
By:
--------------------------------------
Xxxxx Xxxxxxx Xxxxx
President of General Partner
CRI MEDIA PARTNERS II, L.P.
By:
--------------------------------------
Xxxxx Xxxxxxx Xxxxx
President of General Partner
INTEL CORPORATION
BY:
--------------------------------------
NAME:
TITLE:
CITIZENS CAPITAL, INC.
BY:
--------------------------------------
XXXXXXX X. XXXXXXXX
MANAGING DIRECTOR
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
33
XXXXX CAPITAL, LP
BY: XXXXX CAPITAL MANAGEMENT, LLC
ITS: GENERAL PARTNER
By:
--------------------------------------
Managing Member
--------------------------------------
Xxxxxx X. Xxxxxxx
--------------------------------------
Xxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxxx
--------------------------------------
Xxxx X. Xxxxxxx
--------------------------------------
Xxxxxxxx X. Xxxx
--------------------------------------
Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxx X. Xxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxx
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
34
--------------------------------------
Xxxx X. Xxxxxxxx
--------------------------------------
Xxxxxxx X. Xxxx
--------------------------------------
Xxxxx Xxxxxxxx
--------------------------------------
Xxxxxx Xxxxxxx
--------------------------------------
Xxxxx Xxxxxx
--------------------------------------
Xxxxx Xxxxxx
--------------------------------------
Xxxxxx X. Xxx
HOOKS TRUST DATED NOVEMBER 4, 1998
By:
-----------------------------------
Xxxxxxx X. Xxxxx, Trustee
--------------------------------------
Xxxx X. Xxxxxxx
--------------------------------------
Xxxxx X. Honour
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
35
--------------------------------------
Xxxxxx X. Xxxxxx
--------------------------------------
Xxxxx X. Xxxxxx
--------------------------------------
Xxxxxx X. Xxxxxx
--------------------------------------
Xxxxx XxXxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxx
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
36
--------------------------------------
Dr. Xxxxxxx Xxxxxx
--------------------------------------
Xx. Xxxx Xxxxxxxx
--------------------------------------
Xxxxxxxx Xxxxxxxx
--------------------------------------
Xxxxxx Xxxxxxxx
--------------------------------------
Xxxxxxxxx Xxxxxxxx
--------------------------------------
Xxxxxxxx Xxxxx
TCB BETEILIGUNGS GMBH
By:
--------------------------------------
Xx. Xxxxxx Xxxxxxx, Managing Director
CHASE CAPITAL PARTNERS (CCP) GERMANY B.V.
By:
--------------------------------------
Xxxxxxxx Xxxxx, Partner
CHASE EUROPEAN EQUITY ASSOCIATES II LLC
By:
--------------------------------------
Xxxxxxxx Xxxxx, Partner
(Signature Page for Formus Communications, Inc.
Fourth Amended and Restated Investors' Rights Agreement)
37
SCHEDULE A
SCHEDULE OF INVESTORS
38
SCHEDULE B
