EXHIBIT 10.1
BEA SYSTEMS, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is made as of
September 28, 1995 by and among BEA Systems, Inc., a Delaware corporation
(the "Company"), and Xxxxxxx X. Xxxxxxx III, Xxxxxx X. Xxxxxx, and Xxxxxx X.
Xxxxx, Xx (individually "Founder" and collectively, the "Founders") and
Warburg, Xxxxxx Ventures, L.P., a Delaware limited partnership (individually
"Investor" and collectively with the Founders as the "Stockholders").
R E C I T A L S
A. The Founders have organized the Company and own an aggregate of
2,925,000 shares of its Common Stock, $.001 par value (the "Founders Stock").
B. Investor is purchasing an aggregate of 1,000,000 shares of the
Company's Common Stock, $.001 par value ("Investor Common Stock") and
7,900,000 shares of the Company's Series A Preferred Stock, $.001 par value
(the "Preferred Stock") pursuant to a Stock Purchase Agreement of even date
herewith between Investor and the Company (the "Purchase Agreement").
C. The obligations of the Company and Investor under the Purchase
Agreement are conditioned, among other things, upon the execution and
delivery of this Agreement by Investor and the Company.
NOW, THEREFORE, in consideration of the mutual promises and
covenants hereinafter set forth, all parties hereto agree as follows:
1. CERTAIN DEFINITIONS. All capitalized terms used and not otherwise
defined herein shall have the meanings given them in the Purchase Agreement.
As used in this Agreement, the following terms shall have the following
respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"CONVERSION STOCK" means the Common Stock issued or issuable
pursuant to conversion of the Preferred Stock.
1
"HOLDER" shall mean (i) any Founder or Investor holding Registrable
Securities, and (ii) any person holding Registrable Securities to whom the
rights under this Agreement have been transferred in accordance with Section
5.10 hereof; provided that neither the Founders nor any of their assignees
shall not be deemed Holders for the purposes of Sections 5.1 or 5.3 below.
"INITIATING HOLDERS" shall mean any Holders (other than Holders who
are Founders or assignees of the Founders) who in the aggregate hold not less
than 50% of the Registrable Securities held by all such Holders.
"PREFERRED STOCK" shall mean the Series A Preferred Stock of the
Company issued pursuant to the Stock Purchase Agreement.
"REGISTRABLE SECURITIES" means (i) the Conversion Stock, (ii) the
Investor Common Stock; (iii) the Founders Stock; and (iv) any Common Stock of
the Company issued or issuable in respect of the Conversion Stock, the
Investor Common Stock or the Founders Stock upon any stock split, stock
dividend, recapitalization, or similar event, or any Common Stock otherwise
usable with respect to the Conversion Stock, the Investor Common Stock or the
Founders Stock; provided, however, that shares of Conversion Stock or other
securities shall only be treated as Registrable Securities if and so long as
they have not been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction. The terms
"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 the effectiveness of such
registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections
5.1, 5.2 and 5.3 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company) and the reasonable
fees and disbursements of one counsel for all Holders.
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 3 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered
by the Holders and, except as set
2
forth under "Registration Expenses," all fees and disbursements of counsel
for any Holder.
2. RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock, the Investor
Common Stock, the Founders Stock, the Conversion Stock and any other
securities issued in respect of the Preferred Stock, the Investor Common
Stock, the Founders Stock, or the Conversion Stock upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event
shall not be sold, assigned, transferred or pledged except upon the
conditions specified in this Agreement, which conditions are intended to
ensure compliance with the provisions of the Securities Act. Investor will
cause any proposed purchaser, assignee, transferee, or pledgee of any such
shares held by Investor to agree to take and hold such securities subject to
the provisions and upon the conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing (i) the
Preferred Stock, (ii) the Conversion Stock, (iii) the Investor Common Stock,
(iv) the Founders Stock, and (v) any other securities issued in respect of
the Preferred Stock, the Investor Common Stock, the Founders Stock, or the
Conversion Stock upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted by
the provisions of Section 4 below) be stamped or otherwise imprinted with a
legend in substantially the following form (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. SUCH SHARES MAY NOT BE SOLD OR TRANS-
FERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE
AGREEMENTS COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each Stockholder and/or Holder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Preferred
Stock or the Common Stock in order to implement the restrictions on transfer
established in this Agreement.
4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in
all respects with the provisions of this Section 4. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted
3
Securities (other than (i) a transfer not involving a change in beneficial
ownership, (ii) in transactions involving the distribution without
consideration of Restricted Securities by the Investor to any of its
partners, or retired partners, or to the estate of any of its partners or
retired partners, (iii) in transactions involving the transfer without
consideration of Restricted Securities by a Founder during his lifetime by
way of gift or on death by will or intestacy, (iv) in transactions involving
the transfer or distribution of Restricted Securities by a corporation to any
subsidiary, parent or affiliated corporation of such corporation, or (v) in
transactions in compliance with Rule 144), unless there is in effect a
registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the
effect that the proposed transfer of the Restricted Securities may be
effected without registration under the Securities Act, or (ii) a "no action"
letter from the Commission to the effect that the transfer of such securities
without registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder
to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
3 above, except that such certificate shall not bear such restrictive legend
if, in the opinion of counsel for such holder and the Company, such legend is
not required in order to establish compliance with any provision of the
Securities Act.
5. REGISTRATION.
5.1 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to not less than
one-half of their shares of Registrable Securities, or any lesser number of
shares if the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed ten million dollars ($10,000,000),
the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the Securities Act and any other governmental requirements
4
or regulations) 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 Holder or Holders joining in such request as
are specified in a written request received by the Company within 20 days
after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 5.1:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may
be required by the Securities Act;
(B) Prior to the earlier of September 28, 1998 or
six months after the effective date of the Company's first registered public
offering of its stock;
(C) If the Company, within ten (10) days of the
receipt of the request of the Initiating Holders, gives notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within ninety (90) days of receipt of such request (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan);
(D) During the period starting with the date of
filing of, and ending on the date 180 days immediately following the
effective date of, any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(E) After the Company has effected two such
registrations pursuant to this Section 5.1(a), and such registrations have
been declared or ordered effective;
(F) Within twelve (12) months after the Company has
effected such a registration pursuant to this Section 5.1(a), and such
registration has been declared or ordered effective; or
(G) If the Company shall furnish to such Initiating
Holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its stockholders for a registration statement
to be filed in the near future, in which case the Company's obligation to use
its best efforts to register, qualify or comply under this Section 5.1 shall
be deferred for a period not to exceed 90 days from the date of receipt of
written request
5
from the Initiating Holders, provided that the Company may not exercise this
deferral right more than once per twelve-month period.
Subject to the foregoing clauses (A) through (G), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) UNDERWRITING. In the event that a registration pursuant
to Section 5.1 is for a public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 5.1(a)(i), and the right of any Holder to registration pursuant to
Section 5.1 shall be conditioned upon such Holder's participation in such
underwriting arrangements, and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent requested shall be limited to
the extent provided herein.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter
selected for such underwriting by a majority in interest of the Initiating
Holders, but subject to the Company's reasonable approval. Notwithstanding
any other provision of this Section 5.1, if the managing underwriter advises
the Initiating Holders that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
holders of Registrable Securities, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders at the time
of filing the registration statement. No Registrable Securities excluded
from the underwriting by reason of the underwriter's marketing limitation
shall be included in such registration. To facilitate the allocation of
shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the managing underwriter and the Initiating Holders.
The Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 120 days after the effective
date of such registration, or such other shorter period of time as the
underwriters may require.
5.2 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to
time the Company shall determine to register any of its equity securities,
either for its own account or for the account of a security holder or
holders, other than (A) a registration relating solely to employee benefit
plans, or (B) a registration relating solely to a Rule 145 transaction, the
Company will:
6
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 30 days after receipt of such
written notice from the Company, by any Holder.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as a part of the written notice given
pursuant to Section 5.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 5.2 shall be conditioned upon such Holder's
participation in such underwriting, and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 5.2, 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 Registrable Securities
to be included in such registration (i) in the case of the Company's initial
public offering, to zero, and (ii) in the case of any other offering, to an
amount no less than 25% of all shares to be included in such offering;
PROVIDED HOWEVER, that (x) any such limitation or "cut-back" shall be first
applied to all shares proposed to be sold in such offering other than for the
account of the Company which are not Registrable Securities, and (y)
notwithstanding clause (x), in no event shall any shares being sold by a
stockholder exercising a demand registration right similar to that granted in
Section 5.1 be excluded from such offering. The Company shall so advise all
Holders and other holders distributing their securities through such
underwriting, and the number of shares of Registrable Securities or other
securities that may be included in the registration and underwriting shall be
first allocated among all the Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holder 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 or holder to the nearest
100 shares.
If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall
not be transferred in a public distribution prior to 120 days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require.
7
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under
this Section 5.2 prior to the effectiveness of such registration whether or
not any Holder has elected to include securities in such registration.
5.3 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which would equal or exceed
$2,500,000, and the Company is a registrant entitled to use Form S-3 to
register the Registrable Securities for such an offering, the Company shall
use its best efforts to cause such Registrable Securities to be registered
for the offering on such form and to cause such Registrable Securities to be
qualified in such jurisdictions as such Holder or Holders may reasonably
request; provided, however, that the Company shall not be required to effect
more than one registration pursuant to this Section 5.3 in any six (6) month
period. The Company shall inform other Holders of the proposed registration
and offer them the opportunity to participate. In the event the registration
is proposed to be part of a firm commitment underwritten public offering, the
substantive provisions of Section 5.1(b) shall be applicable to each such
registration initiated under this Section 5.3.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 5.3:
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(ii) if the Company, within ten (10) days of the receipt
of the request of the initiating Holders, gives notice of its bona fide
intention to effect the filing of a registration statement with the
Commission within ninety (90) days of receipt of such request (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan);
(iii) after the Company has effected two such
registrations pursuant to Section 5.3(a), and such registrations have been
declared or ordered effective;
(iv) during the period starting with the date of filing
of, and ending on the date 180 days immediately following the effective date
of, any registration statement pertaining to securities of the Company (other
than a registration of securities in a Rule 145 transaction or with respect
to an employee benefit plan), provided that the Company is
8
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(v) if the Company shall furnish to such Holder or
Holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its stockholders for registration statements to
be filed in the near future, in which case the Company's obligation to use
its best efforts to file a registration statement shall be deferred for a
period not to exceed 90 days from the receipt of the request to file such
registration by such Holder or Holders, provided that the Company may not
exercise this deferral right more than once per twelve-month period.
5.4 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the Closing Date, the Company shall not enter into any agreement granting any
holder or prospective holder of any securities of the Company registration
rights with respect to such securities without the written consent of the
holders of a majority of the Registrable Securities then outstanding, unless
(i) such other registration rights are subordinate to the registration rights
granted to the Holders hereunder, and (ii) the holders of such rights are
subject to market standoff obligations no more favorable to such persons than
those contained herein.
5.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with (i) two registrations pursuant to Section 5.1, (ii) all
registrations pursuant to Section 5.2, and (iii) two registrations pursuant
to Section 5.3, shall be borne by the Company. Unless otherwise stated, all
Selling Expenses relating to securities registered on behalf of the Holders
and all other registration expenses shall be borne by the Holders of such
securities pro rata on the basis of the number of shares so registered.
5.6 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Agreement, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for at least one
hundred twenty (120) days or until the distribution described in the
registration statement has been completed, whichever first occurs; and
(b) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such Holders and underwriters may
reasonably request in order to facilitate the public offering of such
securities.
9
5.7 INDEMNIFICATION.
(a) The Company will indemnify each Holder of Registrable
Securities included in a registration pursuant to this Agreement, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
under writer 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 not misleading, or any violation by the
Company of the Securities Act of 1933, the Securities Exchange Act of 1934,
state securities law or any rule or regulation promulgated under the such
laws 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, directors and partners, 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, as
such expenses are 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 any Holder, controlling person or
underwriter and stated to be specifically for use therein; provided, however,
that the foregoing indemnity agreement is subject to the condition that,
insofar as it relates to any such untrue statement, alleged untrue statement,
omission or alleged omission made in a preliminary prospectus on file with
the Commission at the time the registration statement becomes effective or
the amended prospectus filed with the Commission pursuant to Rule 424(b) (the
"Final Prospectus"), such indemnity agreement shall not inure to the benefit
of any underwriter, or any Holder, if there is no underwriter, if a copy of
the Final Prospectus was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act, and if the Final Prospectus would have cured the defect
giving rise to the loss, liability, claim or damage.
(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, 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
10
other such Holder, each of its officers, directors and partners and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all expenses, 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 statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred, as such expenses are incurred, in
connection with investigating, preparing 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.
Notwithstanding the foregoing, the liability of each Holder under this
Section 5.7(b) shall be limited in an amount equal to the net proceeds of the
shares sold by such Holder, unless such liability arises out of or is based
on willful misconduct by such Holder.
(c) Each party entitled to indemnification under this Section
5.7 (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, 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), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Agreement unless the
failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action, and provided further that the
Indemnifying Party shall not assume the defense for matters as to which
representation of both the Indemnifying Party and the Indemnified Party by
the same counsel would be inappropriate due to actual or potential differing
interests between them, but shall instead in such event pay the fees and
costs of separate counsel for the Indemnified Party. 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.
5.8 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall be required in connection with
any registration, qualification or compliance referred to in this Agreement.
11
5.9 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 Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock
of the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the
reporting requirements of the Securities Act or the Securities Exchange Act
of 1934, as amended;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (at any time after it has become
subject to such reporting requirements); and
(c) So long as a Holder owns any Restricted Securities to
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
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the
general public) and of the Securities Act and the Securities Exchange Act of
1934 (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
the Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing the Holder to sell any such securities
without registration.
5.10 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted Investors under Sections 5.1, 5.2 and
5.3 may be assigned to a transferee or assignee in connection with any
transfer or assignment of Registrable Securities by the Investor provided
that: (i) such transfer may otherwise be effected in accordance with
applicable securities laws, (ii) such assignee or transferee acquires at
least 500,000 shares of Preferred Stock, Investor Common Stock, Founders
Stock and/or Conversion Stock held by the assignor or transferor
(appropriately adjusted for recapitalizations, stock splits and the like) or
such lesser number, if it constitutes all such shares held by the assignor or
transferor, (iii) written notice is promptly given to the Company and (iv)
such transferee agrees to be bound by the provisions of this Agreement.
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned to (A) any affiliated partnership or constituent
partner or retired partner of an Investor which is a partnership, or (B) an
officer, director or shareholder or a subsidiary, parent or affiliated
corporation of Investor which is a corporation, or (C) a family member or
trust for the benefit of a Founder who is an individual, without compliance
with item (ii) above, provided written notice thereof is promptly given to
the Company and the transferee agrees to be bound by the provisions of this
Agreement.
12
5.11 TERMINATION OF REGISTRATION RIGHTS. The rights granted
pursuant to Sections 5.2 and 5.3 of this Agreement shall terminate as to any
Holder at such time as such Holder (i) can sell all of his Registrable
Securities pursuant to Rule 144(k) promulgated under the Securities Act or
(ii) can sell all of his Registrable Securities pursuant to Rule 144
promulgated under the Securities Act in any ninety (90) day period.
6. FINANCIAL INFORMATION.
(a) The Company will provide the following reports to Investor:
(i) As soon as practicable after the end of each fiscal year,
and in any event within 90 days thereafter, consolidated balance sheets of
the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of operations and of cash flows and stockholders'
equity of the Company and its subsidiaries, if any, for such year, prepared
in accordance with generally accepted accounting principles and setting forth
in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company, and a capitalization table in
reasonable detail for such fiscal year.
(ii) At least thirty days prior to the beginning of each
fiscal year, a budget adopted by the Company's Board of Directors for the
fiscal year, prepared on a monthly basis, including balance sheets and
sources and applications of funds statements for such months, and, as soon as
prepared, any other budgets or revised budgets prepared by the Company;
(iii) Within 30 days after the end of each monthly
accounting period, a consolidated condensed balance sheet of the Company and
its subsidiaries, if any, as of the end of each such monthly period, and
consolidated condensed statement of operations of the Company and its
subsidiaries for such period and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles (other
than for accompanying notes), subject to changes resulting from year-end
audit adjust ments, together with management's analysis of results and a
statement of the chief financial or accounting officer of the Company
explaining any differences from the budget for such monthly accounting
period, and signed by the principal financial or accounting officer of the
Company, and a capitalization table in reasonable detail for such monthly
accounting period.
7. CONFIDENTIALITY. Investor acknowledges and agrees that any
information obtained pursuant to Section 6 which may be considered "inside"
non-public information will not be utilized by Investor or transferee in
connection with purchases or sales of the Company's securities and will not
be disclosed by any such Investor or transferee.
13
8. RIGHT OF FIRST REFUSAL.
(a) The Company hereby grants to Investor and its assigns, the
right of first refusal to purchase its Pro Rata Share of New Securities (as
defined in this Section 8) which the Company may, from time to time, propose
to sell and issue. The "Pro Rata Share", for purposes of this right of first
refusal, is the ratio that (i) the sum of the number of shares of Common
Stock then held by Investor or such assignee and the number of shares of
Common Stock issuable upon conversion of the Preferred Stock then held by
Investor or such assignees bears to (ii) the sum of the total number of
shares of Common Stock (the "Conversion Stock") then outstanding and the
number of shares of Common Stock issuable upon exercise or conversion of all
then outstanding securities exercisable for or convertible into, directly or
indirectly, Common Stock.
(b) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company, including Common Stock and any series
of preferred stock, whether now authorized or not, and rights, options or
warrants to purchase said shares of Common Stock or preferred stock, and
securities of any type whatsoever that are, or may become, convertible into
or exchangeable for said shares of Common Stock or preferred stock.
Notwithstand ing the foregoing, "New Securities" does not include (i) the
Conversion Stock, (ii) Common Stock offered to the public generally pursuant
to a registration statement under the Securities Act in connection with the
Company's initial public offering, (iii) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of all
or substantially all of the assets or other reorganization whereby the
Company or its stockholders own more than fifty percent (50%) of the voting
power of the surviving or successor corporation, (iv) up to 3,300,000 shares
(net of any repurchases) of the Company's Common Stock or related options,
warrants or other rights to purchase such Common Stock issued on or after the
date hereof to employees, officers and directors of, and consultants to, the
Company, and (v) stock issued in connection with any stock split, stock
dividend or recapitalization by the Company.
(c) In the event the Company proposes to undertake an issuance of
New Securities, it shall give Investor and such assignees written notice of
its intention, describing the amount and type of New Securities, and the
price and terms upon which the Company proposes to issue the same. Investor
and such assignees shall have fifteen (15) days from the date of receipt of
any such notice to agree to purchase up to its respective Pro Rata Share of
such New Securities for the price and upon the terms specified in the notice
by giving written notice to the Company and stating therein the quantity of
New Securities to be purchased.
(d) In the event all of the New Securities are not elected to be
purchased by Investor within fifteen (15) days after the notice pursuant to
Section 9(c) above, the Company shall have ninety (90) days thereafter to
sell the New Securities not elected to be purchased by Investor at the price
and upon the terms no more favorable to the purchasers of such securities
than specified in the Company's notice. In the event the Company has not
sold the New Securities within said ninety (90) day period, the Company shall
not thereafter issue or sell any New Securities without first offering such
securities in the manner provided above.
14
(e) The right of first refusal hereunder is not assignable except
by Investor to its partners or other affiliates or to any party who acquires
at least 500,000 shares of the Investor Common Stock, Preferred Stock and/or
Conversion Stock (appropriately adjusted for recapitalizations, stock splits
and the like) from Investor.
9. TERMINATION OF COVENANTS. The covenants set forth in Sections 6
and 8 shall terminate and be of no further force or effect upon the
consummation of a firm commitment underwritten public offering or at such
time as the Company is required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, whichever shall
occur first.
10. STANDOFF AGREEMENT. In connection with the initial public offering
of the Company's securities, each Holder agrees, upon request of the Company
or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the effective date of such
registration as may be requested by the underwriters, provided that all
officers and directors of the Company who own stock of, or hold options to
purchase stock of, the Company and all other persons who hold 5% or more of
the then outstanding capital stock of the Company also agree to such
restrictions. The Stockholders agree that the Company may instruct its
transfer agent to place stop-transfer notations in its records to enforce the
provisions of this Section 10.
11. DETERMINATION OF SHARE AMOUNTS AND PERCENTAGES. For the purposes
of determining the minimum holdings set forth in this Agreement, including
without limitation the minimum holdings pursuant to Sections 5.10 and 12, the
following rules shall govern:
(a) All shares held by entities affiliated with the holder shall
be deemed held by such holder, and any holder which is a partnership shall be
deemed to hold any shares of Preferred Stock, Investor Common Stock and/or
Conversion Stock originally purchased by such holder and subsequently
distributed to partners of such holder, but which have not been resold by
such partners.
(b) When shares of Preferred Stock are counted together with
shares of Conversion Stock or shares of Common Stock, shares of Preferred
Stock shall be counted on an as-converted into Common Stock basis, and the
term "Conversion Stock" shall mean only the shares of Common Stock which have
been issued pursuant to conversion of Preferred Stock.
15
12. AMENDMENT. Any provision of Section 5 of this Agreement may be
amended or 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 a majority of the
Registrable Securities then outstanding or deemed to be outstanding. Any
provisions of Sections 6 and 8 of this Agreement may be amended or the
observance thereof so waived only with the written consent of the Company and
Investor. Any provisions other than Sections 5, 6 and 8 of this Agreement
may be amended or the observance thereof so waived only with the written
consent of the Company and a majority of the holders of such Registrable
Securities. Any amendment or waiver effected in accordance with this Section
12 shall be binding upon Investor and each Holder of Registrable Securities
at the time outstanding or deemed to be outstanding (including securities
into which such securities are convertible), each future holder of all such
securities and the Company.
13. GOVERNING LAW. This Agreement and the legal relations between the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit
to the jurisdiction of the federal and state courts of the State of
California with respect to the breach or interpretation of this Agreement or
the enforcement of any and all rights, duties, liabilities, obligations,
powers, and other relations between the parties arising under this Agreement.
14. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties regarding the matters set
forth herein. 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.
15. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery to the party to be notified or three (3) days after
deposit with the United States mail, by registered or certified mail, postage
prepaid, addressed (a) if to Investor, at such Investor's address as set
forth in the Purchase Agreement, or at such other address as such Investor
shall have furnished to the Company in writing in accordance with this
Section 15, (b) if to any other holder of Preferred Stock, the Investor
Common Stock, the Founders Stock, or Conversion Stock, at such address as
such holder shall have furnished the Company in writing in accordance with
this Section 15, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder thereof who has so
furnished an address to the Company, or (c) if to the Company, at its
principal office.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
The foregoing Investor Rights Agreement is hereby executed as of the
date first above written.
16
"COMPANY" FOUNDERS
BEA SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx III /s/ Xxxxxxx X. Xxxxxxx III
--------------------------- --------------------------
Xxxxxxx X. Xxxxxxx III
Title: President /s/ Xxxxxx Xxxxxx
------------------------ --------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxx, Xx.
"INVESTOR" --------------------------
WARBURG, XXXXXX VENTURES, L.P. Xxxxxx X. Xxxxx, Xx.
By: /s/ Stuart X. X. Xxxxx
---------------------------
Title: Partner, Warburg, Xxxxxx & Co.
-------------------------------
17
