Exhibit 4.2
AMENDED AND RESTATED
SHAREHOLDER RIGHTS AGREEMENT
This Amended and Restated Shareholder Rights Agreement (this
"Agreement") is made as of this 13th day of November 1998 by and among Viant
Corporation, a California corporation (the "Company"), the persons and entities
listed on the signature pages hereto as purchasers of the Company's Series D
Preferred Stock (the "Series D Preferred") (the "Purchasers"), the holders of
Series A Preferred Stock ("Series A Preferred") of the Company (the "Series A
Holders"), the holders of Series B Preferred Stock ("Series B Preferred") of the
Company ("Series B Holders"), the holders of Series C Preferred Stock ("Series C
Preferred") of the Company (the "Series C Holders"), CKS Group, Inc. ("CKS"),
Xxxxxx Xxxx ("Gett") and Xxxx Xxxxxxxxx (the "Founder"). The Series A Holders,
Series B Holders, Series C Holders, CKS, Gett and the Founder are hereinafter
referred to as the "Prior Rights Holders."
RECITALS
A. The Prior Rights Holders and the Company are parties to that certain
Amended and Restated Shareholder Rights Agreement dated as of June 19, 1996, and
amended November 4, 1996 and June 6, 1997 (the "Prior Agreement"), pursuant to
which the Company granted to the Prior Rights Holders certain registration and
information rights and rights of first refusal; and
B. In connection with the Company's issuance of Series D Preferred
pursuant to the Series D Preferred Stock Purchase Agreement between the Company
and the Purchasers dated as of even date herewith (the "Purchase Agreement"), a
majority of the holders of Demand Registrable Securities (as defined in the
Prior Agreement) have agreed to amend and restate the Prior Agreement in
exchange for being granted the registration and information rights and the
rights of first refusal set forth in this Agreement;
C. In consideration of the mutual agreements, covenants and conditions
contained herein, the Company and each of the Purchasers and Prior Rights
Holders hereby agree as follows:
AGREEMENT
1. TERMINATION OF PRIOR RIGHTS. Effective and contingent upon execution
of this Agreement by holders of a majority of the Shares of Demand Registrable
Securities (as such term is defined in Section 1 of the Prior Agreement) and
upon the closing of the transactions contemplated by the Purchase Agreement, the
Prior Agreement is hereby declared null and void and is amended and restated in
its entirety to read as set forth in this Agreement, and the Company, the
Purchasers and the Prior Rights Holders hereby agree to be bound by the
provisions hereof as the sole agreement of the Company, the
Purchasers and the Prior Rights Holders with respect to registration and
information rights and Rights of First Refusal set forth herein.
2. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or
any successor agency.
"DEMAND HOLDER" shall mean each of the Purchasers, the Series A
Holders, the Series B Holders, the Series C Holders, CKS, Gett and any
transferee of Registrable Securities who, pursuant to Section 16 below, is
entitled to registration rights hereunder.
"DEMAND REGISTRABLE SECURITIES" shall mean (i) shares of the
Company's Common Stock (the "Common Stock") issued or issuable upon the
conversion of the Series A Preferred, the Series B Preferred, the Series C
Preferred, or the Series D Preferred; (ii) the shares of Common Stock held by
CKS at any time, (iii) the shares of Common Stock held by Gett that were
purchased from CKS, (iv) any Common Stock of the Company or other securities
issued or issuable in respect of shares of the Series A Preferred, the Series B
Preferred, the Series C Preferred, the Series D Preferred or the shares held by
CKS or the shares held by Gett that were purchased from CKS; and (v) shares of
the Company's Common Stock or other securities issued or issuable upon any
conversion of the Shares upon any stock split, stock dividend, recapitalization,
combination or similar event; PROVIDED, HOWEVER, that any shares described in
clauses (i)-(iv) above which have been resold to the public shall cease to be
Registrable Securities upon such resale and any shares as to which registration
rights have terminated pursuant to Section 11 below shall cease to be
Registrable Securities upon such termination.
"FOUNDER SHARES" shall mean all shares of Common Stock now held by
the Founder, all shares of Common Stock issued to the Founder in the future and
all shares of Common Stock issuable to Founder in the future upon exercise of
options granted or to be granted to the Founder.
"HOLDER" shall mean the Demand Holders and the Founder.
"REGISTRABLE SECURITIES" shall mean the Founder Shares and the
Demand Registrable Securities.
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 incurred by the
Company in complying with Sections 6, 7 and 10 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, reasonable fees
-2-
and disbursements of one counsel for the Holders, blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration.
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 4 hereof (or any similar
legend).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders.
"SHARES" shall mean (i) the shares of the Company's Series A
Preferred issued pursuant to the Series A Preferred Stock Purchase Agreement
between the Company and the Series A Holders dated as of May 16, 1996, (ii) the
shares of Series B Preferred issued pursuant to the Series B Preferred Stock
Purchase Agreement between the Company and the Series B Holders dated as of June
19, 1996, (iii) the shares of the Company's Series C Preferred issued pursuant
to the Series C Preferred Stock Purchase Agreement between the Company and the
Series C Holders dated as of June 6, 1997, and (iv) the shares of the Company's
Series D Preferred sold to the Purchasers under the Purchase Agreement,
PROVIDED, HOWEVER, that for purposes of Sections 16 and 17 hereof, the term
"Shares" shall also be deemed to include the shares of Common Stock purchased by
Gett from CKS.
3. RESTRICTIONS ON TRANSFERABILITY. The Shares and any Common Stock
into which the Shares may be convertible shall not be transferable except upon
the conditions specified in this Agreement, which conditions are intended to
ensure compliance with the provisions of the Securities Act. Each holder of
Shares will cause any proposed transferee of the Restricted Securities held by
such Holder to agree to take and hold such Shares subject to the provisions and
upon the conditions specified in this Agreement.
4. RESTRICTIVE LEGEND. Each certificate representing (i) the Shares,
(ii) shares of the Company's Common Stock issued upon conversion of the Shares,
and (iii) any other securities issued in respect of the Shares or Common Stock
issued upon conversion of the Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 5 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
COPIES OF THE AGREEMENT 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
-3-
THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
5. 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 5. Prior to any proposed transfer
of any Restricted Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the Holder thereof
shall give written notice to the Company of such Holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and shall, if the Company so
requests, be accompanied (except in transactions in compliance with Rule 144) by
either (i) a written opinion of legal counsel addressed to the Company and
reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed transfer of the 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; PROVIDED, HOWEVER, that no opinion or No Action letter need be obtained
with respect to a transfer to (A) a partner, active or retired, of a Holder of
Restricted Securities, (B) the estate of any such partner, (C) an "affiliate" of
a Holder of Restricted Securities as that term is defined in Rule 405
promulgated by the Commission under the Securities Act, or (D) the spouse,
children, grandchildren or spouse of such children or grandchildren of any
Holder or to trusts for the benefit of any Holder or such persons, if the
transferee agrees to be subject to the terms hereof. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear the
appropriate restrictive legend set forth in Section 4 above, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for the Company such legend is not required in order to establish compliance
with any provisions of the Securities Act.
6. DEMAND REGISTRATION.
(a) DEMAND FOR REGISTRATION. If at any time after six months
following the effective date of the Company's initial registration statement
filed under the Securities Act, the Company shall receive from any Demand Holder
or group of Demand Holders holding at least 30% of the Demand Registrable
Securities then outstanding a written request that the Company effect any
registration, quali fication or compliance with respect to Demand Registrable
Securities and the reasonably anticipated aggregate proceeds of such offering
exceed $3,000,000, the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all Demand Holders; and
(ii) use its best efforts to effect as soon as practicable such
registration, qualification or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, 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
-4-
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Demand Registrable Securities as are specified in such request, together with
all or such portion of the Demand Registrable Securities of any Demand Holder or
Demand Holders joining in such request as are specified in a written request
received by the Company within 20 business 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 6:
(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) After the Company has effected one such registration
pursuant to this Section 6(a), such registration has been declared or ordered
effective and the securities offered pursuant to such registration have been
sold; or
(C) Within three months following the effective date of a
registration statement previously filed by the Company.
Subject to the foregoing clauses (A), (B) and (C), the Company shall
file a registration statement covering the Demand Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
or requests of any Demand Holder or Demand Holders. If, however, the Company
shall furnish to the Demand Holder or Holders requesting a registration
statement pursuant to this Section 6 a certificate signed by the President of
the Company stating that, in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company and its
shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than 120 days after
receipt of the request of the Demand Holder or Demand Holders requesting such
registration; PROVIDED, HOWEVER, that the Company may not utilize this right
more than once in any consecutive twelve-month period.
(b) UNDERWRITING. If the Demand Holders intend to distribute the
Demand 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 Section 6(a) and the Company shall include such information in the
written notice referred to in Section 6(a)(i). The right of any Demand Holder to
registration pursuant to Section 6 shall be conditioned upon such Demand
Holder's participation in such underwriting and the inclusion of such Demand
Holder's Demand Registrable Securities in the underwriting to the extent
requested (unless otherwise mutually agreed by a majority in interest of the
Demand Holders) to the extent provided herein.
The Company shall (together with all Demand Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing
-5-
underwriter selected for such underwriting by a majority in interest of the
Demand Holders. Notwithstanding any other provision of this Section 6, if the
managing underwriter advises the Demand Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then,
subject to the provisions of Section 6(a), the Company shall so advise all
Demand Holders and the number of shares of Demand Registrable Securities that
may be included in the registration and underwriting shall be allocated among
all Demand Holders requesting inclusion in the registration in proportion, as
nearly as practicable, to the respective amounts of Demand Registrable
Securities held by such Demand Holders at the time of filing the registration
statement; PROVIDED, HOWEVER, that the number of shares of Demand Registrable
Securities to be included in such underwriting shall not be reduced unless all
other securities that would have otherwise been included in the underwriting are
first entirely excluded from the underwriting. No Demand Registrable Securities
excluded from the underwriting by reason of the managing underwriter's marketing
limitation shall be included in such registration.
If any Demand Holder of Demand 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 other Demand
Holders. The Demand Registrable Securities and/or other securities so withdrawn
shall also be withdrawn from registration; PROVIDED, HOWEVER, that if by the
withdrawal of such Demand Registrable Securities a greater number of Demand
Registrable Securities held by other Demand Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Demand Holders who have included Demand
Registrable Securities in the registration the right to include additional
Demand Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 6(b). If the registration does not become
effective due to the withdrawal of Demand Registrable Securities, then either
(1) the Demand Holders requesting registration shall reimburse the Company for
expenses incurred in complying with the request or (2) the aborted registration
shall be treated as effected for purposes of Section 6(a)(B).
7. COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If the Company shall determine to
register any of its securities, either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights, other than (i) a registration relating solely to employee benefit plans
or (ii) a registration relating solely to a Commission Rule 145 transaction, the
Company will:
(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 20 business days after receipt of such written notice from
the Company, by any Holder or Holders, PROVIDED THAT to the extent that the
underwriters determine that the amount of Registrable Securities requested by
Holders to be included in such offering is incompatible with the success of the
offering, the Company may limit the amount of Registrable
-6-
Securities to be included by the Holders to an amount no less than 30% of the
shares to be so registered and may exclude, if the underwriters make the
determination described above (and so long as no other shareholder's securities
are included), all Registrable Securities entirely from the registration
relating to the Company's initial public offering.
(b) In any registration in which the Company limits the number of
Registrable Securities included therein pursuant to Section 7(a)(ii), the amount
of Registrable Securities of Holders which are included in such registration
shall be allocated to the Holders in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held, or issuable upon
conversion of other securities held, by each of such Holders as of the date of
the notice given pursuant to Section 7(a)(i); provided, however, that Company
shall first limit or exclude Registrable Securities held by Demand Holders other
than Purchasers.
8. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 6(a), Section 7 and Section 10 below shall be borne by the Company. All
Selling Expenses relating to securities registered by the Holders shall be borne
by the Holders of such securities pro rata on the basis of the number of shares
so registered.
9. 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 Securities and Exchange Commission a
registration statement with respect to the Registrable Securities and use its
best efforts to cause such registration statement to become effective;
(b) Keep such registration, qualification or compliance effective
for a period of 120 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs;
(c) Furnish such number of prospectuses, including a preliminary
prospectus, in conformity with the requirements of the Act, and other documents
incident thereto as a Holder from time to time may reasonably request;
(d) Prepare and file with the Commission 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;
(e) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection
-7-
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;
(f) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;
(g) 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 light of the circumstances then existing;
(h) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to Section 6 of this Agreement, on the date that
such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to Section 6, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities;
(i) The Company shall cause all such Registrable Securities
registered pursuant hereunder to be listed on each securities exchange on which
similar securities issued by the Company are then listed; and
(j) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
10. REGISTRATION ON FORM S-3. In addition to the rights set forth in
Section 6, if any holder or holders of the Demand Registrable Securities request
that the Company file a registration statement on Form S-3 (or any successor
thereto) for a public offering of shares of Demand Registrable Securities the
reasonably anticipated aggregate price to the public of which would equal or
exceed $1,000,000, and the Company is a registrant entitled to use Form S-3 to
register securities for such an offering, the Company shall use its best efforts
to cause such shares to be registered for the offering on such form (or
-8-
any successor thereto). The Company shall be obligated to file only two
registration statements in any consecutive twelve (12) month period under this
Section 10.
11. TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
pursuant to this Agreement shall terminate (i) as to all Holders on the fourth
anniversary of the closing of the Company's initial public offering, (ii) as to
any Holder, at such time after the Company's initial public offering as the
Registrable Securities held by such Holder represent 1% or less of the
outstanding Common Stock of the Company or as such Holder is able to sell all
Registrable Securities held by it (and any affiliated Holder with which it would
be aggregated for purposes of Rule 144) in any three month period without
registration in compliance with Rule 144 of the Securities Act or (iii) upon the
written consent of the holders of a majority of the Registrable Securities then
outstanding or issuable upon conversion or exercise of other securities then
outstanding.
12. LOCKUP AGREEMENT. In consideration for the Company agreeing to its
obligations under this Agreement each Holder of Registrable Securities and each
transferee pursuant to Section 16 hereof hereby agrees, in connection with the
first registration 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
Registrable Securities (other than those included in the registration) without
the prior written consent of the Company and, if such registration is
underwritten, the managing underwriter of the offering, for such period of time
(not to exceed 180 days) from the effective date of such registration as the
Company or such managing underwriter may specify; provided, however, that (i)
all directors and officers of the Company and all persons or entities holding
more than 1% of the capital stock of the Company shall have agreed to identical
restrictions, and (ii) any discretionary waiver or termination of the
restrictions set forth in this Section or in any like agreement containing
similar restrictions by the Company or its underwriters shall apply to all
persons or entities subject to such restrictions pro rata based on the number of
shares held. Each Holder agrees that the Company shall have the right to
instruct its transfer agent to place stop transfer notations in its records to
enforce the provisions of this Section 12.
13. INDEMNIFICATION.
(a) The Company will indemnify each Holder, the officers, directors
and partners of each Holder and each Holder's legal counsel and independent
accountants, 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 underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or
-9-
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, the officers,
directors and partners of each such Holder and such Holder's legal counsel and
independent accountants, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder or underwriter and stated
to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, and will
reimburse the Company, such Holders, such directors, officers, legal counsel,
independent accountants, underwriters or control persons for any legal or any
other expenses reasonably 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;
provided, however, that the obligations of such Holders hereunder shall be
limited to an amount equal to the gross proceeds before expenses and commissions
to each such Holder of Registrable Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 13
(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 be unreasonably
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, except to the extent, but only to the
extent, that the Indemnifying Party's ability to defend against such claim or
litigation is
-10-
impaired as a result of such failure to give notice. The omission so to deliver
notice to the Indemnifying Party will not relieve it of any liability that it
may have to the Indemnified Party otherwise than under this Section 13. 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.
(d) If the indemnification provided for in this Section 13 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission
14. 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 and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification or
compliance referred to in this Agreement.
15. 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:
(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 of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) Use its best efforts to then 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);
(c) Furnish to Holders of Registrable Securities forthwith upon
request, a written statement by the Company as to its compliance with the
reporting requirements of 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
-11-
of 1934, as amended (at any time after it has become subject to such reporting
requirements) or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents of the Company as a Holder of Registrable Securities may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any such securities without
registration.
16. TRANSFER OF REGISTRATION RIGHTS. The right to cause the Company to
register securities granted the Holders hereunder may be assigned to a
transferee or assignee who acquires at least 150,000 Shares (or Common Stock
issued on conversion of Shares) (adjusted for stock splits, reverse stock splits
or similar events after the date hereof) provided that the Company is given
written notice of such assign ment within a reasonable time after such
assignment. In addition, rights to cause the Company to register securities may
be freely assigned (a) to any constituent partner of a Holder of Registrable
Securities, where such Holder is a partnership, (b) to any affiliate (as that
term is defined in Rule 405 promulgated by the Commission under the Securities
Act), (c) to any officer, director or principal shareholder thereof, where such
Holder is a corporation or (d) to the spouse, children, grandchildren or spouse
of such children or grandchildren of any Holder or to trusts for the benefit of
any Holder or such persons.
17. COMPANY COVENANTS. The Company hereby covenants and agrees as
follows:
(a) ANNUAL FINANCIAL INFORMATION. The Company will furnish to each
holder of Shares and for so long as such holder is a holder of any shares of
Common Stock or Shares purchased by such person (or Common Stock issued upon
conversion of the Shares) as soon as practicable after the end of each fiscal
year, and in any event within 120 days thereafter, (i) consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such fiscal
year, (ii) consolidated statements of income of the Company and its
subsidiaries, if any, (iii) consolidated statements of cash flows of the Company
and its subsidiaries, if any, for such year, 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, all
in reasonable detail and audited and certified by independent public accountants
of national standing selected by the Company and (iv) lists of the Company's
shareholders and optionees as of year end, showing securities held by each.
(b) QUARTERLY AND MONTHLY FINANCIAL INFORMATION; FINANCIAL PLAN.
The Company shall furnish to each holder of Shares, so long as such holder then
holds not less than 200,000 shares of Common Stock (after giving effect to the
conversion of all outstanding Shares), the following reports:
(i) 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 45 days thereafter, an unaudited consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of each such quarterly
period, and unaudited consolidated statements of income and unaudited
consolidated statements of cash flows 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 consistently applied,
-12-
all in reasonable detail and signed, subject to changes resulting from year-end
audit adjustments, by the principal financial or accounting officer of the
Company.
(ii) As soon as practicable after the end of each month, and in
any event within 30 days thereafter, consolidated balance sheets of the Company
and its subsidiaries, if any, as of the end of such month, and cash flow
statements and consolidated statements of income for each month and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied, all in reasonable detail and signed,
subject to changes resulting from year-end audit adjustments, by the principal
financial or accounting officer of the Company, together with a comparison of
such statements to the Company's operating plan then in effect and approved by
its Board of Directors.
(iii) As soon as available (but in any event before the
beginning of each fiscal year), a summary of the financial plan of the Company
for each fiscal year, including (but not limited to) a cash flow projection and
operating budget, calculated monthly, as contained in its operating plan
approved by the Company's Board of Directors.
(iv) With reasonable promptness, such other information and
data (including, without limitation, current and future business plans) with
respect to the Company and its subsidiaries as any such Holder may from time to
time reasonably request.
(v) For purposes of determining whether Series D Holders are
entitled to receive the aforesaid reports, Series D Holders who are affiliated
entities may aggregate their respective shares of Series D Preferred for
purposes of complying with the requirements set forth in the preamble to this
Section (b).
(c) INSPECTION. For so long as a holder of Shares is eligible to
receive reports under Section 17(b), it shall also have the right, at its
expense, to visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss their affairs, finances and accounts with their
officers, all at such reasonable times and as often as may be reasonably
requested.
(d) ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights to
receive information pursuant to Section 17(a) may be assigned or otherwise
conveyed by any Holder or subsequent transferee to any transferee of Shares (or
Common Stock issued upon conversion thereof). The rights specified in Sections
17(b) and 17(c) may be assigned or otherwise conveyed by a Holder or subsequent
transferee only to a transferee who acquires at least 150,000 Shares (or Common
Stock issued upon conversion thereof) (adjusted for stock splits, reverse stock
splits or similar events after the date hereof).
(e) MATERIALS TO BE PROVIDED TO XXXX. The Company will provide
Xxxxxxxx Xxxx with copies of all notices, minutes, information, and other
materials of meetings of the Company's Board of Directors that the Company
provides to its directors, when and as such materials are delivered to the
directors; provided, however, that the Company shall not be required to provide
such materials if (i) such provision of materials or access thereto would
adversely affect the attorney-client privilege between the
-13-
Company and its counsel, or (ii) if the provision of such materials is likely to
result in a conflict of interest between the Company and Xxxx or his affiliates.
(f) PROPRIETARY INFORMATION AGREEMENT. The Company will require
each person employed by the Company, whether at present or in the future, to
execute a Proprietary Information Agreement in a form approved by the Company's
Board of Directors as a condition of such employment.
(g) CONFIDENTIALITY AGREEMENT. Each holder of Shares and any
successor or assign of such holder, who receives from the Company or its agents,
directly or indirectly, any information which the Company has not made generally
available to the public, pursuant to the preparation and execution of this
Agreement or disclosure in connection therewith or pursuant to the provisions of
this Section 17, acknowledges and agrees that such information is confidential
and for its use only in connection with evaluating its investment in the
Company, and further agrees that it will not disseminate such information to any
person other than its accountant, investment advisor or attorney and that such
dissemination shall be only for purposes of evaluating its investment. With
respect to information related to the business or financial affairs of the
Company received by holders of Shares from and after the date of this Agreement,
each holder of Shares agrees that, except with prior written permission of the
Company, it shall keep confidential any information that has been specifically
designated by the Company as confidential.
(h) KEY-PERSON INSURANCE. The Company shall obtain and maintain in
full force and effect for a period of five (5) years from June 6, 1997 term life
insurance in the amount of $1,000,000 on the life of Xxxxxx Xxxx with proceeds
payable to the Company.
(i) ADDITIONAL REGISTRATION RIGHTS. The Company shall not grant
additional registration rights to others without the consent of the holders of a
majority of the Series A Preferred, the Series B Preferred, the Series C
Preferred and the Series D Preferred, voting together as a single class;
PROVIDED, HOWEVER, the Company may provide its employees, consultants and
directors participation in the registration rights for Company initiated
registrations described in Section 7 above, so long as such participation does
not diminish the numbers of shares that could otherwise be included by the
Series A Holders, the Series B Holders, the Series C Holders and the Purchasers
in any registration.
(j) TERMINATION OF COVENANTS. Notwithstanding anything to the
contrary set forth herein, the covenants set forth in this Section 17 (except
for those set forth in Section 17(f) which shall survive) shall terminate and be
of no further force or effect after the date upon which the first registration
statement filed by the Company under the Securities Act in connection with an
underwritten public offering of its securities first becomes effective.
18. RIGHTS OF FIRST REFUSAL. The Company hereby grants to each holder
of Shares, CKS, Gett and the Founder the right of first refusal to purchase, pro
rata, all (or any part) of "New Securities" (as defined in this Section 18) that
the Company may, from time to time propose to sell and issue. Such pro rata
share, for purposes of this right of first refusal, is the ratio of (X) the
total of the number of shares
-14-
of Common Stock then owned by such holder or Founder, the number of shares of
Common Stock then issuable upon the conversion of the Shares then owned by such
holder or Founder and the number of shares of Common Stock then issuable upon
exercise of options or warrants held by such holder or Founder, to (Y) the total
number of shares of Common Stock then outstanding, after giving effect to the
conversion of all outstanding convertible securities and the exercise of all
outstanding options and warrants. This right of first refusal shall be subject
to the following provisions:
(a) "NEW SECURITIES" shall mean any Common Stock and Preferred
Stock of the Company whether or not authorized on the date hereof, and rights,
options, or warrants to purchase Common Stock or Preferred Stock and securities
of any type whatsoever that are, or may become, convertible into Common Stock or
Preferred Stock; provided, however, that "New Securities" does not include the
following:
(i) shares of Common Stock, or options to purchase shares of
Common Stock, issued or granted to officers, directors and employees of, or
consultants to, the Company pursuant to a stock grant, employee restricted stock
purchase agreement, option plan or purchase plan or other stock incentive
program (collectively, the "Plans") or issuance, which issuance or sale is
unanimously approved by the Board of Directors;
(ii) shares of Common Stock issuable upon conversion of the
Series A Preferred, Series B Preferred, Series C Preferred, or Series D
Preferred (including any Series D Preferred issued after the date hereof at
subsequent closings, if any, under the Purchase Agreement);
(iii) securities of the Company offered to the public pursuant
to a registration statement filed under the Securities Act where the price per
share is at least $10 (as adjusted for stock splits, stock dividends,
recapitalizations, combinations and the like) and the aggregate offering price
to the public (net of underwriting commissions and discounts) is not less than
$20,000,000;
(iv) securities of the Company issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets, or other reorganization whereby the Company
owns more than fifty percent (50%) of the voting power of such other
corporation;
(v) securities issued to corporate partners or in connection
with other strategic alliances if the Board of Directors unanimously agrees that
such transaction should be excluded from operation of this Section 18;
(vi) shares of Common Stock or Preferred Stock issued in
connection with any stock split, stock dividend, or recapitalization by the
Company; and
(vii) the issuance of shares of Series D Preferred Stock
pursuant to the Purchase Agreement.
-15-
(b) In the event that the Company proposes to undertake an issuance
of New Securities, it shall give each holder of Shares, CKS, Gett and the
Founder written notice of its intention, describing the type of New Securities,
the price, and the general terms upon which the Company proposes to issue the
same. Each such holder, CKS, Gett and the Founder shall have twenty (20)
business days after receipt of such notice to agree to purchase his or its pro
rata share of such New Securities at 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. If any holder of Shares, CKS, Gett
or the Founder fails to agree to purchase his or its full pro rata share within
such twenty (20) business day period, the Company will give the holders of
Shares who did so agree (the "Electing Purchasers") notice of the number of
shares which were not subscribed for by the non-electing persons or entities
(but not by CKS, Gett or the Founder). Such notice may be by telephone if
followed by written confirmation within two days. The Electing Purchasers shall
have ten (10) business days from the date of such notice to agree to purchase
pro rata all of the New Securities not purchased by such non-purchasing
Purchasers (but not any New Securities which CKS, Gett or the Founder elects not
to purchase).
(c) To the extent that holders of Shares, CKS, Gett and the Founder
fail to exercise in full the right of first refusal within the twenty (20)
business plus ten (10) business day period specified above, the Company shall
have ninety (90) days thereafter to sell (or enter into an agreement pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) the New Securities
respecting which the rights of the holders of Shares, CKS, Gett and the Founder
were not exercised at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has not
sold the New Securities within such ninety (90) day period (or sold and issued
New Securities in accordance with the foregoing within sixty (60) days from the
date of such agreement) the Company shall not thereafter issue or sell any New
Securities, without first offering such New Securities to the holders of Shares,
CKS, Gett and the Founder in the manner provided above.
(d) The right of first refusal granted under this Section 18 shall
expire upon the first sale of Common Stock to the public that is effected
pursuant to a registration statement filed with, and declared effective by, the
Commission under the Securities Act, covering the offer and sale of Common Stock
with an aggregate offering price to the public of not less than $20,000,000 (net
of underwriting commissions and discounts) and at a price per share not less
than $10.00 (adjusted for any stock splits or reverse stock splits).
(e) This right of first refusal is nonassignable by the Founder. As
to the holders of Shares, CKS and Gett, this right of first refusal is
non-assignable except to any transferee to whom registration rights may be
transferred pursuant to Section 16 of this Agreement.
19. 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
-16-
all rights, duties, liabilities, obligations, powers, and other relations
between the parties arising under this Agreement.
20. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties regarding rights to
registration. 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.
21. NOTICES. ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five days after deposit with the United States mail, by registered or certified
mail, postage prepaid, addressed (a) if to a holder of Shares, to the address or
addresses set forth on the Exhibit A attached hereto, or at such other address
as such holder shall have furnished to the Company in writing, or (b) if to any
other holder of any Registrable Securities, to such address as such holder shall
have furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Securities who has so furnished an address to the Company, or (c) if to the
Company, to its address set forth on the signature page of this Agreement to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Holders, or (d) if to the Founder, to the address
set forth on the signature page of this Agreement, or at such other addresses as
the Founder shall have furnished to the Holders.
22. 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.
23. AMENDMENT.
(a) Any provision of this Agreement may be amended, waived or
modified upon the written consent of the (i) Company, (ii) holders of a majority
of the shares of Demand Registrable Securities (and Common Stock issued upon
conversion thereof) (excluding for all purposes in such computation any Common
Stock resold to the public), (iii) the Founder, if such amendment, waiver or
modification affects the rights of the Founder hereunder, and (iv) Gett, if such
amendment, waiver or modification affects the rights of Gett hereunder; PROVIDED
that any such amendment, waiver or modification shall be binding upon and apply
by its terms to each such holder and the Founder. Any party to this Agreement
may waive any of his or her rights or the Company's obligations hereunder
without obtaining the consent of any other person. In addition, the Company may
waive performance of any obligation owing to it, as to some or all of the
Holders of Registrable Securities, or agree to accept alternatives to such
performance, without obtaining the consent of any Holder of Registrable
Securities. In the event that an underwriting agreement is entered into between
the Company and any Holder, and such underwriting agreement contains terms
differing from this Agreement, as to any such Holder the terms of such
underwriting agreement shall govern. Notwithstanding the foregoing, purchasers
of shares of the Company's Series D Preferred under the Purchase Agreement or an
addendum thereto after the date of this Agreement may be subsequently added as a
party to this Agreement as a Holder and shall
-17-
be bound by and entitled to the terms, benefits and conditions herein by the
execution of a signature page to this Agreement.
(b) EFFECT OF AMENDMENT OR WAIVER. Each Holder and its successors
and assigns acknowledge that by the operation of Sections 1, 2 and 23 hereof the
holders of a majority of the Demand Registrable Securities, acting in
conjunction with the Company, Gett and the Founder, will have the right and
power to diminish or eliminate all rights pursuant to this Agreement.
(c) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
(d) NO THIRD PARTY BENEFICIARY. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(e) AGGREGATION OF STOCK. All Shares held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
[SIGNATURE PAGES FOLLOW]
-18-
