Exhibit 4.2
CASCADE MICROTECH, INC.
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
EXHIBIT C
CASCADE MICROTECH, INC.
INVESTOR RIGHTS AGREEMENT
MAY 1, 1990
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CASCADE MICROTECH, INC.
INVESTOR RIGHTS AGREEMENT
TABLE OF CONTENTS
1. Restrictions on Transferability of Securities; Registration Rights......1
1.1 CERTAIN DEFINITIONS............................................1
1.2 REQUESTED REGISTRATION.........................................3
1.3 COMPANY REGISTRATION...........................................5
1.4 EXPENSES OF REGISTRATION.......................................6
1.5 REGISTRATION ON FORM S-3.......................................6
1.6 REGISTRATION PROCEDURES........................................7
1.7 INDEMNIFICATION................................................8
1.8 INFORMATION BY HOLDER.........................................10
1.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES...........10
1.10 RULE 144 REPORTING............................................10
1.11 TRANSFER OR-ASSIGNMENT OF REGISTRATION RIGHTS.................11
1.12 "MARKET STAND-OFF" AGREEMENT..................................11
1.13 ALLOCATION OF REGISTRATION OPPORTUNITIES......................12
1.14 DELAY OF REGISTRATION.........................................12
1.15 TERMINATION OF REGISTRATION RIGHTS............................12
2. Covenants of the Company and the Shareholder...........................13
2.1 BASIC FINANCIAL INFORMATION...................................13
2.2 ADDITIONAL INFORMATION AND RIGHTS.............................13
2.3 RIGHT OF FIRST REFUSAL........................................14
2.4 RIGHT TO REMAIN EQUAL TO THE LARGEST OUTSIDE SHAREHOLDER......16
2.5 RIGHT TO MAKE COMPETING OFFER.................................16
2.6 COMPANY REPURCHASE OPTION.....................................17
2.7 PROMPT PAYMENT OF TAXES, ETC..................................19
2.8 MAINTENANCE OF PROPERTIES AND LEASES..........................19
2.9 INSURANCE.....................................................19
2.10 KEY PERSON LIFE INSURANCE.....................................20
2.11 ACCOUNTS AND RECORDS..........................................20
2.12 INDEPENDENT ACCOUNTANTS.......................................20
2.13 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES......20
2.14 MAINTENANCE OF CORPORATE EXISTENCE, ETC.......................20
2.15 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.............20
2.16 EMPLOYEE AND OTHER STOCK ARRANGEMENTS.........................21
2.17 BOARD OF DIRECTORS............................................21
2.18 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS....................21
2.19 INDEBTEDNESS..................................................21
2.20 EXTENSION OF CREDIT...........................................21
2.21 COMPENSATION OF EMPLOYEES.....................................21
2.22 TRANSACTIONS WITH AFFILIATES..................................21
2.23 RESTATED ARTICLES OF INCORPORATION............................22
2.24 CONFIDENTIAL DISCLOSURE AGREEMENT.............................22
2.25 HARDWARE PURCHASES............................................22
2.26 TERMINATION OF COVENANTS......................................22
3. Miscellaneous..........................................................23
3.1 GOVERNING LAW.................................................23
3.2 SUCCESSORS AND ASSIGNS........................................23
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER...........................23
3.4 NOTICES, ETC..................................................23
3.5 DELAYS OR OMISSIONS...........................................23
3.6 RIGHTS; SEPARABILITY..........................................24
3.7 TITLES AND SUBTITLES..........................................24
3.8 COUNTERPARTS..................................................24
EXHIBITS
Exhibit A: Confidential Disclosure Agreement
Exhibit B: Hardware Purchase Agreement
CASCADE MICROTECH, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is made as of the 1st
day of May, 1990, by and among Cascade Microtech, Inc., an Oregon corporation
(the "Company"), Hewlett-Packard Company, a California corporation (the
"Shareholder"), and each of the Founders (as defined herein).
RECITAL:
WHEREAS, the Company and the Shareholder are parties to that certain
Series A Preferred Stock Purchase Agreement, dated of even date herewith (the
"Series A Agreement"), under which certain obligations of the Company and the
Shareholder are conditioned upon the execution and delivery by the Company and
the Shareholder of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants set forth herein,. the parties hereto agree as follows:
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Closing" shall mean the date of the initial sale of the Company's
Series A Preferred Stock.
(b) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(d) "Founder" shall mean Xxxx X. Xxxxx, Xxxxxxx Xxxxx, X. Xxxx
Xxxxxxx, Xxxx X. Xxxxxxx and Xxxxxxx Xxx Xxxx-Xxxxxxx.
(e) "Founder Shares" shall mean any shares of the Company's Common
Stock held by any Founder.
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(f) "Holder" shall mean (i) the Shareholder, (ii) any holder of
Registrable Securities to whom the registration rights conferred by this
Agreement have been transferred in compliance with Section 1.11 hereof, and
(iii) except with respect to Section 2.3 hereof, the Founders.
(g) "Initiating Holders" shall mean any Holder or Holders other than
the Founders who in the aggregate hold not less than fifty percent (50%) of the
outstanding Registrable Securities other than Founder Shares. For purposes of
such calculation, holders of Shares shall be considered to hold the shares of
Common Stock then issuable upon conversion of such Shares.
(h) "Registrable Securities" shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Shares, (ii) Founder
Shares, and (iii) any Common Stock issued as a dividend or other distribution
with respect to or in exchange for or in replacement of the shares referred to
in clauses (i) or (ii) above; provided, however, that Registrable Securities
shall not include any shares of Common Stock which have previously been
registered or which have been sold to the public.
(i) The terms "register," "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder and the declaration or ordering of the effectiveness of such
registration statement.
(j) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including without
limitation all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, fees and
expenses under applicable state securities laws and expenses of any regular or
special audits incident to or required by any such registration, but shall not
include Selling Expenses and fees and disbursements of counsel for the Holders
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
(k) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the commission.
(l) "Rule 145" shall mean Rule 145 as promulgated by the commission
under the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(m) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
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(n) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder (other than the fees and
disbursements of counsel included in Registration Expenses).
(o) "Shares" shall mean the Company's Series A Preferred Stock.
1.2 REQUESTED REGISTRATION
(a) REQUEST FOR REGISTRATION. If the Company shall receive from the
Initiating Holders, at any time or times not earlier than the earlier of (x) f
our years after the date of this Agreement and (y) six months after the
effective date of the first registration statement filed by the Company covering
an underwritten offering of any of its securities to the general public, a
written request that the Company effect any registration with respect to all or
a part of the Registrable securities having an aggregate offering price, net of
underwriting discounts and expenses, equal to or exceeding $6.00 per share of
Common Stock (as adjusted for any stock dividends, combinations or splits with
respect to such shares) and the aggregate proceeds of which (after deduction for
underwriter's discounts and expenses related to the issuance) exceed $7,500,000
the Company will:
(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration (including without limitation filing post-effective amendments,
appropriate qualifications under applicable state securities laws and
appropriate compliance with the Securities Act) and as would permit or
facilitate the sale and distribution of all or such number of such Registrable
Securities as are specified in such request, together with all or such number 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
such written notice from the Company is effective.
The Company shall not be obligated to ef fect or to take any action to
effect, any such registration pursuant to this Section 1.2:
(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 initiated two such registrations
pursuant to this Section 1.2(a) (counting for these purposes only (1)
registrations which have been declared or ordered effective and pursuant to
which securities have been sold, and (2) registrations which have been withdrawn
by the Holders as to which the Holders have not elected to bear the Registration
Expenses pursuant to Section 1.4 hereof and would, absent such election, have
been required to bear such expenses);
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(C) During the period starting with the date 60 days prior to the
Company's good faith estimate of the date of filing of, and ending on a date 180
days after the effective date of, a Company-initiated registration, provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective;
(D) If the Initiating Holders propose to dispose of shares of
Registrable Securities which may be immediately registered on Form S-3 pursuant
to a request made under Section 1.5 hereof;
(E) If the Initiating Holders do not request that such offering
be firmly underwritten by underwriters selected by the Initiating Holders
(subject to the consent of the Company, which consent will not be unreasonably
withheld); or
(F) If the Company and the Initiating Holders are unable to
obtain the commitment of the underwriter described in clause (E) above to a
firmly underwritten offer.
(b) Subject to the foregoing clauses (A) through (F), the Company
shall f ile 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; provided, however, that if (i) in the
good faith judgment of the Board of Directors of the Company such registration
would be seriously detrimental to the Company and the Board of Directors of the
Company concludes as a result, that it is essential to defer the filing of such
registration statement at such time, and (ii) the Company shall furnish to all
participating Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the Company
it would be seriously detrimental to the Company for such registration statement
to be filed in the near future and that it is therefore essential to defer the
filing of such registration statement, then the Company shall have the right to
defer such filing for the period during which such disclosure would be seriously
detrimental; and, provided further, that (except as provided in clause (C)
above) the Company may not defer the filing for a period of more than 120 days
after receipt of the request of the Initiating Holders; and, provided further,
that the Company shall not def er its obligation in this manner more than once
in any 12-month period. Subject to the provisions of Sections 1.2(b) and 1.13
hereof, the registration statement filed pursuant to the request of the
Initiating Holders may include other securities of the Company with respect to
which registration rights have been granted and may include securities of the
Company being ~sold for the account of the Company.
(c) UNDERWRITING. The right of any Holder to registration pursuant to
Section 1.2 shall be conditioned upon the participation of such Holder in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities held by the Holder.
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(d) PROCEDURES. If the Company shall request inclusion in any
registration pursuant to Section 1.2 of securities being sold for its own
account or if other persons shall request inclusion in any registration pursuant
to Section 1.2, the Initiating Holders shall offer to include such securities in
the underwriting on behalf of all Holders and may condition such offer on their
acceptance of the further applicable provisions of this Section 1 (including
Section 1.12). The Company (together with all Holders and other persons
proposing to distribute their securities through such underwriting) shall enter
into an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders, which underwriters shall be reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
1.2, if the representative of the underwriters advises the Initiating Holders in
writing that marketing factors require a limitation on the number of shares to
be underw itten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 1.13 hereof. If a person
who has requested inclusion in such registration as provided above does not
agree to the terms of any such underwriting, such person shall, be excluded
therefrom by written notice from the Company, the underwriter or the Initiating
Holders. Any Registrable Securities or other securities so excluded shall also
be withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section
1.2(d), then the Company shall offer to all Holders who have retained rights to
include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares do withdrawn, with such shares to be allocated among such Holders
requesting additional inclusion in accordance with Section 1.13.
1.3 COMPANY REGISTRATION.
(a) 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 pursuant to
Sections 1.2 or 1.5 hereof), other than a registration relating solely to
employee benefit plans, a registration relating solely to a Rule 145 transaction
or a registration on any registration form that does not permit secondary sales,
the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best xx x xxxx to include in such registration (and
any related qualification under applicable state securities laws or other
compliance), except as set forth in Section 1.3(b) below and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests made by any Holder within 20 days after the written notice from the
Company described in clause (i) above is given. Such written request may specify
all or any number of a Holder's Registrable Securities.
(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 1.3(a)(i). In such event, the right of any Holder to
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registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
(together with the Company and the other holders of securities of the Company
with registration rights to participate therein distributing their securities
through such underwriting) shall enter into an underwriting agreement in
customary f orm with the representative of the underw iter or underwriters
selected by the Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may exclude all Registrable Securities from or limit the number
of Registrable Securities to be included in the registration and underwriting
(subject to the limitations set forth below). The Company shall so advise all
holders of securities requesting registration and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated f irst to the Company for securities being sold for its own
account and thereafter as set forth in Section 1.13. If any person does not
agree to the terms of any such underwriting, such person shall be excluded
therefrom by written notice from the Company or the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities xx.xx included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right, to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.13 hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.3 and 1.5 hereof and all Registration Expenses and reasonable fees of
one counsel f or the selling shareholders in the case of registrations pursuant
to Section 1.2 shall be borne by the Company; provided, however, that if the
Holders bear the Registration Expenses f or any registration proceeding begun
pursuant to Section 1.2 and subsequently withdrawn by the Holders registering
shares therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 1.2 hereof, except in the event that such
withdrawal is based upon material adverse information relating to the Company
that is different from the information known or available (upon request from the
Company or otherwise) to the Holders requesting registration at the time of
their request for registration under Section 1.2, in which event such
registration shall not be treated as a counted registration for purposes of
Section 1.2 hereof, even though the Holders do not bear the Registration
Expenses for such registration. All Selling Expenses relating to securities so
registered shall be borne by the holders of such securities pro rata on the
basis of the number of shares of securities so registered on their behalf.
1.5 REGISTRATION ON FORM S-3
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(a) After its initial public offering, the Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms. After the Company has qualified for the use of Form S-3, the
Holders of Registrable Securities shall have the right, in addition to the
rights contained in the foregoing provisions of this Section 1, to request
registrations on Form S-3 (such requests to be in writing and to state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by such Holder or Holders); provided,
however, that the Company shall not be obligated to effect any such registration
if (i) the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) on Form S-3 at an aggregate price
to the public of less than $1,000,000, (ii) the Company shall furnish the
certification described in Section 1.2(a)(ii) (but subject to the limitations
set forth therein), (iii) in a given 12-month period the Company has effected
one such registration in any such period For (iv) it is to be effected more than
five years after the Company's initial public offering.
(b) If a request complying with the requirements of Section 1.5(a)
hereof is delivered to the Company, the provisions of Sections 1.2(a)(i) and
(ii) and 1.2(b) hereof shall apply to such registration. If the registration is
for an underwritten offering, the provisions of Sections 1.2(c) and 1.2(d)
hereof shall apply to such registration.
1.6 REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to Section 1, the Company will keep each Holder advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of 120 days or until
the Holder or Holders shall have completed the distribution described in the
registration statement relating thereto, whichever first occurs; provided,
however, that (i) such 120-day period shall be extended for a period of time
equal to the period the Holder refrains from selling any securities included in
such registration at the request of an underwriter of Common Stock (or other
securities) of the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145 or any successor rule
under the Securities Act permits an offering on a continuous or delayed basis
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (i) includes any prospectus required by Section
10(a)(3) of the Securities Act or (ii) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in clauses (i) and (ii) above to be contained in periodic reports filed pursuant
to Section 13 or 15(d) of the Exchange Act in the registration statement;
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(b) 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;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a Holder
from time to time may reasonably request;
(d) Notify each seller 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 or incomplete in light of the circumstances
then existing and, at the request of any such seller, prepare and furnish to
such seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) 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;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable securities, in each case not later than the effective
date of such registration;
(g) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least 12 months, but not more than 18 months, beginning with the first month
after the effective date of the Registration Statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act; and
(h) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, enter into an
underwriting agreement reasonably necessary to effect the offer and sale of
Common Stock, provided such underwriting agreement contains customary
underwriting provisions and provided further that, if the underwriter so
requests, the underwriting agreement will contain customary contribution
provisions.
1.7 INDEMNIFICATION.
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(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel and 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 Section 1 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, proceedings or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) 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 or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel and accountants and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter f or any legal and
other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability or action;
provided, however, 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 based upon written information
furnished to the Company by such Holder or underwriter and stated to be
specifically for use therein. It is agreed that the indemnity agreement
contained in this Section 1.7(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent has not been
unreasonably withheld).
(b) Each Holder, if any Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification
or compliance is being effected, will indemnify the Company, each of its
directors, officers, partners, legal counsel and accountants and 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, each
other such Holder and each of its officers, directors and partners and each
person controlling such Holder, 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 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 and will reimburse the Company and such
Holders, directors, officers, partners, legal counsel and accountants,
persons, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder;
provided, however, that the obligations of such Holder hereunder shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities (or actions in respect
9
thereof) if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 1.7 (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, however, that counsel f or the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, 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 Section 1
to the extent such failure is not prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, shall consent, except with the consent
of each Indemnified Party, to the entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnif ied Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 1.7 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 therein, 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 opportunityto
correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
1.8 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the
10
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Section 1.
1.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and after the
date of this Agreement, the Company, without the prior written consent of the
Holders of a majority of the outstanding Registrable Securities, shall not enter
into any agreement with any holder or prospective holder of any securities of
the company giving such holder or prospective holder any registration rights the
terms of which are more favorable than the registration rights granted to the
Holders hereunder.
1.10 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information regarding the Company available
as those terms are understood and defined in Rule 144 under the Securities Act,
at all times from and after 90 days following 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) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements;
(c) As long as a Holder owns any Registrable Securities, furnish to
the Holder forthwith upon written request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time from
and after 90 days following 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 Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
as a Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Holder to sell any such securities without
registration.
1.11 TRANSFER OR-ASSIGNMENT OF REGISTRATION RIGHTS.
(a) Except as provided in Section 1.11(b) below, the rights to cause
the Company to register securities granted to a Holder by the Company under this
Section 1 may be transferred or assigned by a Holder only to a transferee or
assignee of not fewer than 50,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits and the like); provided, however, that the
Company shall be given written notice at the time of or within a reasonable time
after such transfer or assignment, stating the name and address of the
transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned; and, provided further,
that the transferee or assignee of such rights shall assume the obligations of
such Holder under this Section 1.
11
(b) The rights to cause the Company to register securities granted to
a Holder by the Company under this Section 1 may not be transferred or assigned
by any Founder.
1.12 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Holder shall
not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held such Holder (other than those included in the
registration) during the 120-day period following the effective date of a
registration statement of the Company filed under the Securities Act, provided
that:
(a) such agreement shall only apply to the first such registration
statement of the Company, including securities to be sold on its behalf to the
public in an underw itten offering; and
(b) all Holders and off icers and directors of the Company enter into
similar agreements.
The obligations described in this Section 1. 12 shall not apply to a
registration relating solely to employee benef it plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future or a registration
relating solely to a commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of such 120-day period.
1.13 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in which
all of the Registrable Securities requested to be included in a registration on
behalf of the Holders and all of the shares held by any other shareholders
cannot be so included as a result of limitations of the aggregate number of
shares of Registrable Securities and other shares that may be so included, the
number of shares of Registrable Securities and, other shares that may be so
included shall be allocated as follows:
(a) first, among the Holders other than the Founders (the
"Non-founding Holders") requesting inclusion of shares pro rata on the basis of
the number of shares of Registrable Securities other than Founder Shares (the
"Non-founder Registrable Securities") that would be held by the Non-founding
Holders, assuming conversion; provided, however, that, in order that such
allocation shall not operate so as to reduce the aggregate number of Non-founder
Registrable Securities to be included in such registration, if any Non-founding
Holder does not request inclusion of the maximum number of shares of Nonfounder
Registrable Securities allocated to such Non-founding Holder pursuant to the
procedure described in this Section 1.13, the remaining portion of such
Non-founding Holder's allocation shall be reallocated among those requesting
Non-founding Holders whose allocations did not satisfy their requests pro rata
on the basis of the number of shares of Non-founder Registrable Securities which
would be held by such Non-founding Holders, assuming conversion; and, provided
further, that this procedure shall be repeated until all of the shares of the
Non-founder Registrable Securities which may be included in the registration on
behalf of the Non-founding Holders have been so allocated;
12
(b) second, among the Founders requesting inclusion of shares pro rata
on the basis of the number of Founder Shares' that would be held by such
Founders; and
(c) finally, among any other shareholders requesting inclusion of
their shares of the Company's Common Stock pro rata. on the basis of the number
of such shares that would be held by such shareholders.
In no event shall the Company limit the number of Non-founder Registrable
Securities to be included in a registration pursuant to this Agreement in order
to include shares held by Founders or shareholders with no registration rights,
or, except with respect to a registration pursuant to Sections 1.3 and 1.5
above, shares for the Company's own account.
1.14 DELAY OF REGISTRATION. No Holder shall have any right to take any
action toorestrain, enjoin or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.15 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to request
registration or inclusion in any registration pursuant to Section 1.2, 1.3 or
1.5 shall terminate on, or on such date after, the closing of the f irst
Companyinitiated registered public offering of Common Stock of the Company if
all shares of Registrable Securities held or entitled to be. held upon
conversion by such Holder may immediately be sold under Rule 144 during any
90-day period.
SECTION 2
COVENANTS OF THE COMPANY AND THE SHAREHOLDER
The Company hereby covenants and agrees, as long as any Holder owns any
Registrable Shares, as follows:
2.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to each Holder:
(a) As soon as practicable after the end of each f iscal year of the
company and in any event within 90 days thereafter, a consolidated balance sheet
of the Company and its subsidiaries, if any, as at the end of such fiscal year
and consolidated statements of income and 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 certified by independent public accountants of recognized
national standing selected by the Company;
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each f iscal year of the Company and in
any event within 45 days thereafter, a consolidated balance sheet of the Company
and its subsidiaries, if any, as of the end of each such quarterly period and
consolidated statements of income and cash flows of the Company and its
13
subsidiaries for such period and for the current f iscal year to date, prepared.
in accordance with generally accepted accounting principles consistently applied
and setting forth in comparative form the figures for the corresponding periods
of the previous fiscal year and to the Company's operating plan then in effect
and approved by its Board of Directors, subject to changes resulting from normal
year-end audit adjustments, all in reasonable detail and certified by the
principal financial or accounting officer of the Company, except that such
financial statements need not contain the notes required by generally accepted
accounting principles; and
(c) From the date the Company becomes subject to the reporting
requirements of the Exchange Act (which shall include any successor federal
statute) and in lieu of the financial information required pursuant to Sections
2.1(a) and (b), copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively.
2.2 ADDITIONAL INFGRMATION AND RIGHTS
(a) The Company will permit any Holder (or its representative) to
visit and inspect any of the properties of the Company, including its books of
account and other records (and make copies thereof and take extracts therefrom)
and to discuss its affairs, finances and accounts with the Company's officers
and its independent public accountants, all at such reasonable times and as
often as any such person may reasonably request.
(b) The Company will deliver the reports described below in this
Section 2.2 to each Holder:
(i) As soon as practical after the end of each month and in any
event within 30 days thereafter, a consolidated balance sheet of the Company and
its subsidiaries, if any, as at the end of such month and consolidated
statements of income and cash flows of the Company and its subsidiaries, for
each month and for the current fiscal year of the Company to date, all subject
to normal year-end audit adjustments, prepared in accordance with generally
accepted accounting principles consistently applied and certified by the
principal financial or accounting officer of the Company, together with a
comparison of such statements to the corresponding periods of the prior fiscal
year and to the Company's operating plan then in effect and approved by its
Board of Directors;
(ii) Annually (but in any event not later than 90 days after the
commencement of each fiscal year of the Company) the business plan of the
Companyj in such manner and form as approved by the Board of Directors of the
Company, which business plan shall include a projection of income and a
projected cash flow statement for such fiscal year and a projected balance sheet
as of the end of such fiscal year. Any material changes in such business plan
shall be submitted as promptly as practicable after such changes have been
approved by the Board of Directors of the Company;
(iii) With reasonable promptness, such other information and data
with respect to the Company and its subsidiaries as any Holder may from time to
time reasonably request;
14
(iv) As soon as practicable after the end of each fiscal year and
in any event within 90 days thereafter, (A) a report from the Company reporting
on compliance with the terms and conditions of this Agreement and any other
agreement pursuant to which the Company has borrowed money or sold its
securities, and (B) a copy of the annual management review letter of the
Company's independent public accountants; and
(v) As soon as practica b le after transmission or occurrence and
in any event within 10 days thereof, copies of any reports or communications
delivered to any class of the Company's security holders or broadly to the
financial community, including any filings by the Company with any securities
exchange, the Commission or the National Association of Securities Dealers, Inc.
(c) The provisions of Section 2.1 and this Section 2.2 shall not be in
limitation of any rights which any Holder may have with respect to the books and
records of the Company and its subsidiaries or to inspect their properties or
discuss their affairs, finances and accounts, under the laws of the
jurisdictions in which they are incorporated.
2.3 RIGHT OF FIRST REFUSAL. The Company hereby grants to each Holder who
owns any Shares or any shares of Common Stock issued upon conversion of the
Shares a right of first refusal to purchase its pro rata share of New Securities
(as defined below) which the Company, from time to time, may propose to sell and
issue. A Holder's pro rata share, for purposes of this right of first refusal,
is the ratio of the number of shares of Common Stock owned by the Holder
immediately prior to the issuance of' New Securities, assuming full conversion
of the Shares, to the total number of shares of Common Stock outstanding
immediately prior to the issuance of New Securities, assuming full conversion of
the Shares and exercise of all outstanding rights, options and warrants to
acquire Common Stock of the Company. Each Holder shall have a right of
overallotment such that if any Holder fails to exercise its right hereunder to
purchase its pro rata share of New Securities, the other Holders may purchase
the non-purchasing Holder's portion on a pro rata basis within 10 days from the
date such non-purchasing Holder f ails to exercise its right hereunder to
purchase its pro rata share of New Securities. This right of first refusal shall
be subject to the following provisions:
(a) "New Securities" shall mean any capital stock (including Common
Stock or Preferred Stock) of the Company, whether now authorized or not, any
rights, options or warrants to purchase such capital stock and securities of any
type whatsoever that are or may become, convertible into capital stock;
provided, however, that the term "New Securities" does not include (i)
securities purchased under the Series A Agreement; (ii) securities issued upon
conversion of the Shares; (iii) any borrowings, direct or indirect, from
financial institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment evidenced by any type of debt
instrument, provided such borrowings do not have any equity features including
warrants, options or other rights to purchase capital stock and are not
convertible into capital stock of the Company; (iv) securities issued to
employees, consultants, officers or directors of the Company pursuant to any
stock option, stock purchase or stock bonus plan, agreement or arrangement
approved by the Board of Directors; (v) securities issued in connection with
obtaining lease financing, whether issued to a lessor, guarantor or other
person; (vi) securities issued in a firmly
15
written public offering pursuant to a registration under the Securities Act with
an aggregate offering price to the public of at least $7,500,000 at a price per
share of at least $6.00; (vii) securities issued in connection with any stock
split, stock dividend or recapitalization of the Company; and (viii) any right,
option or warrant to acquire any security convertible into the securities
excluded from the definition of New securities pursuant to clauses (i) through
(vii) above.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Holder written notice of its intention,
describing the type of New Securities and their price and the general terms upon
which the Company proposes to issue the same. Each Holder shall have 30 days
after any such notice is effective to agree to purchase its 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.
(c) In the event any Holder fails to exercise fully the right of first
refusal within such 30-day period and after the expiration of 15-day period for
the exercise of the overallotment provisions of this Section 2.3, the Company
shall have 120 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 120 days from the date of such agreement) to sell the New Securities with
respect to which the Holder's right of first refusal option set forth in this
section 2.3 was not exercised, at a price and upon terms no more favorable to
the purchasers thereof than specified in the company's notice to the other
shareholders pursuant to Section 2.3(b). In the event the Company has not sold
all of the New securities within such 120-day period or entered into an
agreement to sell the New Securities in accordance with the foregoing within 120
days from the date of such agreement, the Company shall not thereafter issue or
sell any New Securities, without first again offering such securities to the
Holder in the manner provided in Section 2.3(b) above.
(d) The right of first refusal granted hereunder shall expire upon,
and shall not be applicable to, the first firmly underwritten sale of Common
Stock of the Company to the public effected pursuant to a registration statement
filed with and declared effective by the Commission under the Securities Act,
with proceeds of at least $7,500,000 at a price per share of at least $6.00.
(e) The right of f irst refusal set forth in this Section 2.3 may not
be assigned or transferred, except that such right is assignable by a Holder to
any wholly owned subsidiary or parent of, or to any corporation or entity that
is, within the meaning of the Securities Act, controlling, controlled by or
under common control with, any Holder.
2.4 RIGHT TO REMAIN EQUAL TO THE LARGEST OUTSIDE SHAREHOLDER. The
Shareholder shall have the right at any time to purchase, at a price per share
equal to its then fair market value as determined in good faith by the Company's
Board of Directors, such number of shares of the Company's Common Stock so as to
hold, following such purchase, a total number of shares on an as-converted basis
that is at least equal to the total number of shares on an as-converted basis
that is held by the Company's largest outside shareholder.
16
2.5 RIGHT TO MAKE COMPETING OFFER.
(a) In the event that the Company proposes (i) to merge or consolidate
the Company with or into any other corporation or any other entity or person,
other than to mergethe Company into a wholly owned subsidiary corporation solely
for the purpose of reincorporating the Company in Delaware, (ii) to merge,
consolidate or undertake any other corporate reorganization, reclassification or
other change of any stock or any recapitalization of the Company or any of its
subsidiaries as a result of which the Company shall not be the surviving entity
or the holders of the outstanding capital stock of the Company immediately prior
to any such event shall own less than a majority of the outstanding capital
stock of the company on an as-converted basis immediately after the consummation
of any such event, (iii) to sell, lease, assign, transfer or otherwise convey
all or substantially all of the assets of the Company, including without
limitation a sale of all or substantially all of the assets of the Company to
any of its subsidiaries, or (iv) to undertake a reorganization of the Company as
defined in Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended, or in which more than a majority of the outstanding stock of the
Company is exchanged in any three-month period (each of such proposed
transactions shall be referred to herein as a "Change of Control"), the Company
shall notify the Shareholder in writing within seven days of receiving a good
fAith written offer from a corporation, entity or person (a "Proposing Party")
to engage in any such Change of Control, which notice shall include, to the full
extent known to the Company, the terms and conditions of the proposed Change of
Control and the name or names of the Proposing Party.
(b) Following delivery of such notice, the Shareholder shall have 15 days to
notify the Company in writing whether the Shareholder intends , to submit a
written competing offer (a "Competing Offer") within the next 30 days for
consideration by the Company and its Board of Directors and, if applicable, its
other shareholders.
(c) If the Shareholder so notifies the Company that it intends to
submit a Competing offer, the Company, without the prior written consent of the
Shareholder, shall not consummate any Change of Control with any other
corporation, entity or person until the Shareholder has delivered its Competing
Offer to the Company or notified the Company in writing that it does not intend
to submit a Competing Offer.
(d) If the Shareholder delivers a Competing Offer to the Company
within such 30-day period, the Company and its Board of Directors shall be
obligated to consider the Competing Offer in good faith. If the Competing Offer
is a cash of f er at a higher price than a cash offer by the Proposing Party,
the Company and its Board of Directors shall be obligated to accept the
Competing Offer or if the Proposing Party's offer is to the Company's
shareholders, to recommend that such shareholders accept the Competing offer. If
(i) the Proposing Party's offer includes, in whole or in part, securities or
assets other than cash as part of the consideration to be paid to the Company or
its shareholders, and (ii) the Competing offer is determined to be of value
equal to or greater than the value of the Proposing Party's offer, as determined
by one or more nationally recognized independent investment banking firms
selected by the Company's Board of Directors to advise it in connection with
such transaction, then the Company shall be obligated to accept the Competing
Offer or, if the
17
Proposing Party I s offer is to the company's shareholders, to recommend that
such shareholders accept the Competing offer.
(e) Each party shall bear its own costs and expenses in connection
with the operation of this Section 2.5.
(f) The Company's Board of Directors shall be obligated to comply with
the provisions of this Section 2.5 with respect to each subsequent counteroffer
by the Proposing Party or any other corporation, entity or person following the
submission of a Competing Offer.
2.6 COMPANY REPURCHASE OPTION.
(a) As provided in this Section 2.6, the Company or the Designee (as
defined below) shall have an option to repurchase (the "Repurchase Option") all,
but not fewer than all, Registrable Securities that the Shareholder proposes to
sell, assign, pledge, encumber, transfer or otherwise dispose of for value (the
"Offered Shares").
(b) In the event the Shareholder desires to accept a bonafide third
party offer for any or all of the Offered Shares, the Shareholder shall promptly
deliver to the Secretary of the Company, or such designee as the Company shall
indicate to the Shareholder by prompt written notice (the "Designee"), written
notice (the "Disposition Notice") of the offer and the basic terms and
conditions thereof, including without limitation the proposed purchase price and
the identity of the third party.
(c) The Company or the Designee, as the case may be, shall have 30
days following receipt of the Disposition Notice to exercise the Repurchase
option to repurchase all of the Offered Shares, which repurchase, except as
provided in Section 2.6(d) below, shall be upon the same terms and conditions
specified in the Disposition Notice. In order to exercise the Repurchase Option,
the Company or the Designee, as the case may be, shall deliver a written notice
(the "Exercise Notice") to the Shareholder prior to the expiration of such
30-day period. If the Company or the Designee, as the case may be, exercises the
Repurchase option with respect to all of the Offered Shares specified in the
Disposition Notice, then the Company or the Designee, as the case may be, shall
repurchase the Offered Shares within seven days after delivery of the Exercise
Notice; and at such time the Shareholder shall deliver to the Company or the
Designee, as the case I may be, the certificate(s) representing the Offered
Shares to be repurchased, each certificate properly endorsed for transfer.
(d) If the purchase price specified in the Disposition Notice is
payable in the form of property other than cash or in the form of indebtedness
or cancellation of indebtedness, the company or the Designee, as the case may
be, shall pay the Shareholder, in lieu of such property, indebtedness or
cancellation of indebtedness, an equal amount of cash as provided herein. If the
Company or the Desinee, as the case may be, and the Shareholder cannot agree on
such cash value within 10 days after the receipt by the Company or the Designee,
as the case may be, of the Disposition Notice, the valuation shall be made by
one nationally recognized independent investment banking firm selected
18
jointly by the Company's Board of Directors or the Designee, as the case may be,
and the Shareholder to advise the Company or the Designee, as the case may be,
and the Shareholder in connection with the exercise of the Repurchase Option. In
the event that the Company's Board of Directors or the Designee, as the case may
be, and the Shareholder cannot agree on the selection of such firm, the
Company's Board of Directors or the Designee, as the case may be, and the
Shareholder shall each select one firm, and the two firms so selected shall
jointly select a third firm to carry out the purposes of this Section 2.6(d).
The Company or the Designee, as the case may be, and the Shareholder shall share
equally any fees charged by any such firm or firms and any other related
expenses.
(e) In the event that the Company or the Designee, as the case may be,
does not provide the Shareholder with the Exercise Notice within 30 days after
the receipt by the Company or the Designee, as the case may be, of the
Disposition-Notice or otherwise fails to comply with the requirements of this
Section 2.6, the Shareholder shall have 30 days from the expiration of such
30-day period in which to sell or otherwise dispose of the Offered Shares upon
terms or conditions (including without limitation the purchase price) no more
favorable to the third party purchaser than those specified in the Disposition
Notice, and the third party purchaser shall then own the Offered Shares free and
clear of the Repurchase Option. In the event that the Shareholder does not sell
or otherwise dispose of the Offered Shares within such latter 30-day period, the
Repurchase Option shall continue to apply to any subsequent proposed sale or
disposition of the Offered Shares by the Shareholder.
(f) All certificates representing Registrable Securities held by the
Shareholder that are subject to the Repurchase option shall be endorsed with the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
PLEDGED, ENCUMBERED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN
INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN
RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. THE
SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."
(g) In the event (i) the Shareholder desires to accept a bona fide
third party offer for fewer than seventy-five percent (75%) of the Registrable
Securities then held by the Shareholder, and (ii) the Company desires to
indicate a Designee as provided in Section 2.6(b) above, the Shareholder shall
have the right to approve the Designee, which approval shall not be unreasonably
withheld. The Shareholder must deliver such approval in writing to the Company,
and the 30-day period described in Section 2.6(c) above shall not commence until
the Shareholder has delivered such approval.
19
(h) Except as provided in the last sentence of Section 2.6(e), the
Company, upon the indication of a Designee, shall have no rights pursuant to
this Section 2.6 to repurchase any Registrable Securities held by the
Shareholder.
2.7 PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay and
discharge or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and, provided further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cau ' se to be paid when due or in
conformance with customary trade terms or otherwise in accordance with policies
related thereto adopted by the Company's Board of Directors, all other
indebtedness incident to the operations of the Company.
2.8 MAINTENANCE OF PROPERTIES AND LEASES. The company will keep its
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear excepted and from time to time will make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries will at all times comply with each
material provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such provision might have a
material and adverse effect on the condition, financial or otherwise, or
operations of the Company.
2.9 INSURANCE. Except as otherwise decided in accordance with policies
adopted by the Company's Board of Directors, the Company will keep its assets
and those of its subsidiaries which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
explosion and other risks customarily insured against by companies in the
Company's line of business and the Company will maintain, with financially sound
and reputable insurers, insurance against other hazards and risks and liability
to persons and property to the extent and in the manner customary for companies
in similar businesses similarly situated.
2.10 KEY PERSON LIFE INSURANCE. The Company has as of the date hereof, or
within 90 days of the date hereof shall use its best efforts to obtain, from
financially sound and reputable insurers, and shall maintain at all times, term
life insurance on the lives of Xxxx X. Xxxxx and Xxxx X. Xxxxxxx in the amount
of $1,300,000 each and on the life of K. Xxxx Xxxxxxx in the amount of $650,000.
Such policies shall name the Company as loss payee and shall not be cancellable
by the Company without prior approval of the Board of Directors.
2.11 ACCOUNTS AND RECORDS. The Company will keep true records and books of
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
20
2.12 INDEPENDENT ACCOUNTANTS. The Company will retain independent public
accountants of recognized national standing who shall certify the Company's
financial statements at the end of each fiscal year. In the event the services
of the independent public accountants so selected or any firm of, independent
public accountants hereafter employed by the Company are terminated, the Company
will promptly thereafter notify each Holder and will request the firm of
independent public accountants whose services are terminated to deliver to the
Holders a letter from such firm setting forth the reasons for the termination of
their services. In the event of such termination, the Company will promptly
thereafter engage another firm of independent public accountants of recognized
national standing. In its notice to the Holders the Company shall state whether
the change of accountants was recommended or approved by the Board of Directors
of the Company or any committee thereof.
2.13 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The Company
and all its subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets, the violation of which may have a
material and adverse effect on the financial condition or operations of the
Company.
2.14 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall maintain in
full force and effect its corporate existence, rights and franchises and all
licenses and other rights in or to use patents, processes, licenses, trademarks,
trade names, or copyrights and similar rights owned or possessed by it or any
subsidiary and deemed by the Company to be necessary to the conduct of their
business.
2.15 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. The Company will
cause each employee or consultant now or hereafter employed or engaged by it or
any subsidiary with access to confidential information to enter into a
Proprietary Information and Inventions Agreement substantially in the form
attached as Exhibit F to the Series A Agreement.
2.16 EMPLOYEE AND OTHER STOCK ARRANGEMENTS. Without the approval of the
Board of Directors, the Company will not issue any of its capital stock, or
grant an option or rights to subscribe for, purchase or acquire any of its
capital stock, to any director, officer or employee of, or consultant to, the
Company or any subsidiary thereof except for the issuance of up to an aggregate
of 700,000 shares of Common Stock pursuant to stock purchase agreements or the
exercise of stock options granted or to be granted, under the Company's 1986
Non-Qualified Stock Option Plan, as amended. Each acquisition of any shares of
capital stock of the Company or any option or right to acquire any shares of
capital stock of the Company by any such person will be conditioned upon the
execution and delivery by the Company and such person of an agreement
substantially in a form approved by the Board of Directors of the Company.
2.17 BOARD OF DIRECTORS. The Company shall use its good faith best efforts
to cause the election to its Board of Director of the person designated by the
holders of Series A Preferred Stock pursuant to the Company's Articles of
Incorporation, as amended from time to time.
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2.18 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS.
In the event that the holders of Series A Preferred Stock shall fail for
any reason to designate a representative to be elected to the Company's Board of
Directors pursuant to the Company's Articles of Incorporation, as amended from
time to time, or the person so designated by the holders of Series A Preferred
shall not be elected to the Company's Board of Directors for any reason, then,
and in either such event, the Shareholder may designate a person who, upon
approval by the Company of his or her designation, which approval shall not be
unreasonably withheld, shall have the right to attend all meetings of the Board
of Directors and any committee thereof in a nonvoting observer capacity, to
receive notice of such meetings and to receive the information provided by the
Company to the Board of Directors and its committees at the same time as such
Board or Committee members shall receive such information or as soon thereafter
as practicable. The Shareholder may change the person designated under this
Section 2.18 upon 10 days advance written notice to the Company.
2.19 INDEBTEDNESS. The Company shall not, without the prior approval of the
Board of Directors of the Company, incur any indebtedness in excess of $100,000,
other than trade credit incurred in the ordinary course of business.
2.20 EXTENSION OF CREDIT. The Company shall not, without the prior approval
of the Board of Directors of the Company, extend credit by any method or in any
form or manner in excess of $100,000, other than open account credit extended to
customers in the ordinary course of business.
2.21 COMPENSATION OF EMPLOYEES. The Company shall not, without the prior
approval of the Board of Directors of the Company, compensate any of its
employees, including officers, in an amount greater than $100,000.
2.22 TRANSACTIONS WITH AFFILIATES. The Company, without the approval of the
disinterested members of the Company's Board of Directors, shall not engage in
any loans, leases, contracts or other transactions with any director, officer or
key employee of the Company or any member of any such person's immediate family,
including the parents, spouse, children and other relatives of any such person,
on terms less favorable than the Company would obtain in a transaction with an
unrelated party, as determined in good faith by the Board of Directors.
2.23 RESTATED ARTICLES OF INCORPORATION. Within 90 days after the Closing,
the company shall file with the Secretary of State of the State.of Oregon
Restated Articles of Incorporation of the Company restating the Company's
Articles of Incorporation with all amendments in existence immediately prior to
the Closing and without any further amendment.
2.24 CONFIDENTIAL DISCLOSURE AGREEMENT. Prior to and as a condition to the
fulfillment by the Company of any of the covenants, or the exercise by the
Shareholder of any of the rights, set forth in sections 2.1(a) and (b), 2.2 and
2.18 above, the Shareholder shall execute and deliver to the Company a
Confidential Disclosure Agreement in substantially the form attached hereto as
Exhibit A.
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2.25 HARDWARE PURCHASES. The Company shall have the right to purchase in
each calendar year up to an aggregate of $300,000 of used test and measurement
equipment from the Shareholder pursuant to the terms and conditions of the form
of Hardware Purchase Agreement attached hereto as Exhibit B (the "Hardware
Agreement"); provided, however, that any add-ons, upgrades or other additional
products of the Shareholder purchased by the Company shall be purchased not
pursuant to a Hardware Agreement but instead pursuant to the Shareholder's then
current terms and conditions of sale and at a price equal to the Shareholder's
then current published list price for such add-ons, upgrades or additional
products; and, provided further, that the purchase price of any such add-ons,
upgrades or additional products shall not be included in the $300,000 calendar
year limitation set forth above.
2.26 TERMINATION OF COVENANTS.
(a) Except as provided in Section 2.26(b) below, the covenants set
forth in this Section 2 shall terminate and be of no further force and effect
after the time of effectiveness of the Company's first firmly underwritten
public offering registered under the Securities Act for aggregate proceeds of at
least $7,500,000 at a price per share of at least $6.00 (the "Initial Public
Offering").
(b) (i) The covenants set forth in Sections 2.1(b), 2.2 (a) and 2.2
(b) shall terminate and be of no further force and effect only in the event that
a Holder owns fewer than 30,000 shares of Registrable Securities.
(ii) The covenants set forth in Sections 2.4, 2.5 and 2.18 shall
terminate and be of no further force and effect only in the event that the
Shareholder owns fewer than (a) 30, 000 shares of Registrable Securities or (b)
five percent (5%) of the outstanding shares of the Company's capital stock on an
as-converted basis.
(iii) The covenant set forth in Section 2.17 shall terminate and
be of no further force and effect only upon amendment of the Company's Articles
of Incorporation to eliminate the right of the holders of Series A Preferred
Stock to designate and elect one director.
(iv) The covenant set forth in Section 2.25 shall terminate and
be of no further force and effect only upon the earlier of (a) the effectiveness
of the Company's Initial Public Offering, and (b) the consummation of a Change
in Control.
SECTION 3
MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Oregon.
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3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including any
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the Company and the Holders of at least
a majority of the outstanding Registrable Securities, and any such amendment,
waiver, discharge or termination shall be binding on all the Holders, but in no
event shall the obligation of any Holder hereunder be materially increased,
except upon the written consent of such Holder.
3.4 NOTICES, ETC.. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid or delivered personally addressed by hand or
special courier to the party to be notified at the address indicated for such
party on the signature page hereof, or at such other address as such party may
designate by 10 days' advance written notice to the other party or parties, as
the case may be, with, in the case of any notice to the Company, a copy to
Xxxxxx X. Xxxxx, Esq., Lindsay, Xxxx, Xxxx & Xxxxxxx, 000 X.X. Xxxxxxxx, Xxxxx
0000, Xxxxxxxx, Xxxxxx 00000, in the case of any. notice to the Shareholder, a
copy to Xxx 0. Xxxxxxx, Assistant Secretary and Corporate Counsel,
Hewlett-Packard Company, 0000 Xxxxxxx Xxxxxx, XX: 20BQ, Xxxx Xxxx, Xxxxxxxxxx
00000, and, if to a Holder other than the Shareholder, at such address as such
Holder or permitted assignee shall have furnished to the Company in writing.
Delivery of all such notices and other written communications shall be effective
(i) if mailed, five days after mailing and (ii) if delivered upon delivery.
3.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power
or remedy accruing to any Holder upon any breach or default of the Company under
this Agreement shall impair any such right, power or remedy of such Holder and
it shall not be construed to be a waiver of any such breach or default or an
acquiescence therein or in any similar breach or default thereafter occurring;
and no waiver of any single breach or default shall be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Holder of any
breach or default under this Agreement or any waiver on the part of any Holder
of any provisions or conditions of this Agreement must be made in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise af forded to
any Holder, shall be cumulative and not alternative.
3.6 RIGHTS; SEPARABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
3.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
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3.8 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CASCADE MICROTECH, INC. HEWLETT-PACKARD COMPANY
By:/s/ Xxxx X. Xxxxx By:/s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------- ---------------------------------
Xxxx X. Xxxxx Xxxxxx X. Xxxxxxxxx
President Business Development Manager
Address: 00000 Xxxxxxxxx Xxxxx Address: 0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 MS 20BT
Xxxx Xxxx, XX 00000
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FOUNDERS
/s/ Xxxx X. Xxxxx
--------------------------------------------
Xxxx X. Xxxxx
/s/ Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxx
/s/ K. Xxxx Xxxxxxx
--------------------------------------------
K. Xxxx Xxxxxxx
/s/ Xxxxxxx Xxxxx
--------------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxxxx Xxx Xxxx-Xxxxxxx
--------------------------------------------
Xxxxxxx Xxx Xxxx-Xxxxxxx
26
