EXHIBIT 99.02
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STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT dated as of December 24, 2001 (the
"Agreement") by and among XXX.xxx, Inc., a Delaware corporation (the "Company"),
the investors (the "Series Y Investors") listed on Schedule A to the Series Y
Preferred Stock Purchase Agreement dated as of December 24, 2001 (the "Series Y
Agreement"), and the holders of shares of Series X Convertible Preferred Stock,
par value $.001 per share (the "Series X Preferred Stock"), of the Company set
forth on the signature pages hereto (the "Series X Investors" and together with
the Series Y Investors, the "Investors"):
WITNESSETH:
WHEREAS, the Series X Investors are the holders of all of the
outstanding shares of Series X Preferred Stock;
WHEREAS, the Series Y Investors are acquiring up to an aggregate of
15,000 shares of Series Y Convertible Preferred Stock, par value $.001 per share
(the "Series Y Preferred Stock"), of the Company pursuant to the terms of the
Series Y Agreement;
WHEREAS, the Company, the Series X Investors and the Series Y
Investors desire to provide for the composition of the Company's Board of
Directors and certain other matters as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of other good
and valuable consideration, the parties agree as follows:
ARTICLE I
THE BOARD OF DIRECTORS; ELECTIONS
1.1 Board of Directors.
(a) Number of Directors. Subject to the provisions of the
certificate of incorporation of the Company, the number of directors
constituting the entire Board of Directors of the Company shall be fixed at no
more than eight (8); provided that such number may be increased by resolution of
the Board to the extent necessary to comply with Section 1.5.
(b) Election of Directors. At any time at which stockholders of the
Company will have the right to, or will vote for or consent in writing to, the
election of directors of the Company, then, and in each such event, the Series X
Investors and the Series Y Investors to the extent entitled to by law or the
Company's certificate of incorporation (the "Charter") shall vote (or, if
applicable, consent with respect to) all shares of capital stock or voting
securities of the Company presently owned or hereafter acquired by them (whether
owned of record or over which any such person exercises voting control) in favor
of the following actions:
Stockholders' Agreement - Page 2
(i) to cause and maintain the election to the Board of Directors
of two designated representatives (the "VantagePoint Directors") of VantagePoint
Venture Partners III (Q), L.P., VantagePoint Venture Partners III, L.P.,
VantagePoint Communications Partners, L.P. and VantagePoint Venture Partners
1996, L.P. (collectively, "VantagePoint"), which VantagePoint Directors shall be
two of the four directors elected by holders of the Series X Preferred Stock,
voting as a separate series, in accordance with the Charter;
(ii) to cause and maintain the election to the Board of Directors
of an additional designated representative (the "Additional VP Director") of
VantagePoint, who initially shall be unaffiliated with VantagePoint and who
shall be initially approved by the holders of at least a majority of the
outstanding shares of Series Y Preferred Stock (it being understood that the
Additional VP Director need not be unaffiliated with VantagePoint, and that the
holders of the Series Y Preferred Stock will not have the right to approve the
Additional VP Director, after his or her original designation by VantagePoint),
which Additional VP Director shall be one of the four directors elected by
holders of the Series X Preferred Stock, voting as a separate series, in
accordance with the Charter;
(iii) to cause and maintain the election to the Board of
Directors of one designated representative of the holders of at least a majority
of the outstanding shares of Series Y Preferred Stock (the "Series Y Director";
and together with the VantagePoint Directors and the Unaffiliated Director, the
"Series X Directors"), who initially shall be Xxxxx X. Xxxxxx, which Series Y
Director shall be one of the four directors elected by holders of the Series X
Preferred Stock, voting as a separate series, in accordance with the Charter;
(iv) to cause and maintain the election to the Board of Directors
of the Company's Chief Executive Officer (the "CEO Director"), at and after such
time as such Chief Executive Officer is appointed by the Board of Directors,
which CEO Director shall be elected by all of the holders of the Company's
capital stock entitled to vote for the election of directors in accordance with
the Charter; and
(v) to cause and maintain the election to the Board of Directors
of two independent directors (and any other directors who are not required to be
elected (1) by holders of the Series X Preferred Stock, voting as a separate
series, in accordance with the Charter or (2) by another provision of this
Section 1.1, shall be independent directors), who shall be nominated by the
Nominating Committee and none of whom shall be an affiliate of any Series X
Investor or Series Y Investor (the "Independent Directors"), which Independent
Directors shall be elected by all of the holders of the Company's capital stock
entitled to vote for the election of directors in accordance with the Charter.
(c) Vacancies and Removal. Each director shall serve until his or
her successor is elected and qualified or until his or her earlier resignation
or removal. The Series X Investors shall not remove a Series Y Director during
his or her term of office, with or without cause, without the prior written
approval of at least a majority of the then outstanding shares of Series Y
Preferred Stock. Any vacancy in the office of a Series Y Director may be filled
only by a designated representative of the holders of at least a majority of the
outstanding shares of Series
Stockholders' Agreement - Page 3
Y Preferred Stock and in each case in accordance with the requirements of this
Agreement for designation of the Series Y Director. The remaining Series X
Directors shall appoint such designated representative who shall become the
Series Y Director to the Board of Directors at the meeting of the Board of
Directors next following such designation.
(d) Attendance at Meetings. Each of the Series X Investors and the
Series Y Investors shall attend, in person or by proxy, and vote its shares of
the capital stock of the Company in accordance with this Agreement at, each
annual meeting of the stockholders of the Company and each special meeting of
the stockholders of the Company involving the election of directors of the
Company.
1.2 Observation Rights. Subject to the terms and limitations set
forth in this Section 1.2, the holders of at least a majority of the outstanding
shares of Series Y Preferred Stock may designate up to two (2) representatives
of the Series Y Investors who must be reasonably acceptable to the Company
(collectively, the "Observers" and each an "Observer"), who initially shall be
Xxxx Xxxxxxxxx and Xxxxxx X. Xxxxxxx, to (i) receive concurrently with the
members of the Board of Directors, and in the same manner, notice of and attend
regularly scheduled meetings of the Board of Directors and (ii) receive a copy
of all materials and other information distributed to the Board of Directors.
Notwithstanding anything to the contrary contained in this Agreement, if the
observer rights set forth in the Management Rights Agreement to be entered into
with The Lafayette Investment Fund, L.P. are exercised, the observer resulting
from such exercise shall count as one of the two Observers permitted under this
Section 1.2. Anything in this Section 1.2 to the contrary notwithstanding, the
rights of the Observers hereunder shall be subject to the following:
(a) the rights of the Observers under this Section 1.2 shall not
apply (i) to any meeting of any committee of the Board of Directors, (ii) if, in
the reasonable judgment of the Board of Directors, the exercise of such rights
would adversely affect the attorney-client privilege between the Company and its
counsel or (iii) if, in the reasonable judgment of the Board of Directors, there
exists an actual or potential conflict of interest; and
(b) if the agenda with respect to any meeting of the Board of
Directors includes, or if it is anticipated that any such meeting will include,
any discussions, or actions to be taken, with respect to an Observer or with
respect to any matter in which such Observer has a material interest (whether
direct or indirect) distinct from other Series X Investors and Series Y
Investors, then such Observer will not have any right to attend the portion of
such meeting relating to such discussions or actions, and such Observer will not
have any right to receive any materials or other information related thereto.
If, in the reasonable judgment of an Observer, there exists an actual or
potential conflict of interest, such Observer shall promptly disclose such
actual or potential conflict of interest to the CEO.
Each Observer shall agree not to disclose to any person or entity outside of
such Observer's organization (other than to such other party that may
participate in the selection of such
Stockholders' Agreement - Page 4
Observer, but only if such other party has entered into a confidentiality
agreement relating to such information with the Company) any confidential
information of the Company (including, without limitation, any information
relating to the organization, business, finances, products or services of the
Company or any proprietary information of the Company) learned by such Observer
as a result of the rights granted by this Section 1.2 or any information
concerning a third party with the Company is under a duty to keep confidential
("Confidential Information"). The term "Confidential Information" shall not
include information which the Company has voluntarily disclosed to the public
without restriction or which has lawfully entered the public domain. Each
Observer also agrees that he or she shall not use any Confidential Information
other than for purposes of attending meetings of the Board of Directors as
contemplated by this Section 1.2 and for the continued management and evaluation
of its investment in the Company.
The Company acknowledges that the Observers will likely have, from time to time,
information that may be of interest to the Company ("Information") regarding a
wide variety of matters including, but not limited to, (a) current and future
investments the Observers have made, may make, may consider or may become aware
of with respect to other companies and other technologies, products and
services, including, without limitation, technologies, products and services
that may be competitive with the Company's, and (b) developments with respect to
the technologies, products and services, and plans and strategies relating
thereto, of other companies, including, with limitation, companies that may be
competitive with the Company. The Company recognizes that a portion of such
Information may be of interest to the Company. The Company acknowledges that the
Observer shall have no duty to disclose any Information to the Company or permit
the Company to participate in any projects or investments based on any
Information, or to otherwise take advantage of any opportunity that may be of
interest to the Company if it were aware of such Information, and hereby waives,
to the extent permitted by law, any claim based on the corporate opportunity
doctrine or otherwise that could limit the Observer's ability to pursue
opportunities based on such Information or that would require the Observer to
disclose any such Information to the Company or offer any opportunity relating
thereto to the Company.
The identity of each Observer shall have been furnished in writing to the
Company. No Observer shall be entitled to attend meetings of the Board of
Directors of the Company and receive materials and information pursuant to this
Section 1.2 unless the Company shall have receive five business days' prior
written notice of such Observer's identity.
1.3 Termination of Right to Designate Series Y Director. The right
of the holders of at least a majority of the outstanding shares of Series Y
Preferred Stock to designate the Series Y Director pursuant to Section
1.1(b)(iii) shall terminate, and be of no further force or effect, from and
after the first date on which less than 4,000 shares of Series Y Preferred Stock
are outstanding.
1.4 Nominating Committee. The Company shall form a Nominating
Committee of the Board of Director (the "Nominating Committee") that shall
nominate the Independent Directors. No Series X Director shall be eligible to be
a member of the Nominating Committee.
Stockholders' Agreement - Page 5
1.5 Independent Directors. Notwithstanding anything to the contrary
in this Agreement, each of the Company and the Investors represents and
covenants that they shall take such actions as may reasonably be required to
maintain such number of directors as may be required to provide for such number
of independent directors as required by applicable SEC and Nasdaq National
Market rules and regulations.
ARTICLE II
ADDITIONAL VOTING COVENANTS
2.1 Creation of Senior or Pari Passu Securities. For so long as at
least 3,750 shares of Series Y Preferred Stock are outstanding, without the
prior written approval of at least a majority of the then outstanding shares of
Series Y Preferred Stock, the Series X Investors shall not vote their shares of
capital stock of the Company to authorize under Section 5(a) of the Certificate
of Designation of Series X Convertible Preferred Stock filed with the Secretary
of State of the State of Delaware on November 14, 2001 the Company to, nor shall
the Series X Investors authorize under such Section 5(a) any of the Company's
subsidiaries to, authorize or issue, or obligate itself to issue, (i) any other
equity security, including any other security convertible into or exercisable
for any equity security, having rights, preferences or privileges senior to the
Series Y Preferred Stock or (ii) during the six month period beginning on the
date the Series Y Designation (as defined below) is filed with the Secretary of
State of the State of Delaware (the "Filing Date"), any other equity security,
including any other security convertible into or exercisable for any equity
security, having rights, preferences or privileges pari passu with the Series Y
Preferred Stock.
2.2 Change of Control. For a period of 180 days after the date of
the Initial Closing, without the prior written approval of at least a majority
of the then outstanding shares of Series Y Preferred Stock, the Series X
Investors shall not vote their shares of capital stock of the Company to
authorize the Company to consummate a Change of Control (as defined in Section
2(c)(i) of the Certificate of Designation of Series Y Convertible Preferred
Stock filed with the Secretary of State of the State of Delaware (the "Series Y
Designation")), or to dissolve, liquidate or wind up the Company, unless in such
transaction or series of transactions each share of Series Y Preferred Stock,
calculated on as as-if-converted-to-common stock basis (as adjusted for stock
splits, stock dividends, recapitalizations or the like affecting the Common
Stock (as defined in the Series Y Agreement) after the Filing Date), is entitled
to receive (A) no less than $1.00 in cash, (B) freely marketable securities with
the fair market value equal to at least $1.00 per share (determined in
accordance with Section 2(c)(ii) of the Series Y Designation), or (C) cash and
such securities with a combined value equal to at least $1.00.
2.3 Termination of Covenants. The covenants of the Company contained
in this Article II shall terminate and, to the extent then applicable, be of no
further force or effect upon automatic conversion of both the Series X Preferred
Stock and Series Y Preferred Stock in accordance with the Charter.
Stockholders' Agreement - Page 6
ARTICLE III
REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT
3.1 Registration Rights. (a) At any time on or after July 1, 2002,
one or more holders (the "Initiating Holders") of at least 50% of the shares
(the "Conversion Shares") of the Company's common stock, par value $0.0005 per
share (the "Common Stock"), to be issued upon conversion of either the Series X
Preferred Stock or the Series Y Preferred Stock then outstanding and which have
not been (a) registered under the Act pursuant to an effective registration
statement filed thereunder and disposed of in accordance with the registration
statement covering them or (b) publicly sold pursuant to Rule 144 under the Act
(the "Registrable Shares") may notify (the "Initiating Holder Notice") the
Company in writing that it or they intend to offer or cause to be offered for
public sale Registrable Shares held by them and, if applicable, that they intend
to distribute the Registrable Shares by means of an underwriting. Upon the
receipt of the Initiating Holder Notice, the Company shall provide written
notice (the "Notice") to all remaining holders of Registrable Shares. Upon
written request of any such holder given within 10 days of the date of the
Notice, the Company will use its best efforts to cause such of the Registrable
Shares as may be requested by any holder thereof (including the Initiating
Holders, the "Participating Investors") to be registered on Form S-3 or, if Form
S-3 is not then available, on such other form that is available for use by the
Company (a "Registration Statement") under the Act as expeditiously as possible;
provided, however, that the minimum market value of any offering and
registration of Registrable Shares made pursuant to this Section 3.1 shall be at
least $5,000,000. Notwithstanding the foregoing, the Company shall not be
obligated to register the Registrable Shares of any holder who fails to provide
promptly the Company such information as it may reasonably request at any time
to enable the Company to comply with any applicable law or regulation or to
facilitate preparation of a Registration Statement.
(b) In connection with any registration under this Agreement
involving an underwriting, the underwriter shall be selected by the
Participating Holders that hold a majority of Registrable Shares proposed to be
included in the underwriting, with the consent of the Company, such consent to
not be unreasonably withheld. The Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon among the Company, the Initiating
Holders and such underwriters. If in connection with any registration under this
Agreement involving an underwriting, the managing underwriter shall impose a
limitation on the number of Registrable Shares which may be included in any such
Registration Statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution, then the Company shall be obligated to
include in such Registration Statement only the amount as is determined in good
faith by such managing underwriter. All Investors proposing to distribute their
securities through such underwriting shall, together with the Company, enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting; provided, however that no Investor
shall be required to make any representations, warranties or indemnities except
as they relate to such Investor's ownership of Registrable Shares and authority
to enter into the underwriting agreement and to such Investor's intended method
of distribution, and the liability of such Investor shall be limited to an
amount equal to the net proceeds of the offering
Stockholders' Agreement - Page 7
received by such Investor. If the number of Registrable Shares to be included in
the offering is less than the total number of shares which the holders of
Registrable Shares have requested to be included, then the reduction shall be
made on a pro rata basis, based upon the aggregate number of Registrable Shares
requested to be included in such Registration Statement; provided, however,
that, if the Investors holding Registrable Shares issued upon conversion of
Series Y Preferred Stock request to include such Registrable Shares in the
offering, in no event may less than 30% of the total number of shares of Common
Stock to be included in such underwriting be made available for Registrable
Shares issued upon conversion of Series Y Preferred Stock.
(c) Notwithstanding the foregoing, the Company shall not be required
to effect more than one registration during any six-month period pursuant to
this Section 3.1. If prior to the time the Company receives an Initiating Holder
Notice, the Board of Directors has directed the Company to proceed with a public
offering under the Act, no registration of Registrable Shares shall be initiated
pursuant to this Section 3 until 180 days after the effective date of the
registration statement registering such public offering. With respect to a
proposed offering of Registrable Shares pursuant to a fully underwritten public
offering, the Company shall not publicly announce or file any other registration
statement for a period of 90 days after the effective date of such Registration
Statement without the prior written consent of the holders of a majority of the
Registrable Shares included in such Registration Statement, other than a
registration statement on Form S-4 or Form S-8 or any successor form thereto.
(d) The registration rights set forth in this Agreement shall expire
and terminate on July 1, 2007.
(e) The Company may include shares of Common Stock to be sold by it
in any registration requests pursuant to this Section 3.1 so long as all
Registrable Shares requested for inclusion in any such Registration Statement
shall have been included therein and, in the case of an underwritten public
offering, the inclusion of any shares of Common Stock to be sold by the Company
does not, in the opinion of the managing underwriter of such offering, reduce
the offering price of the shares to be sold by the holders of Registrable Shares
included in such Registration Statement.
3.2 Incidental Registration. If the Company at any time (other than
pursuant to Section 3.1) proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of security holders other than the Investors or both (except with
respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Registrable Shares for sale to the public), each
such time it will give written notice to each Investor then holding Registrable
Shares of its intention so to do. Upon the written request of any such Investor,
received by the Company within 30 days after the giving of any such notice by
the Company, to register any of such Registrable Shares, the Company will use
its best efforts to cause such Registrable Shares as to which registration shall
have been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company. In the event that
any registration pursuant to this Section 3.2 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of shares of
Registrable Shares to be included in such an underwriting may be reduced (pro
rata among the
Stockholders' Agreement - Page 8
requesting Investors based upon the number of Registrable Shares owned by such
Investors) if and to the extent that the managing underwriter shall be of the
opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein; provided, however, that such
number of Registrable Shares shall not be reduced if any shares are to be
included in such underwriting for the account of any person other than the
Company or the requesting Investors, and provided, further, however, that in no
event may less than 30% of the total number of shares of Common Stock to be
included in such underwriting be made available for Registrable Shares.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 3.2 without thereby incurring
any liability to the holders of Restricted Stock.
3.3 Registration Procedures. Whenever the Company is required by the
provisions of this Agreement to use its reasonable best efforts to effect the
registration of any of the Registrable Shares under the Act, the Company shall:
(a) file with the SEC a Registration Statement with respect to such
Registrable Shares and use its reasonable best effort to cause that Registration
Statement to become effective;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus contained therein (the
"Prospectus") and used in connection therewith as may be necessary to keep such
Registration Statement current, effective and free from any material
misstatement or omission to state a material fact for a period not exceeding the
earlier of (i) July 1, 2007, (ii) the date on which the Participating Investors
may sell the Registrable Shares included in such Registration Statement without
restriction by the volume limitations of Rule 144(e) of the Act or (iii) such
time as all Registrable Shares have been sold;
(c) furnish to the Participating Investors or the underwriter, if
any, with respect to any Registrable Shares registered under a Registration
Statement such number of copies of such Registration Statement, Prospectuses,
including the preliminary prospectuses, in conformity with the requirements of
the Act and such other documents as the Participating Investors may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Registrable Shares by the Participating Investor; provided, however,
that the obligation of the Company to deliver copies of Prospectuses, including
the preliminary prospectuses, to the Participating Investor shall be subject to
the receipt by the Company of reasonable assurances from the Participating
Investor that the Participating Investor and the underwriter, if any, will
comply with the applicable provisions of the Act and of such other securities or
blue sky laws as may be applicable in connection with any use of such
Prospectuses or preliminary prospectuses; and
(d) file documents required of the Company for normal blue sky
clearance in states specified in writing by the Participating Investor or the
underwriter, if any; provided, however, that the Company shall not be required
to qualify to do business or consent to service of process in any jurisdiction
in which it is not now so qualified or has not so consented.
Stockholders' Agreement - Page 9
3.4 Transfer of Registrable Shares after Registration; Suspension.
(a) Each Participating Investor agrees that it will not effect any
disposition of the Registrable Shares or its right to purchase the Registrable
Shares that would constitute a sale within the meaning of the Act except as
contemplated in a Registration Statement referred to in Sections 3.1 or 3.2 and
as described below or as otherwise permitted by law, and that it will promptly
notify the Company of any changes in the information set forth in a Registration
Statement or any Prospectus regarding the Participating Investor or its plan of
distribution.
(b) Except in the event that paragraph (c) below applies, the
Company shall (i) if deemed necessary by the Company, prepare and file from time
to time with the SEC a post-effective amendment to a Registration Statement or a
supplement to the related Prospectus, a new Prospectus or a supplement or
amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain 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, and
so that, as thereafter delivered to purchasers of the Registrable Shares being
sold thereunder, such Prospectus will not contain 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, in light of the circumstances under
which they were made, not misleading; (ii) provide the Participating Investor
copies of any documents filed pursuant to Section 3.4(b)(i); and (iii) inform
each Participating Investor that the Company has complied with its obligations
in Section 3.4(b)(i) (or that, if the Company has filed a post-effective
amendment to such Registration Statement which has not yet been declared
effective, the Company will notify the Participating Investor to that effect,
will use its reasonable best efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the
Participating Investor when the amendment has become effective).
(c) Subject to paragraph (d) below, in the event (i) of any request
by the SEC or any other federal or state governmental authority during the
period of effectiveness a Registration Statement for amendments or supplements
to a Registration Statement or related Prospectus or for additional information;
(ii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose; (iii) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; or (iv) of any event or circumstance which, in the good faith
determination of the Company's Disinterested Directors upon the advice of
counsel, necessitates the making of any changes in a Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of such Registration Statement, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; then the Company shall deliver a certificate in writing to the
Participating
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Investors (the "Suspension Notice") to the effect of the foregoing and, upon
receipt of such Suspension Notice, the Participating Investors will refrain from
selling any Registrable Shares pursuant to such Registration Statement (a
"Suspension") until the Participating Investor's receipt of copies of a
supplemented or amended Prospectus prepared and filed by the Company, or until
it is advised in writing by the Company that the current Prospectus may be used,
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in any such Prospectus. In the
event of any Suspension, the Company will use its reasonable best efforts to
cause the use of the Prospectus so suspended to be resumed as soon as reasonably
practicable. In addition to and without limiting any other remedies (including,
without limitation, at law or at equity) available to the Participating
Investor, the Participating Investor shall be entitled to specific performance
in the event that the Company fails to comply with the provisions of this
Section 3.4(c).
(d) NOTWITHSTANDING THE FOREGOING PARAGRAPHS OF THIS SECTION 3.4,
THE PARTICIPATING INVESTOR SHALL NOT BE PROHIBITED FROM SELLING REGISTRABLE
SHARES UNDER A REGISTRATION STATEMENT AS A RESULT OF SUSPENSIONS ON MORE THAN
TWO OCCASIONS OF NOT MORE THAN 60 DAYS EACH IN ANY TWELVE-MONTH PERIOD.
(e) Provided that a Suspension is not then in effect, a
Participating Investor may sell Registrable Shares under a Registration
Statement, provided that it arranges for delivery of a current Prospectus to the
transferee of such Registrable Shares.
3.5 Indemnification.
(a) In the event of any registration of any of the Registrable
Shares under this Agreement, the Company agrees to indemnify and hold harmless
each Participating Investor, each underwriter, if any, of such Registrable
Shares, and each other person, if any, who controls such Participating Investor
or underwriter within the meaning of Section 15 of the Act from and against any
losses, claims, damages or liabilities to which such Participating Investor,
underwriter or controlling person may become subject (under the Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any untrue
statement of a material fact contained in a Registration Statement or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading and the Company will
reimburse such Participating Investor, underwriter or controlling person for any
reasonable legal or other reasonable expenses incurred in investigating,
defending or preparing to defend any such action, proceeding or claim, or
preparing to defend any such action, proceeding or claim, provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of, or is based upon, an untrue
statement or alleged untrue statement made in such Registration Statement or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Participating Investor specifically for use in preparation of a
Registration Statement or any statement or omission in any Prospectus that is
corrected in any subsequent
Stockholders' Agreement - Page 11
Prospectus that was delivered to the Participating Investor or underwriter prior
to the pertinent sale or sales by such Participating Investor or underwriter.
For purposes of this Section 3.5, the term "Registration Statement" shall
include any final Prospectus, exhibit, supplement or amendment included in or
relating to a Registration Statement referred to in Sections 3.1 or 3.2 and any
documents incorporated by reference therein. The Company shall reimburse each
Participating Investor, underwriter or controlling person for the amounts
provided for herein on demand as such expenses are incurred.
(b) Each Participating Investor agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors and officers and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act from and against any losses, claims, damages or liabilities to which the
Company, officer, director or controlling person may become subject (under the
Act or otherwise), insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or are based upon any
untrue or alleged untrue statement of a material fact contained in a
Registration Statement or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading if such untrue statement or omission was made in reliance upon and in
conformity with information furnished by or on behalf of the Participating
Investor specifically for use in preparation of such Registration Statement or
documents incorporated by reference therein, and the Participating Investor will
reimburse the Company, officer, director or controlling person, as the case may
be, for any reasonable legal or other reasonable expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided that the Participating Investor's obligation to indemnify the
Company shall be limited to the net proceeds received by the Investor from the
sale of the Registrable Shares included in such Registration Statement. The
Participating Investor shall reimburse the Company for the amounts provided for
herein on demand as such expenses are incurred.
(c) Promptly after receipt by any indemnified person of a notice of
a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 3.5, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action and such indemnifying person shall assume
the defense of any such claim or any litigation resulting therefrom; provided,
however that the omission to so notify the indemnifying person will not relieve
such indemnifying person from any liability which it may have to any indemnified
person under this Section 3.5 unless and except to the extent that the
indemnifying person is prejudiced by such omission. After such notice, such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof, provided, however, that if there exists an actual or potential
conflict of interest that would make it inappropriate, in the opinion of counsel
to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel (together with appropriate local counsel) for all indemnified parties.
In no event shall any indemnifying person
Stockholders' Agreement - Page 12
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld. No indemnifying person
shall, without the prior written consent of the indemnified person, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified person is or could have been a party and indemnification could have
been sought hereunder by such indemnified person, unless such settlement
includes an unconditional release of such indemnified person from all liability
on claims that are related to the subject matter of such proceeding.
(d) If the indemnification provided for in this Section 3.5 is
unavailable to or insufficient to hold harmless an indemnified person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying person shall contribute to the amount paid or payable by
such indemnified person as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the
Participating Investor, as well as any other Participating Investors under such
registration statement, on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, in the case of an untrue statement, whether the untrue
statement relates to information supplied by the Company on the one hand or a
Participating Investor or other Participating Investor on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement. The Company and the Participating
Investor agree that it would not be just and equitable if contribution pursuant
to this subsection (d) were determined by pro rata allocation (even if the
Participating Investor and other Participating Investor s were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified person as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Participating Investor shall not be
required to contribute any amount in excess of the net proceeds of such
Registrable Shares included in such Registration Statement received by such
Participating Investor. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Investor's obligations in this subsection to contribute shall be in proportion
to its sale of Registrable Shares to which such loss relates and shall not be
joint with any other Participating Investor.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 3.5, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 3.5
fairly allocate the risks in light of the ability of the parties to investigate
the Company
Stockholders' Agreement - Page 13
and its business in order to assure that adequate disclosure is made in a
Registration Statement as required by the Act and the Exchange Act. The parties
are advised that federal or state public policy as interpreted by the courts in
certain jurisdictions may be contrary to certain of the provisions of this
Section 3.5, and the parties hereto hereby expressly waive and relinquish any
right or ability to assert such public policy as a defense to a claim under this
Section 3.5 and further agree not to attempt to assert any such defense.
3.6 Termination of Conditions and Obligations. The conditions
precedent imposed by this Section 3 or otherwise under this Agreement upon the
transferability of the Conversion Shares (including shares of Series X Preferred
Stock and Series Y Preferred Stock convertible into Conversion Shares) shall
cease and terminate as to any particular number of the such shares when such
shares shall have been effectively registered under the Act and sold or
otherwise disposed of in accordance with the intended method of disposition set
forth in such Registration Statement covering such Registrable Shares or at such
time as an opinion of counsel satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply
with the Act.
3.7 Information Available. So long as a Registration Statement is
effective covering the resale of Registrable Shares owned by a Participating
Investor, the Company will furnish to the Participating Investor on demand:
(a) as soon as practicable after it is available, one copy of
(i) its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles by a national firm of certified public accountants), (ii) its Annual
Report on Form 10-K and (iii) its Quarterly Reports on Form 10-Q (the foregoing,
in each case, excluding exhibits); and
(b) upon the request of the Participating Investor, all exhibits
excluded by the parenthetical to subparagraph (a) of this Section 3.7 as filed
with the SEC and all other information that is made available to shareholders.
3.8 Expenses. All expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or qualifications
pursuant to Sections 3.1 or 3.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for all the Participating Investors shall be borne
by the Company. Notwithstanding the foregoing, the Company shall not be
obligated to pay any expenses of the holders of the Registrable Shares in
connection with any registration initiated pursuant to Section 3.1 of this
Agreement if such registration statement is withdrawn, delayed or abandoned at
the request of the Participating Investors or if any Participating Investors
withdraw their request to register their Registrable Shares and the market value
of the Registrable Shares to be then registered is less than $5,000,000;
provided, however, that if at the time of such withdrawal, the Participating
Investors have learned of a material adverse change in the condition, business,
or prospects of the Company from that known to the Participating Investors at
the time of their request and have withdrawn the request with reasonable
promptness following disclosure by the
Stockholders' Agreement - Page 14
Company of such material adverse change, then such Participating Investors shall
not be required to pay any such expenses and shall retain their rights pursuant
to Section 3.1 or 3.2.
3.9 Prior Registration Rights Agreement. Pursuant to Section 1.11 of
the Amended and Restated Investors Rights Agreement dated July 16, 1999 (the
"Investors Rights Agreement") by and among the Company, VantagePoint and certain
other parties thereto, VantagePoint hereby consents to the registration rights
set forth in this Agreement.
3.10 "Lock-Up" Agreements with Underwriters. If on any occasion of
registration in which the Company proposes to file a registration statement
under the Act pursuant to a firmly-underwritten public offering, the managing
underwriter shall request an agreement by the Investors not to sell any capital
stock of the Company so held by each Investor for a period of 90 days after the
effectiveness of any such registration statement in order to effect an orderly
public distribution thereof, then the Investors shall agree to enter into and
execute such an agreement with such managing underwriter and the Company
pertaining to a restriction on the transfer of any shares of capital stock of
the Company then held by the Investor during such 90-day period, provided that
VantagePoint may elect to agree to such shorter period that it, after consulting
with the managing underwriter, in its sole opinion deems advisable, provided
that such shorter period is applicable to all other Investors.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. All notices, requests, consents and other
communications to be given or otherwise made to any party to this Agreement
shall be deemed to be sufficient if contained in a written instrument, delivered
by hand in person, by express overnight courier service, or by electronic mail
or facsimile transmission (with a confirming copy sent by U.S. mail, first
class, postage prepaid mail), or by registered or certified mail, return receipt
requested, postage prepaid, addressed to the Company at 000 Xxxx Xxxxx Xxxxx,
Xxxxx Xxxxx, Xxx Xxxxx, XX 00000, Attention: Xxxxxxx Xxxxxxxx, Vice President
and General Counsel, Fax No: (000) 000-0000, e-mail: xxxxxxxxx@xxx.xxx, and to
such other parties at the address set forth in Schedule A to the Company's
Series X Convertible Preferred Stock Purchase Agreement dated as of November 14,
2001 (the "Series X Stock Purchase Agreement") or Schedule A to the Series Y
Stock Purchase Agreement, as the case may be, or at such other address as may
hereafter be designated in writing by the addressee, with a copy to the
respective party's counsel listed therein. All notices shall be considered to be
delivered three (3) days after dispatch in the event of first class or
registered mail, and on the next succeeding business day in the event of
electronic mail or facsimile transmission (with confirmation of receipt) or
overnight courier service.
4.2 Restrictive Legend. During the term of this Agreement the
certificate(s) evidencing the shares of Series X Preferred Stock and Series Y
Preferred Stock subject to this Agreement may be inscribed by the Company with
the following legend, or one substantially similar thereto:
Stockholders' Agreement - Page 15
"The shares of stock represented by this certificate are subject
to certain voting agreements as set forth in a Stockholders
Agreement, as amended from time to time, by and among the
registered owner of this certificate, the Company and certain
other stockholders of the Company, a copy of which is available
for inspection at the offices of the Secretary of the Company."
4.3 Entire Agreement; Amendment. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the party against whom the
waiver is to be effective; provided, however, that the Series X Investors
holding at least a majority of the outstanding shares of Series X Preferred
Stock, voting as a separate class, and Series Y Investors holding at least a
majority of the outstanding shares of Series Y Preferred Stock, voting as a
separate class, may effect any such waiver, modification, amendment or
termination on behalf of all of the Series X Investors and Series Y Investors,
respectively; provided, further, however, that (i) any such waiver, amendment or
modification made with the consent of less than all of the Series X Investors
may only be made in a manner which applies to all Series X Investors in the same
fashion, (ii) any such waiver, amendment or modification made with the consent
of less than all of the Series Y Investors may only be made in a manner which
applies to all Series Y Investors in the same fashion, and (iii) if this
Agreement is amended, modified or terminated, or a waiver with respect to all
parties hereto is given, without the unanimous consent of the Series X Investors
or the Series Y Investors, all such Series X Investors or Series Y Investors
that are not a party to such agreement shall be given prompt notice of such
amendment, modification, termination or waiver. No waiver hereunder shall be
deemed a waiver of any subsequent breach or default of the same or similar
nature.
4.4 Governing Law. The provisions of Article I and II of this
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware, without giving effect to the principles of the conflicts of
laws thereof, and all other provisions of this Agreement shall be governed by
and construed in accordance with the laws of the State of Connecticut, without
giving effect to the principles of the conflicts of laws thereof,
4.5 Additional Parties. The Company shall take all necessary action
to ensure that each person who shall after the date hereof acquires shares of
Series X Preferred Stock or Series Y Preferred Stock shall become a party to
this Agreement by executing and delivering to the Company an Instrument of
Adherence, and such additional party shall thereafter be added to Annex I hereto
and be deemed an Series X Investor or Series Y Preferred Investor, as the case
may be, for all purposes of this Agreement without the requirement of consent of
the other parties hereto.
4.6 Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
Stockholders' Agreement - Page 16
4.7 Captions. Captions are for convenience only and are not deemed
to be part of this Agreement.
4.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.9 Remedies. Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
4.10 Section 6 of Series X Purchase Agreement. The Company and the
Series X Investors hereby agree that, in accordance with Section 8.8 of the
Series X Stock Purchase Agreement, the terms and provisions of Sections 6 and
7.1 of the Series X Stock Purchase Agreement are hereby terminated, shall have
no further force or effect and are superseded in their entirety by this
Agreement.
4.11 Effective Date. This Agreement shall become effective upon the
Initial Closing as defined in the Series Y Agreement.
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Stockholders' Agreement - Page 17
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
XXX.XXX, INC.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
--------------------------------
Title: Chairman & CEO
-------------------------------
Stockholders' Agreement - Page 18
SERIES Y INVESTORS:
COLUMBIA CAPITAL EQUITY PARNTERS II (QP), L.P.
By: Columbia Capital Equity Partners, L.L.C.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxx
--------------------------------
Title: Partner
-------------------------------
COLUMBIA CAPITAL EQUITY PARNTERS
III (QP), L.P.
By: Columbia Capital Equity Partners III, L.P.
Its: General Partner
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxx
--------------------------------
Title: Partner
-------------------------------
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Stockholders' Agreement - Page 19
XXXXXXX RIVER PARTNERSHIP X, A LIMITED
PARTNERSHIP
By: Xxxxxxx River X GP, LLC, General Partner
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
------------------------------------
Title: General Partner
-----------------------------------
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Stockholders' Agreement - Page 20
THE LAFAYETTE INVESTMENT FUND, L.P.
By: Lafayette Investment Partners, L.P.,
its sole general partner
By: Lafayette Private Equities, Inc.,
its sole general partner
By: /s/ Xxxxxx Xxxxxxx
----------------------------------
Xxxxxx Xxxxxxx
Vice President
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Stockholders' Agreement - Page 21
N.I.G. - BROADSLATE, LTD.
By: /s/ Xxxxxx Xxxxx
--------------------------------------
Name: Xxxxxx Xxxxx
------------------------------------
Title: Managing Director
-----------------------------------
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Stockholders' Agreement - Page 22
SERIES X INVESTORS:
VANTAGEPOINT VENTURE PARTNERS III (Q), L.P.
By: VantagePoint Venture Associates III,
L.L.C., its general partner
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
------------------------------------
Managing Member
VANTAGEPOINT VENTURE PARTNERS III, L.P.
By: VantagePoint Venture Associates III,
L.L.C., its general partner
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
------------------------------------
Managing Member
VANTAGEPOINT COMMUNICATIONS PARTNERS, L.P.
By: VantagePoint Communications Associates,
L.L.C., its general partner
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
------------------------------------
Managing Member
VANTAGEPOINT VENTURE PARTNERS 1996, L.P.
By: VantagePoint Associates, L.L.C., its
general partner
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
------------------------------------
Managing Member
Stockholders' Agreement - Page 23
ANNEX I
-------
XXX.XXX, INC.
INSTRUMENT OF ADHERENCE
The undersigned, _____________________, in order to become the owner
or holder of ________ shares of the Series __ Convertible Preferred Stock, par
value $.001 per share, of XXX.XXX, INC., a Delaware corporation (the "Company"),
hereby agrees to become a party to that certain Stockholders Agreement (the
"Agreement") dated as of December 24, 2001 (as may be amended from time to time
in accordance with its terms) (the "Agreement") among the Company and the other
parties thereto, and to be bound by all provisions thereof. The undersigned
agrees to become a Series __ Investor (as defined in the Agreement) under the
terms of the Agreement. This Instrument of Adherence shall take effect and shall
become a part of said Agreement immediately upon execution by the undersigned
hereto and acceptance thereof by the Company.
Executed as a contract under seal as of the date set forth below:
Signature:
----------------------------------
Name:
---------------------------------------
By:
-----------------------------------------
Address:
------------------------------------
----------------------------------------------
----------------------------------------------
Social Security No.:
------------------------
Date:
---------------------------------------
Accepted :
XXX.XXX, INC.
By:
-----------------------------------------
Name:
Title:
Date:
---------------------------------------
