EXHIBIT 10.10
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PEMSTAR INC.
FIRST AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
June 7, 1999
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TABLE OF CONTENTS
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Page
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1. Registration Rights ...................................................... 1
1.1 Definitions ..................................................... 1
1.2 Request for Registration ........................................ 2
1.3 Company Registration ............................................ 3
1.4 Obligations of the Company ...................................... 4
1.5 Furnish Information ............................................. 5
1.6 Expenses of Demand Registration ................................. 6
1.7 Expenses of Company Registration ................................ 6
1.8 Underwriting Requirements ....................................... 6
1.9 Delay of Registration ........................................... 7
1.10 Indemnification ................................................. 7
1.11 Reports Under Securities Exchange Act of 1934 ................... 9
1.12 Form S-3 Registration ...........................................10
1.13 Assignment of Registration Rights ...............................11
1.14 Limitations on Subsequent Registration Rights ...................11
1.15 "Market Stand-Off" Agreement ....................................11
1.16 Termination of Registration Rights ..............................12
2. Covenants of the Company .................................................12
2.1 Delivery of Financial Statements ................................12
2.2 Inspection ......................................................13
2.3 Termination of Information, Inspection and First Offer
Covenants .....................................................13
2.4 Right of First Offer ............................................13
3. Miscellaneous. ...........................................................14
3.1 Successors and Assigns ..........................................14
3.2 Governing Law ...................................................15
3.3 Counterparts ....................................................15
3.4 Titles and Subtitles ............................................15
3.5 Notices .........................................................15
3.6 Expenses ........................................................15
3.7 Amendments and Waivers ..........................................15
3.8 Severability ....................................................15
3.9 Entire Agreement ................................................16
Schedule A - Schedule of Investors
(i)
FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
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THIS FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
the 7th day of June, 1999, by and among PEMSTAR INC., a Minnesota corporation
(the "Company"), and the investors listed on Schedule A hereto, each of which is
herein referred to individually as an "Investor" and all of which are herein
referred to collectively as the "Investors," and terminates and supersedes in
all respects that certain Investors' Rights Agreement dated February 12, 1998,
by and among the Company and certain of the Investors.
RECITALS
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The Company and certain of the Investors have entered into a Series B
Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith pursuant to which the Company desires to sell to certain of the
Investors and certain of the Investors desire to purchase from the Company
shares of the Company's Series B Preferred Stock. A condition to such Investors'
obligations under the Purchase Agreement is that the Company and the Investors
enter into this Agreement in order to provide such Investors with (i) certain
rights to register shares of the Company's Common Stock issuable upon conversion
of the Series B Preferred Stock held by the Investors, (ii) certain rights to
receive or inspect information pertaining to the Company, and (iii) a right of
first offer with respect to certain issuances by the Company of its securities.
The Company, the Investors and the Founders each desire to induce certain of the
Investors to purchase shares of Series B Preferred Stock pursuant to the
Purchase Agreement by agreeing to the terms and conditions set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company and the Investors covenant and agree as
follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act
subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.13 hereof.
(d) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered," and "registration" refer
to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock and
the Series B Preferred Stock, and (ii) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) above, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which
his rights under this Section 1 are not assigned or any Registrable
Securities sold in a public offering or pursuant to SEC Rule 144.
(g) The number of shares of "Registrable Securities then
outstanding" means the number of shares of Common Stock outstanding
which are, and the number of shares of Common Stock issuable pursuant
to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" means the Securities and Exchange Commission.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the earlier of
(i) February 12, 2001, or (ii) six (6) months after the effective date
of the first registration statement for a public offering of
securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction), a written request from the Holders of at least
thirty-five percent (35%) of the Registrable Securities then
outstanding that the Company file a registration statement under the
Act covering the registration of Registrable Securities then
outstanding, the anticipated aggregate offering price of which would
exceed $10,000,000, then the Company shall:
(i) within ten (10) days of the delivery thereof, give
written notice of such request to all Holders; and
(ii) use its best efforts to effect as soon as practicable,
and in any event within ninety (90) days of the delivery of such
request, the registration under the Act of all Registrable
Securities which the Holders request to be registered, subject to
the limitations of subsection 1.2(b), within twenty (20) days of
the delivery of such notice by the Company.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to
subsection 1.2(a) and the Company shall include such information in
the written
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notice referred to in subsection 1.2(a). The underwriter will be
selected by the majority in interest of the Initiating Holders and
shall be reasonably acceptable to the Company. In such event, the
right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and such Holder) to the
extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company
as provided in subsection 1.4(e)) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for
such underwriting. Notwithstanding any other provision of this Section
1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders
of Registrable Securities which would otherwise be underwritten
pursuant thereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated among all
Holders thereof, including the Initiating Holders, in proportion (as
nearly as practicable) to the amount of Registrable Securities of the
Company owned by each Holder; provided, however, that the number of
shares of Registrable Securities to be included in such underwriting
shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such registration statement to be filed and it is
therefore essential to defer the filing of such registration
statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than ninety (90)
days after delivery of the request of the Initiating Holders;
provided, however, that the Company may not utilize this right more
than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this
Section 1.2:
(i) after the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been
declared or ordered effective;
(ii) during the period starting with the date ninety (90)
days prior to the Company's good faith estimate of the date of
filing of, and ending on a date one hundred eighty (180) days
after the effective date of, a registration subject to Section
1.3 hereof; provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration
statement to become effective; or
(iii) if the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on
Form S-3 pursuant to a request made pursuant to Section 1.12
below.
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1.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration
relating solely to the sale of securities to participants in a Company
stock plan, a registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty
(20) days after delivery of such notice by the Company, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested
to be registered.
1.4 Obligations of the Company. Whenever required under this Section 1
to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for
a period of up to one hundred twenty (120) days; 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 415, or any successor rule under the Act,
permits an offering on a continuous or delayed basis, and provided
further that applicable rules under the Act governing the obligation
to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by
Section 10(a)(3) of the 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 (I) and (II) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of
the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
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(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested
by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any
such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering.
Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto
is required to be delivered under the 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 the light of the circumstances
then existing, and at the request of any such Holder, prepare and
furnish to such Holder 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.
(g) Cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company
are then listed.
(h) Provide a transfer agent and registrar and a CUSIP number for
all such Registrable Securities, in each case not later than the
effective date of such registration.
(i) In the event of any underwritten public offering, cooperate
with the selling Holders, the underwriters participating in the
offering and their counsel in any due diligence investigation
reasonably requested by the selling Holders or the underwriters in
connection therewith, and participate, to the extent reasonably
requested by the managing underwriter for the offering or the selling
Holder, in efforts to sell the Registrable Securities under the
offering (including, without limitation, participating in "roadshow"
meetings with prospective investors) that would be customary for
underwritten primary offerings of a comparable amount of equity
securities by the Company.
1.5 Furnish Information.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to
the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the
registration of such Holder's Registrable Securities.
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(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 if, due to the
operation of subsection 1.5(a), the number of shares or the
anticipated aggregate offering price of the Registrable Securities to
be included in the registration does not equal or exceed the number of
shares or the anticipated aggregate offering price required to
originally trigger the Company's obligation to initiate such
registration as specified in subsection 1.2(a).
1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees,
and fees and disbursements of counsel for the Company (including fees and
disbursements of one counsel for the selling Holders) shall be borne by the
Company; provided, however, that the Company shall not be required to pay
for any expenses of any registration proceeding begun pursuant to Section
1.2 if the registration request is subsequently withdrawn at the request of
the Holders of a majority of the Registrable Securities to be registered
(in which case all participating holders shall bear such expenses), unless
the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the fees and disbursements of one
counsel for the selling Holders, but excluding in all cases underwriting
discounts and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of the
Holders' securities in such underwriting unless they accept the terms of
the underwriting as agreed upon between the Company and the underwriters
selected by the Initiating Holders (or by other persons entitled to select
the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not materially adversely affect the
success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by shareholders to be included
in such offering exceeds the amount of securities sold other than by the
Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their
sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling Shareholder or in such other
proportions as shall mutually be agreed to by such selling shareholders)
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below thirty percent (30%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's securities in
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which case the selling Holders may be excluded if the underwriters make the
determination described above and no other shareholder's securities are
included or (ii) notwithstanding (i) above, any shares being sold by a
shareholder exercising a demand registration right similar to that granted
in Section 1.2 be excluded from such offering. For purposes of the
preceding parenthetical concerning apportionment, for any selling
shareholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders
of such holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing
persons shall be deemed to be a single "selling shareholder," and any
pro-rata reduction with respect to such "selling shareholder" shall be
based upon the aggregate amount of shares carrying registration rights
owned by all entities and individuals included in such "selling
shareholder," as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration
as the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, each of its directors, officers and
employees, and any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by
the Company of the Act, the 1934 Act, or any rule or regulation
promulgated under the Act, or the 1934 Act; and the Company will,
promptly upon demand, pay to each such Holder, director, officer,
employee, underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this
subsection 1.10(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement
is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability, or action to
the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the
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registration statement, each person, if any, who controls the Company
within the meaning of the Act or the 1934 Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against
any losses, claims, damages, or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the Act
or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity
with written information furnished by such Holder expressly for use in
connection with such registration; and each such Holder will, promptly
upon demand, pay any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection
1.10(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection
1.10(b) exceed the net proceeds from the offering received by such
Holder.
(c) Promptly after delivery by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under
this Section 1.10, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to
the parties; provided, however, that an indemnified party (together
with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate
counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due
to actual or potential differing interests between such indemnified
party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party
under this Section 1.10, but the omission so to deliver written notice
to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section
1.10. Notwithstanding the foregoing, any indemnifying party shall not
enter into any settlement of any such loss, claim, damage, liability
or action without the full and complete release of all the indemnified
parties.
(d) If the indemnification provided for in this Section 1.10 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
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resulted in such loss, liability, claim, damage, or expense as well as
any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement
or omission.
(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
with respect to the rights and obligations of each of the parties to
such underwriting agreement.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and
otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees
to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general
public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to
enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable
after the end of the fiscal year in which the first registration
statement filed by the Company for the offering of its securities to
the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of
SEC Rule 144 (at any time after ninety (90) days after the effective
date of the first registration statement filed by the Company), the
Act and the 1934 Act (at any time after it has become subject to such
reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably
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requested in availing any Holder of any rule or regulation of the SEC
which permits the selling of any such securities without registration
or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from a
Holder a written request or requests that the Company effect a registration
on Form S-3 with respect to all or a part of the Registrable Securities
owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion
of such Holder's or Holders' Registrable Securities as are specified
in such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request as
are specified in a written request given within fifteen (15) days
after delivery of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section
1.12: (i) if Form S-3 is not available for such offering by the
Holders; (ii) if the Company shall furnish to the 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 and its shareholders for such
Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than ninety (90) days
after delivery of the request of the Holder or Holders under this
Section 1.12; provided, however, that the Company shall not utilize
this right more than once in any twelve month period; (iii) if the
Company has, within the twelve (12) month period preceding the date of
such request, already effected two (2) registrations on Form S-3 for
the Holders pursuant to this Section 1.12; or (iv) in any particular
jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after
delivery of the request or requests of the Holders. All expenses
incurred in connection with a registration requested pursuant to
Section 1.12, including (without limitation) all registration, filing,
qualification, printer's and accounting fees and the reasonable fees
and disbursements of one counsel for the selling Holder or Holders and
counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by
the Company. Registrations effected pursuant to this Section 1.12
shall not be counted as registrations effected pursuant to Sections
1.2 or 1.3.
1.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may
be assigned (but only with all related obligations) by a Holder to a
transferee or assignee of such securities, provided: (a) the Company is,
within a reasonable time after such transfer, furnished with written notice
of the
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name and address of such transferee or assignee and the Registrable
Securities with respect to which such registration rights are being
assigned; and (b) such transferee or assignee agrees in writing to be bound
by and subject to the terms and conditions of this Agreement, including
without limitation the provisions of Section 1.15 below.
1.14 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder
of any securities of the Company which would allow such holder or
prospective holder (a) to include such securities in any registration filed
under Section 1.2 hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of his securities will
not reduce the amount of the Registrable Securities of the Holders which is
included or (b) to make a demand registration which could result in such
registration statement being declared effective prior to the earlier of
either of the dates set forth in subsection 1.2(a) or within one hundred
eighty (180) days of the effective date of any registration effected
pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter
of Common Stock or other securities of the Company, following the effective
date of a registration statement of the Company filed under the Act, it
shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any securities of the Company held by it at any time
during such period except Common Stock included in such registration;
provided, however, that:
(a) such agreement shall not exceed one hundred eighty (180) days
for the first such registration statement of the Company which covers
Common Stock (or other securities) to be sold on its behalf to the
public in an underwritten offering;
(b) such agreement shall not exceed ninety (90) days for any
subsequent registration statement of the Company which covers Common
Stock (or other securities) to be sold on its behalf to the public in
an underwritten offering; and
(c) an Investor shall not be subject to such agreement unless all
executive officers and directors of the Company enter into similar
agreements and all other Investors and holders of other registration
rights are subject to or obligated to enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject
to the foregoing restriction) until the end of such period.
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1.16 Termination of Registration Rights. No Holder shall be entitled
to exercise any right provided for in this Section 1 after the earlier of
(i) five (5) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public (the "IPO") and (ii) that date following
the IPO upon which each Holder holds less than 1% of the then issued and
outstanding shares of capital stock of the Company and such shares may be
immediately sold under Rule 144 during any 90 day period.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall deliver to
each Investor:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and
statement of shareholder's equity as of the end of such year, and a
schedule as to the sources and applications of funds for such year,
such year-end financial reports to be in reasonable detail, prepared
in accordance with generally accepted accounting principles ("GAAP"),
and audited and certified by independent public accountants of
nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss
statement, schedule as to the sources and application of funds for
such fiscal quarter and an unaudited balance sheet as of the end of
such fiscal quarter;
(c) within thirty (30) days of the end of each month, an
unaudited income statement and schedule as to the sources and
application of funds and unaudited balance sheet for and as of the end
of such month, in reasonable detail;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on a monthly basis, including balance
sheets and sources and applications of funds statements for such
months and, as soon as prepared, any other budgets or revised budgets
prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by
the Chief Financial Officer or President of the Company and certifying
that such financial statements were prepared in accordance with GAAP
consistently applied with prior practice for earlier periods (with the
exception of footnotes that may be required by GAAP) and fairly
present the financial condition of the Company and its results of
operation for the period specified, subject to year-end audit
adjustment;
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time
request, provided, however, that the Company shall not be obligated
under this
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subsection (f) or any other subsection of Section 2.1 to provide
information which it deems in good faith to be a trade secret or
similar confidential information.
2.2 Inspection. The Company shall permit each Investor, at such
Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable
times and during normal working hours as may be requested by the Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 2.2 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
2.3 Termination of Information, Inspection and First Offer Covenants.
The covenants set forth in Sections 2.1, 2.2 and 2.4 shall terminate and be
of no further force or effect upon the IPO or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the 1934 Act, whichever event shall first occur.
2.4 Right of First Offer. Subject to the terms and conditions
specified in this Section 2.4, the Company hereby grants to each Investor a
right of first offer with respect to future sales by the Company of its
Shares (as hereinafter defined). For purposes of this Section 2.4, Investor
includes any general partners and affiliates of an Investor. An Investor
shall be entitled to apportion the right of first offer hereby granted it
among itself and its partners and affiliates in such proportions as it
deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares
to each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Investors stating (i) its bona fide intention to
offer such Shares, (ii) the number of such Shares to be offered, and
(iii) the price and terms, if any, upon which it proposes to offer
such Shares.
(b) Within twenty (20) calendar days after delivery of the
Notice, the Investor may elect to purchase or obtain, at the price and
on the terms specified in the Notice, up to that portion of such
Shares which equals the proportion that the number of shares of Common
Stock issued and held, or issuable upon conversion of the Series A
Preferred Stock and Series B Preferred Stock then held, by such
Investor bears to the total number of shares of Common Stock of the
Company then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities).
(c) If all Shares which Investors are entitled to obtain pursuant
to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 30-day period
following the expiration of the period provided in subsection 2.4(b)
hereof, offer the remaining unsubscribed portion of such Shares to any
person or persons at a price not less than, and upon terms no more
favorable to the offeree than, those
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specified in the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such
agreement is not consummated within thirty (30) days of the execution
thereof, the right provided hereunder shall be deemed to be revived
and such Shares shall not be offered unless first reoffered to the
Investors in accordance herewith.
(d) The right of first offer in this Section 2.4 shall not be
applicable to the issuance or sale of securities issued pursuant to
the exercise or conversion of exercisable or convertible securities;
securities issued pursuant to the terms of any joint venture agreement
or in an acquisition of the business of any other corporation, or
other business entity, by way of merger, reorganization, transfer of
assets or consolidation (or any similar transaction) approved by the
Board of Directors of the Company in good faith as being in the best
interests of the Company and its shareholders; securities issued by
the Company to a lender in connection with any bona fide arm's-length
debt-financing transaction that is approved by the Board of Directors
of the Company in good faith as being in the best interests of the
Company and its shareholders, 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; Common Stock issued pursuant to any arrangement approved
by the Board of Directors to employees, officers and directors of, or
consultants, advisors or other persons performing services for, the
Company; securities issued to vendors or customers or to other persons
in similar commercial situations with the Company if such issuance is
approved by the Board of Directors; securities issued by the Company
to a lessor, guarantor or other person in connection with any bona
fide arm's-length lease financing transaction that is approved by the
Board of Directors of the Company in good faith as being in the best
interests of the Company and its shareholders; securities issued in
connection with any stock split, stock dividend or recapitalization of
the Company; and any right, option or warrant to acquire or any
security convertible into the securities excluded from the definition
of Shares pursuant to subsections (i) through (vii) above.
(e) The right of first offer set forth in this Section 2.4 may
not be assigned or transferred, except that such right is assignable
by each Holder to any wholly owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Act,
controlling, controlled by or under common control with, any such
Holder.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
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3.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New
York residents entered into and to be performed entirely within New York.
3.3 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.
3.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be
deemed effectively given or delivered upon (a) personal delivery to the
party to be notified, (b) upon telefacsimile transmission to the party to
be notified at the telefacsimile number indicated for such party on the
signature page hereof, if any, or (c) upon deposit with an overnight
courier service or the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified
at the address(es) indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties.
3.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
holders of a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Registrable Securities then outstanding,
each future holder of all such Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted
as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.9 Entire Agreement. This Agreement (including the Exhibits hereto,
if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and
thereof.
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IN WITNESS WHEREOF, the parties have executed this Investors' Rights
Agreement as of the date first above written.
COMPANY:
PEMSTAR INC., a Minnesota corporation
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx, Chief Financial Officer
Address: 0000 Xxxxxxxxxx Xxxxx X.X.
Xxxxxxxxx, Xxxxxxxxx 00000
INVESTORS:
LB I Group Inc.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Title: Vice President
--------------------------------------
Address: 0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxx
Address:
---------------------------------------------
---------------------------------------------
[SIGNATURE PAGE TO THE FIRST AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
XXXXXX BROTHERS VENTURE
PARTNERS L.P.
By: Xxxxxx Brothers Venture Associates Inc.
Its: General Partner
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
(Signature)
Xxxxxxx X. Xxxxxx
---------------------------------------------
(Name)
President
---------------------------------------------
(Title)
XXXXXX BROTHERS VENTURE
CAPITAL PARTNERS I, L.P.
By: LB I Group Inc.
Its: General Partner
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
(Signature)
Xxxxxxx X. Xxxxxx
---------------------------------------------
(Name)
Vice President
---------------------------------------------
(Title)
XXXXXX BROTHERS VC
PARTNERS L.P.
By: LB I Group Inc.
Its: General Partner
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
(Signature)
Xxxxxxx X. Xxxxxx
---------------------------------------------
(Name)
Vice President
---------------------------------------------
(Title)
SCHEDULE A
----------
INVESTORS
---------
LB I Group Inc.
Xxxxxxx X. Xxxxxx
Xxxxxx Brothers Venture Partners X.X.
Xxxxxx Brothers Venture Capital Partners I, X.X.
Xxxxxx Brothers VC Partners L.P.
