EXHIBIT 10.8
FIRST AMENDED AND RESTATED SHAREHOLDER RIGHTS AGREEMENT
This First Amended and Restated Shareholder Rights Agreement (the
"Agreement") is made as of this 16th day of November 1995 by and among MMC
Networks, Inc., a California corporation (the "Company"), the purchasers of
Series A Preferred Stock of the Company pursuant to that certain Series A
Preferred Stock Purchase Agreement dated July 12, 1994 (the "Series A
Agreement") between the Company and such purchasers (the "Series A Purchasers"),
the purchasers of the Series B Preferred Stock of the Company pursuant to that
certain Series B Preferred Stock Purchase Agreement dated of even date herewith
(the "Series B Agreement") between the Company and such purchasers (the "Series
B Purchasers") (the Series A Purchasers and the Series B Purchasers being
collectively referred to herein as the "Purchasers") and Xxxx Xxxxxx, Xxxx Xxxxx
and X.X. Xxxxx (the "Founders") and Dominion Fund III, a California Limited
Partnership ("Dominion").
Recitals
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A. Pursuant to the Series A Agreement, the Series A Purchasers have
purchased shares of Series A Preferred Stock of the Company (the "Series A
Preferred") and pursuant to the Series B Agreement, the Series B Purchasers have
purchased shares of Series B Preferred Stock of the Company (the "Series B
Preferred") (the Series A Preferred and Series B Preferred are hereinafter
collectively referred to as the "Preferred Stock"). In connection with the
Series A Agreement, the Series A Purchasers, the Founders and the Company
entered into a Shareholder Rights Agreement dated July 12, 1994 (the "Prior
Shareholder Agreement") setting forth their agreement and understandings with
respect to certain rights and privileges accompanying the shares of the Series A
Preferred, and to which Prior Shareholder Rights Agreement Dominion was
subsequently added.
B. The Series A Purchasers, the Founders, the Company and Dominion desire
to amend and restate the Prior Shareholder Agreement to contain the rights
contained herein.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Purchasers and the Company agree as follows:
Agreement
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1. Certain Definitions. As used in this Agreement, the following terms
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shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
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successor agency.
"Demand Registrable Securities" shall mean (i) shares of the Company's
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Common Stock issued or issuable upon the conversion of the Series A Preferred or
Series B Preferred; (ii) any Common Stock of the Company or other securities
issued or issuable in respect of shares of the Series A Preferred or Series B
Preferred; (iii) shares of the Company's Common Stock or other securities issued
or issuable upon any conversion of the Series A Preferred or Series B Preferred
upon any stock split, stock dividend,
recapitalization, or similar event; provided, however, that any shares described
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in clauses (i)-(iii) above which have been resold to the public shall cease to
be Registrable Securities upon such resale.
"Holder" shall mean Dominion, each Purchaser, Founder and any transferee of
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Registrable Securities who, pursuant to Section 15 below, is entitled to
registration rights hereunder.
"Restricted Securities" shall mean the securities of the Company required
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to bear the legend set forth in Section 3 hereof (or any similar legend).
"Registrable Securities" shall mean (i) shares of the Company's Common
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Stock issued or issuable upon the conversion of the Series A Preferred or Series
B Preferred; (ii) any Common Stock of the Company or other securities issued or
issuable in respect of shares of the Series A Preferred or Series B Preferred;
(iii) an aggregate of 3,225,000 shares of Common Stock held by the Founders or
issuable upon exercise of stock options held by them; and (iv) shares of the
Company's Common Stock or other securities issued or issuable upon any
conversion of the Series A Preferred or Series B Preferred or in respect of the
shares described in clause (iii) upon any stock split, stock dividend,
recapitalization, or similar event; provided, however, that any shares described
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in clauses (i)-(iv) above which have been resold to the public shall cease to be
Registrable Securities upon such resale.
The terms "register," "registered" and "registration" refer to a
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registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
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complying with Sections 5, 6 and 9 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
reasonable fees and disbursements of one counsel to the Holders, and the expense
of any special audits incident to or required by any such registration.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Selling Expenses" shall mean all underwriting discounts, selling
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commissions and stock transfer taxes applicable to the securities registered by
the Holders.
2. Restrictions on Transferability. The Restricted Securities shall not
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be transferable except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Each Holder of Restricted Securities will cause any proposed
transferee of the Restricted Securities held by such Holder to agree to take and
hold such Restricted Securities subject to the provisions and upon the
conditions specified in this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Series A
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Preferred or Series B Preferred, (ii) shares of the Company's Common Stock
issued upon conversion of the Series A Preferred or Series B Preferred, (iii)
the Common Stock issued to the Founders and (iv) any other securities issued in
respect of the Series A Preferred, Series B Preferred or Common Stock issued
upon conversion of the
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Series A Preferred, Series B Preferred and Common Stock issued to the Founders
upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of Section 4
below) be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
4. Notice of Proposed Transfers. The Holder of each certificate
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representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the Holder thereof
shall give written notice to the Company of such Holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and shall, if the Company so
requests, be accompanied (except in transactions in compliance with Rule 144) by
either (i) an unqualified written opinion of legal counsel who shall be
reasonably satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "No Action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the Holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the Holder to the
Company; provided, however, that no opinion or No Action letter need be obtained
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with respect to a transfer to (A) a partner, active or retired, of a Holder of
Restricted Securities, (B) the estate of any such partner, (C) an "affiliate" of
a Holder of Restricted Securities as that term is defined in Rule 405
promulgated by the Commission under the Securities Act, or (D) the spouse,
children, grandchildren or spouse of such children or grandchildren of any
Holder or to trusts for the benefit of any Holder or such persons, if the
transferee agrees to be subject to the terms hereof. Each certificate
evidencing the Restricted Securities transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 3 above, except that
such certificate shall not bear such restrictive legend if in the opinion of
counsel for the Company such legend is not required in order to establish
compliance with any provisions of the Securities Act.
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5. Requested Registration.
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(a) Request for Registration. If at any time after two years from the date
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of this Agreement, the Company shall receive from any Holder or group of Holders
holding at least 50% of the Demand Registrable Securities a written request that
the Company effect any registration, qualification or compliance with respect to
at least 1,000,000 shares of Demand Registrable Securities, or such lesser
number of shares of Demand Registrable Securities if the aggregate proceeds of
such offering (after deduction for Selling Expenses) exceed $5,000,000, the
Company will:
(x) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders holding Demand Registrable
Securities; and
(y) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Demand Registrable Securities as are specified in such
request, together with all or such portion of the Demand Registrable Securities
of any Holder or Holders joining in such request as are specified in a written
request received by the Company within 15 days after receipt of such written
notice from the Company;
Provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 5:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(B) After the Company has effected two such registrations pursuant
to this Section 5(a), such registrations have been declared or ordered effective
and the securities offered pursuant to such registration have been sold; or
(C) Within six months following the effective date of a
registration statement previously filed by the Company.
Subject to the foregoing clauses (A), (B) and (C), the Company shall file a
registration statement covering the Demand Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of any Holder or Holders. If, however, the Company shall furnish to the Holder
or Holders requesting a registration statement pursuant to this Section 5 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
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Company shall have the right to defer such filing for a period of not more than
120 days after receipt of the request of the Holder or Holders requesting such
registration; provided, however, that the Company may not utilize this right
more than once in any twelve-month period.
(b) Underwriting. If the Holders intend to distribute the Demand
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Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 5(a) and the Company shall include such information in the written
notice referred to in Section 5(a)(x). The right of any Holder to registration
pursuant to Section 5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Demand Registrable
Securities in the underwriting to the extent requested (unless otherwise
mutually agreed by a majority in interest of the Holders) to the extent provided
herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Holders. Notwithstanding any other provision of
this Section 5, if the managing underwriter advises the Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then, subject to the provisions of Section 5(a), the Company shall
so advise all Holders and the number of shares of Demand Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all Holders requesting inclusion in the registration in proportion, as
nearly as practicable, to the respective amounts of Demand Registrable
Securities held by such Holders at the time of filing the registration
statement, provided however, that the number of shares of Demand Registrable
Securities held by Holders who initiated the registration under subsection (a)
above to be included in such Underwriting shall not be reduced unless all other
Demand Registrable Securities are first entirely excluded from the Underwriting.
No Demand Registrable Securities excluded from the underwriting by reason of the
managing underwriter's marketing limitation shall be included in such
registration.
If any Holder of Demand Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the other Holders. The Demand
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration; provided, however, that if by the withdrawal of
such Demand Registrable Securities a greater number of Registrable Securities
held by other Holders may be included in such registration (up to the maximum of
any limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Demand Registrable Securities in the registration the
right to include additional Demand Registrable Securities in the same proportion
used in determining the underwriter limitation in this Section 5(b). If the
registration does not become effective due to the withdrawal of Demand
Registrable Securities, then either (1) the Holders requesting registration
shall reimburse the Company for expenses incurred in complying with the request
or (2) the aborted registration shall be treated as effected for purposes of
Section 5(a)(B).
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6. Company Registration.
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(a) Notice of Registration. If the Company shall determine to
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register any of its securities, either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights, other than (i) a registration relating solely to employee benefit plans
or (ii) a registration relating solely to a Commission Rule 145 transaction:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 20 days after receipt of such written notice from the
Company, by any Holder or Holders, provided that the Company may limit, to the
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extent so advised by the underwriters, the amount of Registrable Securities to
be included in the registration by the Holders, by (1) up to 100% of the
Registrable Securities sought to be included in the case of the initial public
offering of the Company and (2) up to 70% of the Registrable Securities sought
to be included in the case of any subsequent public offering.
(b) In all registered public offerings, whether underwritten or not,
the amount of Registrable Securities of Holders which are included in such
registration, in accordance with the limitations set forth in Section 6(a)(ii)
above, shall be allocated to the Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities which would be
held by each of such Holders assuming conversion of all outstanding Series A
Preferred and Series B Preferred as of the date of the notice given pursuant to
this Section 6.
7. Expenses of Registration. All Registration Expenses incurred in
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connection with any registration, qualification or compliance pursuant to
Section 5(a), Section 6 and Section 9 shall be borne by the Company. All
Selling Expenses relating to securities registered by the Holders shall be borne
by the Holders of such securities pro rata on the basis of the number of shares
so registered.
8. Registration Procedures. In the case of each registration,
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qualification or compliance effected by the Company pursuant to this Agreement
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Keep such registration, qualification or compliance effective for
a period of 120 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs;
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(c) 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
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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;
(d) 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;
(e) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, include an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(f) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which securities of the
same class issued by the Company are then listed;
(g) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration; and
(h) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to Section 5 herein, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to Section 5 herein, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
9. Registration on Form S-3. In addition to the rights set forth in
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Section 5, if the Holders holding a majority of the Demand Registrable
Securities request that the Company file a registration statement on Form S-3
(or any successor thereto) for a public offering of shares of Demand Registrable
Securities the reasonably anticipated aggregate price to the public of which
would exceed $2,000,000, and the Company is a registrant entitled to use Form S-
3 to register securities for such an offering, the Company shall use its best
efforts to cause such shares to be registered for the offering on such form (or
any successor thereto). A Holder or group of Holders is entitled to an
unlimited number of Form S-3
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registrations; provided, however, that the Company shall be required to file no
more than one (1) such registration statement during any 12-month period.
10. Termination of Registration Rights. The registration rights granted
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pursuant to this Agreement shall terminate (i) as to all Holders on the fifth
anniversary of the closing of the Company's initial public offering and (ii) as
to any Holder, at such time after the Company's initial public offering as the
Registrable Securities held by such Holder represents 1% or less of the
outstanding Common Stock of the Company or such Holder is able to sell all
Registrable Securities held by it pursuant to Rule 144(k) promulgated under the
Securities Act.
11. Lockup Agreement. In consideration for the Company agreeing to its
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obligations under this Agreement each Holder of Registrable Securities and each
transferee pursuant to Section 15 hereof agrees, in connection with the first
registration of the Company's securities, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as the Company or the
underwriters may specify. Each Holder agrees that the Company may instruct its
transfer agent to place stop transfer notations in its records to enforce the
provisions of this Section 11.
12. Indemnification.
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(a) The Company will indemnify each Holder, each of its officers,
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners and such Holder's legal
counsel and independent accountants, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished
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to the Company by an instrument duly executed by such Holder or underwriter and
stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, legal counsel, independent accountants, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders hereunder shall be limited to an amount equal to the gross proceeds
before expenses and commissions to each such Holder of Registrable Securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 12 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that the 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 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 under the California Rules of Professional Conduct as a result of
conflicting interests between such Indemnified Party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent, but only to the extent, that the Indemnifying Party's ability to
defend against such claim or litigation is impaired as a result of such failure
to give notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
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13. Information by Holder. The Holder or Holders of Registrable
----------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
14. Rule 144 Reporting. With a view to making available the benefits of
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certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements);
(c) Furnish to Holders of Registrable Securities forthwith upon
request, a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public), and of the Securities Act and
the Securities Exchange Act of 1934 (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company as a
Holder of Registrable Securities may reasonably request in availing itself of
any rule or regulation of the Commission allowing such Holder to sell any such
securities without registration.
15. Transfer of Registration Rights. The right to cause the Company to
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register securities granted hereunder may be assigned to a transferee or
assignee who acquires at least fifteen percent (15%) of the then outstanding
shares of Series A Preferred or Series B Preferred (or Common Stock issued on
conversion of Series A Preferred) (adjusted for stock splits, reverse stock
splits or similar events after the date hereof) provided that the Company is
given written notice of such assignment prior to such assignment. In addition,
rights to cause the Company to register securities may be freely assigned (a) to
any constituent partner or retired partner of a Holder (or Common Stock issued
on conversion of Series A Preferred) (adjusted for stock splits, reverse stock
splits or similar events after the date hereof), where such Holder is a
partnership, (b) to any affiliate (as that term is defined in Rule 405
promulgated by the Commission under the Securities Act), (c) to any officer,
director or principal shareholder thereof, where such Holder is a corporation or
(d) to the spouse, children, grandchildren or spouse of such children or
grandchildren of any Holder or to trusts for the benefit of any Holder or such
persons where the Holder is a natural person.
16. Subsequent Grant of Registration Rights. The Company shall not grant
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rights to have securities other than the Registrable Securities registered under
the Securities Act that are superior to the
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registration rights granted herein without the consent of the holders of a
majority of the shares of Series A Preferred and Series B Preferred (or Common
Stock issued upon conversion thereof).
17. Company Covenants. The Company hereby covenants and agrees as
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follows:
17.1 Annual Financial Information. The Company will furnish to each
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Purchaser for so long as such Purchaser is a holder of any shares of Series A
Preferred or Series B Preferred purchased by such person pursuant to this
Agreement (or Common Stock issued upon conversion of the Series A Preferred or
Series B Preferred), as soon as practicable after the end of each fiscal year,
and in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of cash flows of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and certified by independent public accountants of
national standing selected by the Company.
17.2 Monthly Financial Information and Financial Plan. The Company
------------------------------------------------
will furnish the following reports to each Purchaser for so long as such
Purchaser is a holder of at least 10% of the outstanding shares of Series A
Preferred or Series B Preferred (or Common Stock issued upon conversion of
Series A Preferred or Series B Preferred or a combination of such Series A
Preferred, Series B Preferred and Common Stock) (adjusted for stock splits,
reverse stock splits or similar events after the date hereof):
(a) As soon as practicable after the end of each month, and in
any event within 30 days thereafter, consolidated balance sheets of the Company
and its subsidiaries, if any, as of the end of such month, and cash flow
statements and consolidated statements of income for each month and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied, all in reasonable detail and signed,
subject to changes resulting from year-end audit adjustments, by the principal
financial or accounting officer of the Company, together with a comparison of
such statements to the Company's operating plan then in effect and approved by
its Board of Directors.
(b) As soon as available (but in any event within 10 days after
the commencement of its fiscal year), a summary of the financial plan of the
Company for each fiscal year, including (but not limited to) a cash flow
projection and operating budget, calculated monthly, as contained in its
operating plan approved by the Company's Board of Directors.
17.3 Assignment of Rights to Financial Information. The rights to
---------------------------------------------
receive information pursuant to Section 17.1 may be assigned or otherwise
conveyed by any Purchaser or subsequent transferee to any transferee of shares
of Series A Preferred or Series B Preferred (or Common Stock issued upon
conversion thereof). The rights specified in Section 17.2 may be assigned or
otherwise conveyed by a Purchaser or subsequent transferee only to a transferee
who acquires at least 10% of the outstanding shares of Series A Preferred or
Series B Preferred (or Common Stock issued upon conversion of Series A Preferred
or Series B Preferred or a combination of such Series A Preferred,
-11-
Series B Preferred and Common Stock) (adjusted for stock splits, reverse stock
splits or similar events after the date hereof).
17.4 Proprietary Information Agreement. The Company will require each
---------------------------------
person employed by the Company, whether at present or in the future, to execute
a Proprietary Information Agreement in a form approved by the Company's Board of
Directors as a condition of such employment.
17.5 Confidentiality Agreement. Each Purchaser and any successor or
-------------------------
assign of such Purchaser, who receives from the Company or its agents, directly
or indirectly, any information which the Company has not made generally
available to the public, pursuant to the preparation and execution of this
Agreement or disclosure in connection therewith or pursuant to the provisions of
this Section 17, acknowledges and agrees that such information is confidential
and for its use only in connection with evaluating its investment in the
Company, and further agrees that it will not disseminate such information to any
person other than its accountant, investment advisor or attorney and that such
dissemination shall be only for purposes of evaluating its investment.
17.6 Key Person Insurance. The Company shall use its best efforts to
--------------------
obtain term life insurance policies on the lives of Xxxx Xxxxxx and Xxxx Xxxxx
in the amounts of $1,000,000 each with proceeds payable to the Company.
17.7 Qualified Small Business Reporting. The Company will use
----------------------------------
reasonable efforts to comply with the reporting and recordkeeping requirements
of Section 1202 of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
17.8 Termination of Covenants. Notwithstanding anything to the
------------------------
contrary set forth herein, the covenants set forth in this Section 17 (except
for those set forth in Sections 17.5 and 17.7 which shall survive) shall
terminate and be of no further force or effect after the date upon which the
first registration statement filed by the Company under the Securities Act in
connection with an underwritten public offering of its securities first becomes
effective.
18. Rights of First Refusal. The Company hereby grants to each Purchaser,
-----------------------
each Founder and Dominion the right of first refusal to purchase, pro rata, all
(or any part) of "New Securities" (as defined in this Section 18) that the
Company may, from time to time propose to sell and issue. Such pro rata share,
for purposes of this right of first refusal, is the ratio of (X) the number of
shares of Common Stock then owned by such Purchaser, Founder or Dominion or
issuable upon the conversion of the Series A Preferred or Series B Preferred
then owned by such Purchaser, Founder or Dominion (including shares issuable
upon exercise of options or warrants held by such Purchaser, Founder or
Dominion), to (Y) the total number of shares of Common Stock then outstanding,
after giving effect to the conversion of all outstanding convertible securities
(including the Series A Preferred Stock and Series B Preferred) and the exercise
of all outstanding options and Warrants. This right of first refusal shall be
subject to the following provisions:
(a) "New Securities" shall mean any Common Stock and Preferred Stock
----------------
of the Company whether or not authorized on the date hereof, and rights,
options, or warrants to purchase
-12-
Common Stock or Preferred Stock and securities of any type whatsoever that are,
or may become, convertible into Common Stock or Preferred Stock; provided,
however, that "New Securities" does not include the following:
(i) shares of Common Stock, or options to purchase shares of
Common Stock, issued or granted to officers, directors and employees of, or
consultants to, the Company pursuant to a stock grant, employee restricted stock
purchase agreement, option plan or purchase plan or other stock incentive
program (collectively, the "Plans") or issuance unanimously approved by the
Board of Directors;
(ii) shares of Common Stock issuable upon conversion of the
Series A Preferred or Series B Preferred (including any Series B Preferred
issued after the date hereof at Subsequent Closings under the Purchase
Agreement);
(iii) securities of the Company offered to the public pursuant
to a registration statement filed under the Securities Act;
(iv) securities of the Company issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets, or other reorganization whereby the Company
owns more than fifty percent (50%) of the voting power of such other
corporation;
(v) securities of the Company issued in connection with
equipment lease financing transactions or bank financing transactions the
principal purpose of which is not to raise equity funding;
(vi) securities issued to corporate partners or in connection
with other strategic alliances if the Board of Directors unanimously agrees that
such transaction should be excluded from operation of this Section 18; and
(vii) shares of Common Stock or Preferred Stock issued in
connection with any stock split, stock dividend, or recapitalization by the
Company.
(b) In the event that Company proposes to undertake an issuance of New
Securities, it shall give each Purchaser, Dominion and the Founders written
notice of its intention, describing the type of New Securities, the price, and
the general terms upon which the Company proposes to issue the same. Each
Purchaser, Dominion and each Founder shall have twenty (20) business days after
receipt of such notice to agree to purchase its pro rata share of such New
Securities at the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. If any Purchaser, Dominion or the Founder fails to agree to
purchase its full pro rata share within such twenty (20) business day period,
the Company will give the Purchasers, Dominion and the Founders who did so agree
(the "Electing Holders") notice of the number of shares which were not
subscribed for. Such notice may be by telephone if followed by written
confirmation within two days. The Electing Holders shall have ten (10) business
days from the date of
-13-
such notice to agree to purchase pro rata all of the New Securities not
purchased by such non-purchasing Purchasers, Founders and Dominion.
(c) In the event that Purchasers Dominion, and the Founders fail to
exercise in full the right of first refusal within the twenty (20) business plus
ten (10) business day period specified above, the Company shall have one hundred
twenty (120) days thereafter to sell (or enter into an agreement pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) the New Securities
respecting which the rights of the Purchasers, Dominion and the Founders were
not exercised at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has
not sold the New Securities within such one hundred twenty (120) day period (or
sold and issued New Securities in accordance with the foregoing within sixty
(60) days from the date of such agreement) the Company shall not thereafter
issue or sell any New Securities, without first offering such New Securities to
the Purchasers, Dominion and the Founders in the manner provided above.
(d) The right of first refusal granted under this Section 18 shall
expire upon the earlier of (i) five years from the date hereof, or (ii) the
first sale of Common Stock to the public that is effected pursuant to a
registration statement filed with, and declared effective by, the Commission
under the Securities Act.
(e) This right of first refusal is nonassignable except to any
transferee to whom registration rights may be transferred pursuant to Section 15
of this Agreement.
19. Governing Law. This Agreement and the legal relations between the
-------------
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
20. Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties regarding rights to
registration. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
21. Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five days after deposit with the United States mail, by registered or certified
mail, postage prepaid, addressed (a) if to a Purchaser, to such Purchaser's
address set forth on Exhibit A to the Purchase Agreement, or at such other
address as such Purchaser shall have furnished to the Company in writing, (b) if
to any other holder of any Registrable Securities, to such address as such
holder shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such securities who has so furnished an address to the Company, (c) if
to the Company, to its address set forth on the signature page of this Agreement
to the
-14-
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Holders, or (d) if to a Founder, to the address set
forth on the signature page of this Agreement, or at such other address as a
Founder shall have furnished to the Holders.
22. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
23. Amendment. Any provision of this Agreement may be amended, waived or
---------
modified upon the written consent of the (i) Company and (ii) holders of a
majority of the sum of (A) the shares of Series A Preferred and Series B
Preferred (or Common Stock issued upon conversion thereof) and (B) the
outstanding shares of Common Stock held by the Founders (excluding for all
purposes in such computation any Common Stock resold to the public), provided
--------
that any such amendment, waiver or modification applies by its terms to each
holder. Any Purchaser or Founder may waive any of his or her rights or the
Company's obligations hereunder without obtaining the consent of any other
person.
24. Waiver of Prior Shareholder Agreement. The Prior Shareholder
-------------------------------------
Agreement is hereby terminated and the Series A Purchasers, Founders and
Dominion irrevocably waive all of their rights under the Prior Shareholder
Agreement (including, but not limited to, the Rights of First Refusal contained
in Section 18 thereof) in exchange for the rights contained herein.
25. Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
-15-
IN WITNESS WHEREOF, the undersigned have executed this Amended and Restated
Shareholder Rights Agreement as of the date set forth above.
"COMPANY"
MMC NETWORKS, INC.
0000 Xxxxx Xxxx
Xxxxx Xxxxx, XX 00000
/s/ X.X. XXXXX
By: ____________________________
X.X. Xxxxx
President
/s/ XXXX XXXXXX
________________________________
Xxxx Xxxxxx
0000 Xxxxx Xxxx
Xxxxx Xxxxx, XX 00000
/s/ XXXX XXXXX
________________________________
Xxxx Xxxxx
0000 Xxxxx Xxxx
Xxxxx Xxxxx, XX 00000
DOMINION FUND III
00 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
By: Dominion Partners III
/s/ [Signature]
By: ____________________________
Title: General Partner
_________________________
-16-
"PURCHASERS"
XXXXXXX XXXXXXX XXXXXXXX & XXXXX VII
By: KPCB VII Associates, its General Partner
By: /s/ [signature]
------------------------------
Title: General Partner
-----------------------
KPCB VII FOUNDERS FUND
By: KPCB VII Associates, its General Partner
By: /s/ [signature]
------------------------------
Title: General Partner
-----------------------
KPCB INFORMATION SCIENCES ZAIBATSU FUNDS II
By: KPCB VII Associates, its General Partner
By: /s/ [signature]
------------------------------
Title: General Partner
-----------------------
JAPAN ASSOCIATED FINANCE CO., LTD.
By: /s/ XXXXXX XXXXXXX
------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
-17-
JAFCO G-5 INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ XXXXXX XXXXXXX
------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
Japan Associated Finance Co., Ltd.
Its Executive Partner
U.S. INFORMATION TECHNOLOGY INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ XXXXXX XXXXXXX
------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
Japan Associated Finance Co., Ltd.
Its Executive Partner
INSTITUTIONAL VENTURE PARTNERS VI, L.P.
By Its General Partner Institutional Venture Management VI
By: /s/ XXXXXXXX X. XXXX
---------------------------------
Xxxxxxxx X. Xxxx, General Partner
INSTITUTIONAL VENTURE MANAGEMENT VI, L.P.
By: /s/ XXXXXXXX X. XXXX
---------------------------------
Xxxxxxxx X. Xxxx, General Partner
IVP FOUNDERS FUND I, L.P.
By Its General Partner Institutional Venture Management VI
By: /s/ XXXXXXXX X. XXXX
---------------------------------
Xxxxxxxx X. Xxxx, General Partner
-18-
U.S. VENTURE PARTNERS IV, L.P.
By Presidio Management Group IV, L.P.,
Its General Partner
By: /s/ XXXXXXX X. XXXXX
---------------------------------
Xxxxxxx X. Xxxxx
Attorney-in-Fact
USVP ENTREPRENEUR PARTNERS II, L.P.
A Delaware Limited Partnership
By Presidio Management Group IV, L.P.
Its General Partner
By: /s/ XXXXXXX X. XXXXX
---------------------------------
Xxxxxxx X. Xxxxx
Attorney-in-Fact
SECOND VENTURES II, L.P.
By Presidio Management Group IV, L.P.
Its General Partner
By: /s/ XXXXXXX X. XXXXX
---------------------------------
Xxxxxxx X. Xxxxx
Attorney-in-Fact
STANFORD UNIVERSITY
By: /s/ XXXXX XXXXXX
----------------------------------
Xxxxx Xxxxxx
Title: Assistant Secretary, The Board of
Trustees of the Xxxxxx Xxxxxxxx
Junior University
WS INVESTMENT COMPANY 95B
By: /s/ XXXXXX X. XXXXXXXX
----------------------------------
Xxxxxx X. Xxxxxxxx
Title: Partner
/s/ XXXXXX X. XXXXXXXX
----------------------------------
Xxxxxx X. Xxxxxxxx
-19-
/s/ XXXXX X. XXXXXXX
----------------------------------
Xxxxx X. Xxxxxxx
/s/ XXXX XXXXXX
----------------------------------
Xxxx Xxxxxx
/s/ G. ARJAVALINGAM
----------------------------------
G. Arjavalingam
/s/ XXXXXXX X. XXXXX
----------------------------------
Xxxxxxx X. Xxxxx
/s/ XXXX XXXXXXX
----------------------------------
Xxxx Xxxxxxx
-20-
