SUPER LEAGUE GAMING, INC. INVESTORS’ RIGHTS AGREEMENT
Exhibit 10.12
THIS
INVESTORS’ RIGHTS AGREEMENT (this “Agreement”),
is made as of ___________________________, by and among Super League Gaming, Inc., a Delaware
corporation (the “Company”), and
the purchasers of the Company’s Common Stock listed on
Schedule 1
hereto (the “Investors”).
RECITALS
WHEREAS, the Company and the Investors
are parties to that certain Common Stock Purchase Agreement of even
date herewith (the “Purchase
Agreement”).
WHEREAS, in order to induce the Company
to enter into the Purchase Agreement and to induce the Investors to
invest funds in the Company pursuant to the Purchase Agreement, the
Investors and the Company hereby agree that this Agreement shall
govern the rights of the Investors to cause the Company to register
shares of Common Stock issuable to the Investors, to receive
certain information from the Company, and to participate in future
equity offerings by the Company, and shall govern certain other
matters as set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, the parties to this
Agreement agree as follows:
1. Definitions
. For
purposes of this Agreement:
1.1 “Affiliate”
means, with respect to any specified Person, any other Person who,
directly or indirectly, controls, is controlled by or is under
common control with such Person, including, without limitation, any
general partner, managing member, officer or director of such
Person, or such Person’s principal, or any venture capital
fund, financial investment firm or collective investment vehicle
now or hereafter existing that is controlled by one or more general
partners or managing members (or any affiliates thereof, which
shall include any series or cell of a general partner or managing
member that is structured as a series limited liability company)
of, or shares the same management company with, such Person. For
purposes of this definition, the terms “controlling,”
“controlled by,” or “under common control
with” shall mean the possession, directly or indirectly, of
(a) the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise, or (b) the power to elect or
appoint at least 50% of the directors, managers, general partners,
or Persons exercising similar authority with respect to such
Person. For the avoidance of doubt, an “Affiliate” of a
specified Person shall include (x) such Person’s partners,
members, stockholders, other equity owners, officers, directors,
managers, former or retired partners, former or retired members,
former or retired stockholders, former or retired other equity
owners, and the estate of any of the foregoing and (y) a parent or
subsidiary of a Person that is an entity.
1.2 “Board”
means the board of directors of the Company.
1.3 “Common
Stock” means shares of
the Company’s common stock, par value $0.001 per
share.
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1.4 “Damages”
means any loss, damage, claim or liability (joint or several) to
which a party hereto may become subject under the Securities Act,
the Exchange Act, or other federal or state law, insofar as such
loss, damage, claim or liability (or any action in respect thereof)
arises out of or is based upon: (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration
statement of the Company, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements
thereto, and any free-writing prospectus and any issuer information
(as defined in Rule 433 of the Securities Act) filed or required to
be filed pursuant to Rule 433(d) under the Securities Act or any
other document incident to such registration prepared by or on
behalf of the Company or used or referred to by the Company; (ii)
an 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 indemnifying party (or any of its agents or
Affiliates) of the Securities Act, the Exchange Act, any state
securities law, or any rule or regulation promulgated under the
Securities Act, the Exchange Act, or any state securities
law.
1.5 “Deemed
Liquidation Event” has
the meaning given to such term in the Restated Certificate in
effect on the date hereof.
1.6 “Derivative
Securities” means any
securities or rights convertible into, or exercisable or
exchangeable for (in each case, directly or indirectly), Common
Stock, including options and warrants.
1.7 “Exchange
Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
1.8 “Excluded
Registration” means (i) a
registration relating to the sale of securities to employees of the
Company or a subsidiary pursuant to a stock option, stock purchase,
or similar plan; (ii) a registration relating to an SEC Rule 145
transaction; (iii) a registration on any form that 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; or (iv) a registration in which the only
Common Stock being registered is Common Stock issuable upon
conversion of debt securities that are also being
registered.
1.9 “Exempted
Securities” means: (i)
securities issued pursuant to a Recapitalization; (ii) securities
issued to employees, consultants, officers or directors for bona
fide compensatory purposes pursuant to the Company’s existing
equity incentive plan(s), such issuances to be approved by a
majority of the Board; (iii) securities issued upon exercise or
conversion of options, warrants or other exercisable or convertible
securities outstanding as of the date hereof; (iv) securities
issued in connection with the closing of the IPO; (v) securities
issued in connection with a bona fide acquisition of another entity
by the Company by merger, purchase of substantially all of the
assets or other reorganization or a joint venture agreement
approved by a majority of the Board; (vi) securities issued to
banks, equipment lessors or other financial institutions pursuant
to a debt financing or commercial leasing transaction approved by a
majority of the Board; (vii) securities issued in connection with
sponsored research, collaboration, technology license, development,
marketing or other similar agreements or strategic partnerships
approved by a majority of the Board; and (viii) securities issued
to suppliers or third party service providers in connection with
the provision of goods or services pursuant to transactions
approved by a majority of the Board.
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1.10 “Form
S-1” means such form
under the Securities Act as in effect on the date hereof or any
successor registration form under the Securities Act subsequently
adopted by the SEC.
1.11 “Form
S-3” means such form
under the Securities Act as in effect on the date hereof or any
registration form under the Securities Act subsequently adopted by
the SEC that permits incorporation of substantial information by
reference to other documents filed by the Company with the
SEC.
1.12 “GAAP”
means generally accepted accounting principles in the United
States, consistently applied.
1.13 “Holder”
means any holder of Registrable Securities who is a party to this
Agreement.
1.14 “Immediate
Family Member” means a
child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including, adoptive relationships,
of a natural person referred to herein.
1.15 “Initiating
Holders” means,
collectively, Holders who properly initiate a registration request
under this Agreement.
1.16 “IPO”
means the Company’s first underwritten public offering of its
Common Stock under the Securities Act.
1.17 “New
Securities” means,
collectively, equity securities of the Company, whether or not
currently authorized, as well as any rights, options, or warrants
to purchase such equity securities, or securities of any type
whatsoever that are, or may become, convertible or exchangeable
into or exercisable (in each case, directly or indirectly) for such
equity securities.
1.18 “Original
Issue Price” has the
meaning given to such term in the Purchase
Agreement.
1.19 “Person”
means any individual, corporation, partnership, trust, limited
liability company, association or other entity.
1.20 “Qualified
Public Offering” means
the closing of the sale of shares of Common Stock to the public at
a price of at least $10.80 per share (subject to appropriate
adjustment in the event of any Recapitalization with respect to the Common Stock), in a
firm-commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act resulting
in at least $25,000,000 of gross proceeds, net of the underwriting
discount and commissions, to the Company.
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1.21 “Recapitalization”
means any stock dividend, stock split, combination of shares,
reorganization, recapitalization, reclassification or other similar
event.
1.22 “Registrable
Securities” means (i) any
Common Stock issued pursuant to the Purchase Agreement, (ii) any
Common Stock, or any Common Stock issued or issuable (directly or
indirectly) upon conversion and/or exercise of any other securities
of the Company, currently owned, or acquired after the date hereof,
by any Investor or its Affiliate(s); (iii) any Common Stock issued
or issuable upon conversion of those certain Zero Coupon Unsecured
Convertible Promissory Notes by the Company; and (iv) any Common
Stock issued as (or issuable upon the conversion or exercise of any
warrant, right, or other security that is issued as) a dividend or
other distribution with respect to, or in exchange for or in
replacement of, the shares referenced in clauses (i)-(iii) above
held by an Investor; excluding in all cases, however, any
Registrable Securities sold by a Person in a transaction in which
the applicable rights under this Agreement are not assigned
pursuant to Section
6.1,
and excluding for purposes of Section
2
any shares for which registration
rights have terminated pursuant to Section
2.12
of this Agreement.
1.23 “Registrable
Securities then outstanding” means the number of shares determined by
adding the number of shares of outstanding Common Stock that are
Registrable Securities and the number of shares
of Common Stock issuable (directly or indirectly)
pursuant to then exercisable and/or convertible securities that are
Registrable Securities.
1.24 “Restated
Certificate” means the
Company’s Amended and Restated Certificate of Incorporation,
as amended from time to time.
1.25 “Restricted
Securities” means the
securities of the Company required to be notated with the legend
set forth in Section 2.11(b)
hereof.
1.26 “SEC”
means the Securities and Exchange Commission.
1.27 “SEC
Rule 144” means Rule 144
promulgated by the SEC under the Securities
Act.
1.28 “SEC
Rule 145” means Rule 145
promulgated by the SEC under the Securities
Act.
1.29 “Securities
Act” means the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
1.30 “Selling
Expenses” means all
underwriting discounts, selling commissions, and stock transfer
taxes applicable to the sale of Registrable Securities, and fees
and disbursements of counsel for any Holder, all of which shall be
borne and paid for by the Holder(s) as described in this Agreement,
except for the fees and disbursements of the Selling Holder Counsel
(as defined herein) borne and paid by the Company as provided
in Section 2.6.
1.31 “Toba”
means Toba Capital Ventures Series, a series of Toba Capital LLC, a
Delaware limited liability company.
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2. Registration
Rights. The Company
covenants and agrees as follows:
(a) Form S-1
Demand. If at any time after
the earlier of (i) three (3) years after the date of this Agreement
or (ii) one (1) year after the
effective date of the registration statement for the IPO, the
Company receives a request from Holders of at least fifty percent
(50%) of the Registrable Securities then outstanding that the
Company file a Form S-1 registration statement with respect to Registrable Securities then
outstanding with an anticipated aggregate offering price, net of
Selling Expenses, in excess of $10,000,000, then the Company shall
(x) within ten (10) days after the date such request is given, give
notice thereof (the “Demand
Notice”) to all Holders
other than the Initiating Holders; and (y) as soon as practicable,
and in any event within one hundred twenty (120) days after the
date such request is given by the Initiating Holders, file such
Form S-1 registration statement under the Securities Act covering
all Registrable Securities that the Initiating Holders
requested to be registered and any additional Registrable
Securities requested to be included in such registration by any
other Holders, as specified by notice given by each such Holder to
the Company within twenty (20) days of the date the Demand Notice
is given, and in each case, subject to the limitations of
Subsections
2.1(c)
and 2.3.
(b) Form S-3
Demand. If at any time when it
is eligible to use a Form S-3 registration statement, the Company
receives a request from Holders of at least fifty percent (50%) of
the Registrable Securities then outstanding that the Company file a
Form S-3 registration statement with respect to outstanding
Registrable Securities of such Holders having an anticipated
aggregate offering price, net of Selling Expenses, of at least
$5,000,000, then the Company shall (i) within ten (10) days after
the date such request is given, give a Demand Notice to all Holders
other than the Initiating Holders; and (ii) as soon as practicable,
and in any event within sixty (60) days after the date such request
is given by the Initiating Holders, file such Form S-3 registration
statement under the Securities Act covering all Registrable
Securities requested to be included in such registration by any
other Holders, as specified by notice given by each such Holder to
the Company within twenty (20) days of the date the Demand Notice
is given, and in each case, subject to the limitations of
Subsections
2.1(c)
and 2.3.
(c) Notwithstanding the foregoing obligations, if the
Company furnishes to Holders requesting a registration pursuant to
this Subsection
2.1
a certificate signed by the
Company’s chief executive officer stating that in the good
faith judgment of the Board it would be materially detrimental to
the Company and its stockholders for such registration statement to
either become effective or remain effective for as long as such
registration statement otherwise would be required to remain
effective, because such action would (i) materially interfere with
a significant acquisition, corporate reorganization, or other
similar transaction involving the Company; (ii) require premature
disclosure of material information that the Company has a bona fide
business purpose for preserving as confidential; or (iii) render
the Company unable to comply with requirements under the Securities
Act or Exchange Act, then the
Company shall have the right to defer taking action with respect to
such filing for a period of not more than one hundred eighty (180)
days after the request of the Initiating Holders is given;
provided,
however,
that the Company may not invoke this right more than once in any
twelve (12) month period;
and provided further
that the Company shall not register
any securities for its own account or that of any other stockholder
during such ninety (90) day period other than an Excluded
Registration.
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(d) The
Company shall not be obligated to effect, or to take any action to
effect, any registration pursuant to Subsection
2.1(a):
(i) during the period that is ninety (90) days before the
Company’s good faith estimate of the date of filing of, and
ending on a date that is one hundred eighty (180) days after the
effective date of, a Company-initiated registration,
provided
that the Company is actively employing
in good faith commercially reasonable efforts to cause such
registration statement to become effective; (ii) after the Company
has effected two registrations pursuant to Subsection
2.1(a);
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 Subsection
2.1(b).
The Company shall not be obligated to effect, or to take any action
to effect, any registration pursuant to Subsection
2.1(b):
(i) during the period that is forty-five (45) days before the
Company’s good faith estimate of the date of filing of, and
ending on a date that is ninety (90) days after the effective date
of, a Company-initiated registration, provided
that the Company is actively employing
in good faith commercially reasonable efforts to cause such
registration statement to become effective; or (ii) if the Company
has effected two registrations pursuant to Subsection
2.1(b)
within the twelve (12) month period
immediately preceding the date of such request. A registration
shall not be counted as “effected” for purposes of
this Subsection
2.1(d)
until such time as the applicable
registration statement has been declared effective by the SEC,
unless the Initiating Holders withdraw their request for such
registration, elect not to pay the registration expenses therefor,
and forfeit their right to one (1) demand registration statement
pursuant to Subsection
2.6,
in which case such withdrawn registration statement shall be
counted as “effected” for purposes of this
Subsection
2.1(d).
2.2 Company
Registration. If the Company
proposes to register (including, for this purpose, a registration
effected by the Company for stockholders other than the Holders)
any of its securities under the Securities Act in connection with
the public offering of such securities solely for cash (other than
in an Excluded Registration), the Company shall, at such time,
promptly (and in any event no less than twenty (20) calendar days
prior to the filing of the registration statement with respect to
such Company securities) give each Holder notice of such
registration. Upon the request of each Holder given within ten (10)
days after such notice is given by the Company, the Company shall,
expressly subject to the provisions of Section 2.3, cause to be registered all
of the Registrable Securities that each such Holder has requested
to be included in such registration. The Company shall have the
right to terminate or withdraw any registration initiated by it
under this Section 2.2 before the effective
date of such registration, whether or not any Holder has elected to
include Registrable Securities in such registration. The expenses
(other than Selling Expenses) of such withdrawn registration shall
be borne by the Company in accordance with Section 2.6.
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2.3 Underwriting
Requirements
(a) If,
pursuant to Section 2.1,
the 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 Section 2.1,
and the Company shall include such information in the Demand
Notice. The underwriter(s) will be selected by the Company and
shall be reasonably acceptable to a majority in interest of the
Initiating Holders. In such event, the right of any Holder to
include such Holder’s 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 to the
extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the
Company as provided in Section 2.4(e))
enter into an underwriting agreement in customary form with the
underwriter(s) selected for such underwriting. Notwithstanding any
other provision of this Section 2.3,
if the managing underwriter(s) advise(s) the Initiating Holders in
writing that marketing or other factors, in its reasonable
discretion, require a limitation on the number of shares to be
underwritten, or the elimination thereof, then the Initiating
Holders shall so advise all Holders of Registrable Securities that
otherwise would be underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting
shall be allocated among such Holders of Registrable Securities,
including the Initiating Holders, in proportion (as nearly as
practicable) to the number of Registrable Securities owned by each
Holder or in such other proportion as shall unanimously be agreed
to by all such selling Holders; provided,
however, that the number of
Registrable Securities held by the Holders, to be included in such
underwriting, shall only be reduced in proportion to the percentage
reduction of other registrable securities of the Company included
in such underwriting and not part of the Registrable Securities
defined herein. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder
to the nearest one hundred (100) shares.
(b) In
connection with any offering involving an underwriting of shares of
the Company’s capital stock pursuant to Section 2.2,
the Company shall not be required to include any of the
Holders’ Registrable Securities in such underwriting unless
the Holders accept the terms of the underwriting as agreed upon
between the Company and its underwriters, and then only in such
quantity, if any, as the underwriters in their sole discretion
determine will not jeopardize the success of the offering by the
Company. If the total number of securities, including Registrable
Securities, requested by stockholders to be included in such
offering exceeds the number of securities to be sold (other than by
the Company), that the underwriters in their reasonable discretion
determine 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 and the Company in their sole discretion determine
will not jeopardize the success of the offering. If the
underwriters determine that less than all of the Registrable
Securities requested to be registered can be included in such
offering, then the Registrable Securities that are included in such
offering shall be allocated among the selling Holders in proportion
(as nearly as practicable) to the number of Registrable Securities
owned by each selling Holder or in such other proportions as shall
mutually be agreed to by all such selling Holders. To facilitate
the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest one hundred (100) shares.
Notwithstanding the foregoing, in no event shall (i) the number of
Registrable Securities included in the offering be reduced unless
all other securities (expressly excluding securities to be sold by
the Company) are proportionally reduced, or (ii) the number of
Registrable Securities included in the offering be reduced below
fifty percent (50%) of the total number of securities included in
such offering, unless such offering is the IPO, in which case the
selling Holders may be excluded in full if the underwriters make
the determination described above and no other stockholder’s
securities are included in such offering. For purposes of the provision in this
Section 2.3(b)
concerning apportionment, for any
selling Holder that is a partnership, limited liability company, or
corporation, the partners, members, retired partners, retired
members, stockholders, and Affiliates of such Holder, or the
estates and Immediate Family Members of any such partners, retired
partners, members, and retired members and any trusts for the
benefit of any of the foregoing Persons, shall be deemed to be a
single “selling Holder,” and any pro rata reduction
with respect to such “selling Holder” shall be based
upon the aggregate number of Registrable Securities owned by all
Persons included in such “selling Holder,” as defined
in this sentence.
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(c) For
purposes of Section
2.1, a registration shall not
be counted as “effected” if, as a result of an exercise
of the underwriter’s cutback provisions in
Section
2.3(a), fewer than twenty-five
percent (25%) of the total number of Registrable Securities that
Holders have requested to be included in such registration
statement are actually included.
2.4 Obligations
of the Company. Whenever required
under this Section 2 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 commercially reasonable
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 or, if earlier, until the
distribution contemplated in the registration statement has been
completed; provided,
however, that such one hundred
twenty (120) day period shall be extended for a period of time
equal to the period the Holder refrains, at the request of an
underwriter of Common Stock (or other securities) of the Company,
from selling any securities included in such
registration;
(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
Securities Act in order to enable the disposition of all securities
covered by such registration statement;
(c) furnish
to the selling Holders such numbers of copies of a prospectus,
including a preliminary prospectus, as required by the Securities
Act, and such other documents as the Holders may reasonably request
in order to facilitate their disposition of their Registrable
Securities;
(d) use
its commercially reasonable 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 selling Holders; provided that the Company shall not be required to qualify
to do business or to file a general consent to service of process
in any such states or jurisdictions, unless the Company is already subject to service
in such jurisdiction and except as may be required by the
Securities Act;
(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 underwriter(s) of such
offering;
(f) use
its commercially reasonable efforts to cause all such Registrable
Securities covered by such registration statement to be listed on a
national securities exchange or trading system and each securities
exchange and trading system (if any) on which similar securities
issued by the Company are then listed;
(g) provide
a transfer agent and registrar for all Registrable Securities
registered pursuant to this Agreement and provide a CUSIP number
for all such Registrable Securities, in each case not later than
the effective date of such registration;
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(h) promptly
make available for inspection by the selling Holders, any
underwriter(s) participating in any disposition pursuant to such
registration statement, and any attorney or accountant or other
agent retained by any such underwriter or selected by the selling
Holders, all financial and other records, pertinent corporate
documents, and properties of the Company, and cause the
Company’s officers, directors, employees, and independent
accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant, or agent, in each
case, as necessary or advisable to verify the accuracy of the
information in such registration statement and to conduct
appropriate due diligence in connection therewith;
(i) notify
each selling Holder, promptly after the Company receives notice
thereof, of the time when such registration statement has been
declared effective or a supplement to any prospectus forming a part
of such registration statement has been filed; and
(j) after
such registration statement becomes effective, notify each selling
Holder of any request by the SEC that the Company amend or
supplement such registration statement or prospectus.
In
addition, the Company shall ensure that, at all times after any
registration statement covering a public offering of securities of
the Company under the Securities Act shall have become effective,
its xxxxxxx xxxxxxx policy shall provide that the Company’s
directors may implement a trading program under Rule 10b5-1 of the
Exchange Act.
2.5 Furnish
Information. It shall be a
condition precedent to the obligations of the Company to take any
action pursuant to this Section 2 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 is reasonably required to effect
the registration of such Holder’s Registrable
Securities.
2.6 Expenses of
Registration. All expenses
(other than Selling Expenses) incurred in connection with
registrations, filings, or qualifications pursuant to
Section 2, including all registration, filing, and
qualification fees; printers’ and accounting fees; fees and
disbursements of counsel for the Company; and the reasonable fees
and disbursements, not to exceed $25,000, of one counsel for the
selling Holders (“Selling Holder
Counsel”), shall be borne and paid 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 2.1 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 selling Holders shall bear such expenses pro rata based
upon the number of Registrable Securities that were to be included
in the withdrawn registration), unless the Holders of a majority of
the Registrable Securities agree to forfeit their right to one
registration pursuant to Sections 2.1(a) or 2.1(b), as the case may be, in
which case the Holders shall not be required to pay any of such
expenses and shall not forfeit their right to one registration
pursuant to Sections 2.1(a) or 2.1(b). All Selling Expenses
relating to Registrable Securities registered pursuant to this
Section 2 shall be borne and paid by
the Holders pro rata on the basis of the number of Registrable
Securities registered on their behalf.
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2.7 Delay
of Registration. No Holder shall
have any right to obtain or seek an injunction restraining or
otherwise delaying any registration pursuant to this Agreement as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.8 Indemnification.
If any Registrable Securities are included in a registration
statement under this Section 2:
(a) To
the extent permitted by law, the Company will indemnify and hold
harmless each selling Holder, and the partners, members, officers,
directors, and stockholders of each such Holder; legal counsel and
accountants for each such Holder; any underwriter (as defined in
the Securities Act) for each such Holder; and each Person, if any,
who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any Damages, and the
Company will pay to each such Holder, underwriter, controlling
Person, or other aforementioned Person any legal or other expenses
reasonably incurred thereby in connection with investigating or
defending any claim or proceeding from which Damages may result, as
such expenses are incurred; provided,
however, that the indemnity
agreement contained in this Section 2.8(a)
shall not apply to amounts paid in
settlement of any such claim or proceeding if such settlement is
effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable for
any Damages to the extent that they arise out of or are based upon
actions or omissions made in reliance upon and in conformity with
written information furnished by or on behalf of any such Holder,
underwriter, controlling Person, or other aforementioned Person
expressly for use in connection with such
registration.
(b) To
the extent permitted by law, each selling Holder, severally and not
jointly, will indemnify and hold harmless the Company, and each of
its directors, each of its officers who has signed the registration
statement, each Person (if any), who controls the Company within
the meaning of the Securities Act, legal counsel and accountants
for the Company, any underwriter (as defined in the Securities
Act), any other Holder selling securities in such registration
statement, and any controlling Person of any such underwriter or
other Holder, against any Damages, in each case only to the extent
that such Damages arise out of or are based upon actions or
omissions made in reliance upon and in conformity with written
information furnished by or on behalf of such selling Holder
expressly for use in connection with such registration; and each
such selling Holder will pay to the Company and each other
aforementioned Person any legal or other expenses reasonably
incurred thereby in connection with investigating or defending any
claim or proceeding from which Damages may result, as such expenses
are incurred; provided,
however, that the indemnity
agreement contained in this Section 2.8(b)
shall not apply to amounts paid in
settlement of any such claim or proceeding if such settlement is
effected without the consent of the Holder, which consent shall not
be unreasonably withheld; and provided further
that in no event shall the aggregate
amounts payable by any Holder by way of indemnity or contribution
under Sections 2.8(b)
and 2.8(d)
exceed the proceeds from the offering
received by such Holder (net of any Selling Expenses paid by such
Holder), except in the case of fraud or willful misconduct by such
Holder.
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(c) Promptly
after receipt by an indemnified party under this
Section 2.8 of
notice of the commencement of any action (including any
governmental action) for which a party may be entitled to
indemnification hereunder, such indemnified party will, if a claim
in respect thereof is to be made against any indemnifying party
under this Section 2.8,
give the indemnifying party notice of the commencement thereof. The
indemnifying party shall have the right to participate in such
action and, to the extent the indemnifying party so desires,
participate jointly with any other indemnifying party to which
notice has been given, and to assume the defense thereof with
counsel mutually satisfactory to the parties; provided,
however, that an indemnified
party (together with all other indemnified parties that 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 due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such action. The failure to give
notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying
party of any liability to the indemnified party under this
Section 2.8,
to the extent that such failure materially prejudices the
indemnifying party’s ability to defend such action. The
failure to give 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 2.8.
(d) To
provide for just and equitable contribution to joint liability
under the Securities Act in any case in which either: (i) any party
otherwise entitled to indemnification hereunder makes a claim for
indemnification pursuant to this Section 2.8
but it is judicially determined (by
the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be
enforced in such case, notwithstanding the fact that this
Section 2.8
provides for indemnification in such
case, or (ii) contribution under the Securities Act may be required
on the part of any party hereto for which indemnification is
provided under this Section 2.8,
then, and in each such case, such parties will contribute to the
aggregate losses, claims, damages, liabilities, or expenses to
which they may be subject (after contribution from others) in such
proportion as is appropriate to reflect the relative fault of each
of the indemnifying party and the indemnified party in connection
with the statements, omissions, or other actions that resulted in
such loss, claim, damage, liability, or expense, as well as to
reflect 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 allegedly untrue statement of a material fact, or the
omission or alleged omission of 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; provided,
however, that, in any such case
(x) no Holder will be required to contribute any amount in excess
of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration
statement, and (y) no Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation; and provided further
that in no event shall a
Holder’s liability pursuant to this Section 2.8(d),
when combined with the amounts paid or payable by such Holder
pursuant to Section 2.8(b),
exceed the proceeds from the offering received by such Holder (net
of any Selling Expenses paid by
such Holder), except in the case of willful misconduct or fraud by
such Holder.
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(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.
(f) Unless
otherwise superseded by an underwriting agreement entered into in
connection with the underwritten public offering, the obligations
of the Company and Holders under this Section 2.8
shall survive the completion of any
offering of Registrable Securities in a registration under
this Section 2,
and otherwise shall survive the termination of this
Agreement.
2.9 Reports
Under Exchange Act. With a view to
making available to the Holders the benefits of SEC Rule 144 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
shall:
(a) make
and keep available adequate current public information, as those
terms are understood and defined in SEC Rule 144, at all times
after the effective date of the registration statement filed by the
Company for the IPO;
(b) use
commercially reasonable efforts to file with the SEC in a timely
manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act (at any time after
the Company has become subject to such reporting requirements);
and
(c) furnish
to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request to the extent accurate, 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 registration statement
filed by the Company for the IPO), the Securities Act, and the
Exchange Act (at any time after the Company 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 the Company so qualifies); and (ii) such other information as
may be reasonably requested in availing any Holder of any rule or
regulation of the SEC that permits the selling of any such
securities without registration (at any time after the Company has
become subject to the reporting requirements under the Exchange
Act) or pursuant to Form S-3 (at any time after the Company so
qualifies to use such form).
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2.10 “Market
Stand-off” Agreement. Each Holder hereby agrees
that it will not, without the prior written consent of the managing
underwriter, during the period commencing on the date of the final
prospectus relating to the registration by the Company of shares of
its Common Stock or any other equity securities under the
Securities Act on a registration statement on Form S-1
or Form S-3, and ending on the date specified by the Company and
the managing underwriter (such period not to exceed one hundred
eighty (180) days in the case of the IPO, or such other period as
may be requested by the Company or an underwriter to accommodate
regulatory restrictions on (1) the publication or other
distribution of research reports, and (2) analyst recommendations
and opinions, including, but not limited to, the restrictions
contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any
successor provisions or amendments thereto), (i) lend; offer;
pledge; sell; contract to sell; sell any option or contract to
purchase; purchase any option or contract to sell; grant any
option, right, or warrant to purchase; or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable
(directly or indirectly) for Common Stock held
immediately before the
effective date of the registration statement for such
offering or (ii) enter
into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
such securities, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or
other securities, in cash, or otherwise. The foregoing provisions
of this Section 2.100 shall apply only to the IPO,
shall not apply to the sale of any shares to an underwriter
pursuant to an underwriting agreement, or the transfer of any
shares to any trust for the direct or indirect benefit of the
Holder or the immediate family of the Holder, provided that the
trustee of the trust agrees to be bound in writing by the
restrictions set forth herein, and provided further that any such
transfer shall not involve a disposition for value. The
underwriters in connection with such registration are intended
third-party beneficiaries of this Section 2.10 and shall have the right,
power and authority to enforce the provisions hereof as though they
were a party hereto. Each Holder further agrees to execute such
agreements as may be reasonably requested by the underwriters in
connection with such registration that are consistent with this
Section 2.10 or that are necessary to
give further effect thereto, and the Company shall cause all future
stockholders of the Company to execute a document containing a
market stand-off agreement comparable to this Section 2.10. Any discretionary
waiver or termination of the restrictions of any or all of such
agreements by the Company or the underwriters shall apply pro rata
to all Holders subject to such agreements, based on the number of
shares subject to such agreements.
(a) The
Registrable Securities shall not be sold, pledged, or otherwise
transferred other than in conformity with the Securities Act, and
the Company shall not recognize and shall issue stop-transfer
instructions to its transfer agent (when a transfer agent has been
engaged by the Company) with respect to any such sale, pledge, or
transfer, except upon the conditions specified in this Agreement,
which conditions are intended to ensure compliance with the
provisions of the Securities Act. A transferring Holder will cause
any proposed purchaser, pledgee, or transferee of the Registrable
Securities held by such Holder to agree to take and hold such
securities subject to the provisions and upon the conditions
specified in this Agreement.
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(b) Each
certificate, instrument, or book entry representing (i) the
Registrable Securities, and (ii) any other securities issued in
respect of the securities referenced in clause (i), upon any
Recapitalization, merger, consolidation, or similar event, shall
(unless otherwise permitted by the provisions of
Section 2.11(c))
be notated with a legend substantially in the following
form:
THE
SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE
SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
The
Holders consent to the Company making a notation in its records and
giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer set
forth in this Section 2.11.
(c) The
holder of such Restricted Securities, by acceptance of ownership
thereof, agrees to comply in all respects with the provisions of
this Section 2.
Before any proposed sale, pledge, or transfer of any Restricted
Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transaction, the
Holder thereof shall give notice to the Company of such
Holder’s intention to effect such sale, pledge, or transfer.
Each such notice shall describe the manner and circumstances of the
proposed sale, pledge, or transfer in sufficient detail and, if
reasonably requested by the Company, shall be accompanied at such
Holder’s expense by either (i) a written opinion of legal
counsel who shall, and whose legal opinion shall, be reasonably
satisfactory to the Company, addressed to the Company, to the
effect that the proposed transaction may be effected without
registration under the Securities Act; (ii) a “no
action” letter from the SEC to the effect that the proposed
sale, pledge, or transfer of such Restricted Securities without
registration will not result in a recommendation by the staff of
the SEC that action be taken with respect thereto; or (iii) any
other evidence reasonably satisfactory to counsel to the Company to
the effect that the proposed sale, pledge, or transfer of the
Restricted Securities may be effected without registration under
the Securities Act, whereupon the Holder of such Restricted
Securities shall be entitled to sell, pledge, or transfer such
Restricted Securities in accordance with the terms of the notice
given by the Holder to the Company. The Company will not require
such a legal opinion or “no action” letter or detail
with respect to such transfer other than the number of shares and
the name of the transferee (x) in any transaction in compliance
with SEC Rule 144; or (y) in any transaction in which such Holder
distributes Restricted Securities to an Affiliate of such Holder
for no consideration; provided that each transferee agrees in writing to be
subject to the terms of this Section 2.11.
Each certificate, instrument, or book entry representing the
Restricted Securities transferred as above provided shall be
notated with, except if such transfer is made pursuant to SEC Rule
144, the appropriate restrictive legend set forth in
Section 2.11(b),
except that such certificate instrument, or book entry shall not be
notated with such restrictive legend if, in the opinion of counsel
for such Holder and the Company, such legend is not required in
order to establish compliance with any provisions of the Securities
Act.
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2.12 Termination
of Registration Rights. The right of any
Holder to request registration or inclusion of Registrable
Securities in any registration pursuant to Sections 2.1 or 2.2 shall terminate upon
the earliest to occur of:
(a) such
time as Rule 144 or another similar exemption under the Securities
Act is available for the sale of all of such Holder’s shares without limitation during a three-month
period without registration; and
(b) the
fifth anniversary of the IPO.
3. Information
Rights
(a) as
soon as practicable, but in any event within one hundred twenty
(120) days after the end of each fiscal year of the Company (i) a
balance sheet as of the end of such year, (ii) statements of income
and of cash flows for such year, and (iii) a statement of
stockholders’ equity as of the end of such
year, all prepared in
accordance with 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 sixty (60) days after
the end of each of the first three (3) quarters of each fiscal year
of the Company, unaudited statements of income and cash flows for
such fiscal quarter, and an unaudited balance sheet, all prepared
in accordance with GAAP (except that such financial statements may
(i) be subject to normal year-end audit adjustments; and (ii) not
contain all notes thereto that may be required in accordance with
GAAP);
(c) as
soon as practicable, but in any event before the end of each fiscal
year, a budget and business plan for the next fiscal year
(collectively, the “Budget”),
prepared on a monthly basis, including balance sheets, income
statements, and statements of cash flow for such months and,
promptly after prepared, any other budgets or revised budgets
prepared by the Company; and
(d) such
other information relating to the financial condition, business,
prospects, or corporate affairs of the Company as any Investor may
from time to time reasonably request; provided, however, that the Company shall not be obligated under
this Section 3.1
to provide information that the
Company reasonably determines in good faith (i) to be a trade
secret or confidential information (unless covered by an
enforceable confidentiality agreement, in a form reasonably
acceptable to the Company) or (ii) would, if disclosed, adversely
affect the attorney-client privilege between the Company and its
counsel.
If, for
any period, the Company has any subsidiary whose accounts are
consolidated with those of the Company, then in respect of such
period the financial statements delivered pursuant to the foregoing
sections shall be the consolidated and consolidating financial
statements of the Company and all such consolidated
subsidiaries.
-15-
Notwithstanding
anything else in this Section 3.1 to the contrary, the
Company may cease providing the information set forth in this
Section 3.1 during the period starting
with the date one hundred twenty (120) days before the
Company’s good-faith estimate of the date of filing
of a registration statement if it
reasonably concludes it must do so to comply with the SEC rules
applicable to such registration statement and related
offering; provided
that the Company’s covenants under this Section 3.1 shall be reinstated at such
time as the Company is no longer actively employing its
commercially reasonable efforts to cause such registration
statement to become effective.
3.2 Inspection.
The Company shall permit each Investor, at such Investor’s
expense, to visit and inspect the Company’s properties;
examine its books of account and records; and discuss the
Company’s affairs, finances, and accounts with its officers,
during normal business hours of the Company as may be reasonably
requested by the Investor upon at least five (5) days’
notice; provided, however,
that the Company shall not be obligated pursuant to this
Section 3.2 to provide access to
any information that it reasonably and in good faith determines (a)
to be a trade secret or confidential information (unless covered by
an enforceable confidentiality agreement, in form reasonably
acceptable to the Company) (b) would, if disclosed, adversely
affect the attorney-client privilege between the Company and its
counsel.
3.3 Toba
Observer Rights. As long as
Toba and/or its Affiliates beneficially own any Registrable
Securities, the Company shall invite a representative of Toba to
attend all meetings of the Board in a nonvoting observer capacity
and, in this respect, shall give such representative copies of all
notices, minutes, consents, and other materials that it provides to
its directors at the same time and in the same manner as provided
to such directors; provided, however, that such representative shall agree to hold in
confidence and trust and to act in a fiduciary manner with respect
to all information so provided; and provided further, that the Company reserves the right to withhold
any information and to exclude such representative from any meeting
or portion thereof if the Company reasonably determines in good
faith, upon advice of counsel, that access to such information or
attendance at such meeting could adversely affect the
attorney-client privilege between the Company and its counsel or
result in disclosure of trade secrets or a conflict of
interest.
3.4 Termination
of Information Rights
and Observer Right. The
covenants set forth in Sections 3.1, 3.2, and 3.3 shall terminate and be of
no further force or effect immediately before the consummation of a
Qualified Public Offering.
3.5 Confidentiality.
Each Investor agrees that such Investor will keep confidential and
will not disclose, divulge, or use for any purpose (other than to
monitor its investment in the Company) any confidential information
obtained from the Company pursuant to the terms of this Agreement
(including notice of the Company’s intention to file a
registration statement), unless such confidential information (a)
is known or becomes known to the public in general (other than as a
result of a breach of this Section 3.55 by such Investor), (b) is or
has been independently developed or conceived by the Investor
without use of the Company’s confidential information as
evidenced by written documentation, or (c) is or has been made
known or disclosed to the Investor by a third party without a
breach of any obligation of confidentiality such third party may
have to the Company; provided,
however, that an Investor may disclose confidential
information (i) to its attorneys, accountants, consultants, and
other professionals to the extent necessary to obtain their
services in connection with monitoring its investment in the
Company; (ii) to any prospective purchaser of any Registrable
Securities from such Investor, if such prospective purchaser agrees
to be bound by the provisions of this Section 3.55; (iii) to any Affiliate, partner,
member, stockholder, or wholly owned subsidiary of such Investor in
the ordinary course of business, provided that such Investor informs
such Person that such information is confidential and directs such
Person to maintain the confidentiality of such information; or (iv)
as may otherwise be required by law, provided that the Investor promptly
notifies the Company of such disclosure and takes reasonable steps
to minimize the extent of any such required
disclosure.
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4. Rights
Related to Future Stock Issuances
4.1 Pro Rata Purchase
Rights. Subject to the
terms and conditions of this Section 4.1 and applicable securities
laws, if, after the date of this Agreement, the Company proposes to
offer or sell any New Securities, the Company shall first offer
such New Securities to each Investor. Each Investor shall be
entitled to apportion the pro rata purchase right hereby granted to
it among itself and its Affiliates in such proportions as it deems
appropriate.
(a) The
Company shall give notice (the “Offer
Notice”) to each
Investor, stating (i) its bona fide intention to offer such New
Securities, (ii) the number of such New Securities to be offered,
and (iii) the price and terms, if any, upon which it proposes to
offer such New Securities.
(b) By
notification to the Company within twenty (20) days after the Offer
Notice is given, each Investor may, in its sole discretion, elect
to purchase or otherwise acquire, at the price and on the terms
specified in the Offer Notice, up to that portion of such New Securities which
equals the proportion that the number of shares of Common Stock
then held by such Investor (including all shares of Common Stock
then issuable (directly or indirectly) upon conversion and/or
exercise, as applicable, of any and all Derivative Securities then
held by such Investor) bears to the total number of shares of
Common Stock of the Company then outstanding (assuming full
conversion and/or exercise, as applicable, of all Derivative
Securities). The closing of any sale pursuant to this Section
4.1(b) shall occur at the same closing covering the initial sale of
New Securities pursuant to Section 4.1(c).
(c) If
all New Securities referred to in the Offer Notice are not elected
to be purchased or acquired as provided in Section 4.1(b),
the Company may, during the ninety (90) day period following the
expiration of the period provided in Section 4.1(b),
offer and sell the remaining unsubscribed portion of such New
Securities to any Person(s) at a price not less than, and upon
terms no more favorable to the offeree than, those specified in the
Offer Notice. If the Company does not enter into an agreement for
the sale of the New Securities 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 New Securities shall not be offered unless
first reoffered to the Investors in accordance with this
Section 4.1.
(d) The
pro rata purchase rights in this Section 4.1
shall not be applicable to (i)
Exempted Securities or (ii) any shares of Common Stock issued
pursuant to Section
4.2.
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4.2 Down
Round Protection. If, after the
date of this Agreement, the Company issues any New Securities
(other than Exempted Securities and any shares of Common Stock
issued pursuant to this Section
4.2) at a price implying a
pre-money valuation of the Company of less than $40,000,000 (a
“Down Round
Valuation”), then,
subject to all applicable securities laws, the Company shall
promptly (and in any event within 7 days thereafter) issue to each
Investor, without the payment of any additional consideration by
such Investor, such number of additional shares of Common Stock as
is equal to the positive difference between (x) the aggregate
number of shares of Common Stock issued to such Investor pursuant
to the Purchase Agreement (as adjusted for any Recapitalization
with respect to the Common Stock effected after the date of the
Purchase Agreement) and (y) if the Down Round Valuation is greater
than or equal to $20,000,000, then the aggregate number of shares
of Common Stock that would have been issued to such Investor
pursuant to the Purchase Agreement (subject to appropriate
adjustment for any Recapitalization with respect to the Common
Stock effected after the date of the Purchase Agreement) if the
price per share of the Common Stock issued and sold thereunder had
been calculated at that time on the basis of a Company pre-money
valuation equal to such Down Round Valuation (and utilizing the
same treasury stock method as was used by the Company in originally
calculating the Original Issue Price), or (z) if the Down Round
Valuation is less than $20,000,000, then the aggregate number of
shares of Common Stock that would have been issued to such Investor
pursuant to the Purchase Agreement (subject to appropriate
adjustment for any Recapitalization with respect to the Common
Stock effected after the date of the Purchase Agreement) if the
price per share of the Common Stock issued and sold thereunder had
been calculated at that time on the basis of a Company pre-money
valuation equal to $20,000,000 (and utilizing the same treasury
stock method as was used by the Company in originally calculating
the Original Issue Price).
4.3 Termination.
The covenants set forth in Sections 4.1 and 4.2, shall terminate and be of
no further force or effect immediately before the consummation of a
Qualified Public Offering.
5.1 Employee
Agreements. The Company will
cause each person now or hereafter employed by it or by any
subsidiary (or engaged by the Company or any subsidiary as a
consultant/independent contractor) with access to confidential
information and/or trade secrets to enter into a nondisclosure and
proprietary rights assignment agreement. In addition, the Company
shall not amend, modify, terminate, waive, or otherwise alter, in
whole or in part, any of the above-referenced agreements or any
restricted stock agreement between the Company and any employee,
without the majority consent of the Board.
5.2 Employee
Stock. Unless otherwise
approved by a majority of the Board, all future employees and
consultants of the Company who purchase, receive options to
purchase, or receive awards of shares of the Company’s
capital stock after the date hereof shall be required to execute
restricted stock or option agreements, as applicable, providing for
vesting of shares over a four (4) year period, with vesting in
equal monthly installments over the forty-eight (48)
months.
-18-
5.3 Qualified
Small Business Stock. The
Company shall use commercially reasonable efforts to cause the
shares of Common Stock issued pursuant to the Purchase Agreement to
constitute “qualified small business stock” as defined
in Section 1202(c) of the Internal Revenue Code (the
“Code”);
provided,
however, that such requirement
shall not be applicable if the Board determines, in its good-faith
business judgment, that such qualification is inconsistent with the
best interests of the Company. The Company shall submit to its
stockholders (including the Investors) and to the Internal Revenue
Service any reports that may be required under Section
1202(d)(1)(C) of the Code and the regulations promulgated
thereunder. In addition, within twenty (20) business days after any
Investor’s written request therefor, the Company shall, at
its option, either (i) deliver to such Investor a written statement
indicating whether (and what portion of) such Investor’s
interest in the Company constitutes “qualified small business
stock” as defined in Section 1202(c) of the Code or (ii)
deliver to such Investor such factual information in the
Company’s possession as is reasonably necessary to enable
such Investor to determine whether (and what portion of) such
Investor’s interest in the Company constitutes
“qualified small business stock” as defined in Section
1202(c) of the Code.
5.4 Board
Matters. The Company shall
reimburse its directors for all reasonable out-of-pocket travel
expenses incurred (consistent with the Company’s travel
policy) in connection with attending meetings of the Board or any
committees thereof and in connection with attending any other
events (e.g. meetings and
trade shows) required by or at the request of the
Company.
5.5 Successor
Indemnification. If the Company or
any of its successors or assignees consolidates with or merges into
any other Person and is not the continuing or surviving corporation
or entity of such consolidation or merger, then to the extent
necessary, proper provision shall be made so that the successors
and assignees of the Company assume the obligations of the Company
with respect to indemnification of members of the Board as in
effect immediately before such transaction, whether such
obligations are contained in the Company’s Bylaws, the
Restated Certificate, or elsewhere, as the case may
be.
5.6 Termination
of Covenants. The covenants set
forth in this Section 5, except for Section 5.5, shall terminate
and be of no further force or effect immediately before the
consummation of a Qualified Public Offering.
6. Miscellaneous
6.1 Successors and
Assigns. The rights under
this Agreement may be assigned (but only with all
related obligations) by a Holder to a transferee of Registrable
Securities that (i) is an Affiliate of a Holder, (ii) is a
Holder’s Immediate Family Member or trust for the benefit of
an individual Holder or one or more of such Holder’s
Immediate Family Members, or (iii) after such transfer, holds at
least 100,000 shares of Registrable Securities (subject to
appropriate adjustment for Recapitalizations); provided, however, that (x) the Company
is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee and the
Registrable Securities with respect to which such rights are being
transferred; and (y) such transferee agrees in a written instrument
delivered to the Company to be bound by and subject to the terms
and conditions of this Agreement, including the provisions of
Section 2.10. For the purposes of
determining the number of shares of Registrable Securities held by
a transferee, the holdings of a transferee (1) that is an Affiliate
or stockholder of a Holder; (2) who is a Holder’s Immediate
Family Member; or (3) that is a trust for the benefit of an
individual Holder or such Holder’s Immediate Family Member
shall be aggregated together and with those of the transferring
Holder; provided further that all transferees who would not qualify
individually for assignment of rights shall have a single
attorney-in-fact for the purpose of exercising any rights,
receiving notices, or taking any action under this Agreement. The
terms and conditions of this Agreement inure to the benefit of and
are binding upon the respective successors and permitted assignees
of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or
their respective successors and permitted assignees any rights,
remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
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6.2 Governing
Law. This Agreement
shall be governed by and construed under the internal laws of the
State of Delaware, irrespective of conflict of law
principles.
6.3 Counterparts.
This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts
may be delivered via facsimile, electronic mail (including pdf or
any electronic signature complying with the U.S. federal ESIGN Act
of 2000, e.g.,
xxx.xxxxxxxx.xxx) or other transmission method and any counterpart
so delivered shall be deemed to have been duly and validly
delivered and be valid and effective for all purposes.
6.4 Titles
and Subtitles. The titles and
subtitles used in this Agreement are for convenience only and are
not to be considered in construing or interpreting this
Agreement.
6.5 Notices.
All notices and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed effectively given
upon the earlier of actual receipt or (i) personal delivery to the
party to be notified; (ii) when sent, if sent by electronic mail or
facsimile during the recipient’s normal business hours, and
if not sent during normal business hours, then on the
recipient’s next business day; (iii) five (5) days after
having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) business day after the
business day of deposit with a nationally recognized overnight
courier, freight prepaid, specifying next-day delivery, with
written verification of receipt. All communications shall be sent
to the respective parties at their addresses as set forth on
Schedule 1
hereto, or to the principal office of the Company and to the
attention of the Chief Executive Officer, in the case of the
Company, or to such email address, facsimile number, or address as
subsequently modified by written notice given in accordance with
this Section 6.5. If notice is given to the
Company, a copy shall also be sent to Xxxxxxx X. Xxxxxx, Esq.,
General Counsel, Super League Gaming, Inc., 0000 Xxxxxxxx Xxx.,
Xxxxx Xxxxxx, XX 00000, xxxxx@xxxxxxxxxxx.xxx,
and if notice is given to Toba, a copy (which shall not constitute
notice) shall also be given to Xxxxxxxxxxx X. La Chance, VLP Law
Group LLP, 0000 Xxxxx Xxxxxx, Xxxxx 0, Xxx Xxxxxxxxx, XX 00000,
xxxxxxxxx@xxxxxxxxxxx.xxx.
6.6 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 at least a
majority of the Registrable Securities then outstanding (which such
majority must include Toba); provided that any amendment or waiver
of Section 3.3 or
3.4 (or, solely to
the extent such provision pertains to Section 3.3 or 3.4, any other provision of
this Agreement) shall require the written consent of Toba;
provided further that the
Company may in its sole discretion waive compliance with
Section 2.11(c) (and the
Company’s failure to object promptly in writing after
notification of a proposed assignment allegedly in violation of
Section 2.11(c) shall be deemed to be a
waiver); and provided
further that any provision hereof may be waived by any
waiving party on such party’s own behalf, without the consent
of any other party. Notwithstanding the foregoing, this Agreement
may not be amended or terminated and the observance of any term
hereof may not be waived with respect to any Investor without the
written consent of such Investor, unless such amendment,
termination, or waiver applies to all Investors in the same
fashion. The Company shall give prompt notice of any amendment or
termination hereof or waiver hereunder to any party hereto that did
not consent in writing to such amendment, termination, or waiver.
Any amendment, termination, or waiver effected in accordance with
this Section 6.6 shall be binding on all
parties hereto, regardless of whether any such party has consented
thereto. No waivers of or exceptions to any term, condition, or
provision of this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any
such term, condition, or provision.
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6.7 Severability.
In case any one or more of the provisions contained in this
Agreement is for any reason held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this
Agreement, and such invalid, illegal, or unenforceable provision
shall be reformed and construed so that it will be valid, legal,
and enforceable to the maximum extent permitted by
law.
6.8 Aggregation
of Stock. All shares of
Registrable Securities held or acquired by Affiliates shall be
aggregated together for the purpose of determining the availability
of any rights under this Agreement and such Affiliated persons may
apportion such rights as among themselves in any manner they deem
appropriate.
6.9 Entire
Agreement. This Agreement
constitutes the full and entire understanding and agreement among
the parties with respect to the subject matter hereof, and any
other written or oral agreement relating to the subject matter
hereof existing between the parties is expressly
canceled.
6.10 Dispute
Resolution. The parties (a)
hereby irrevocably and unconditionally submit to the jurisdiction
of the federal and state courts located in Los Angeles County,
California for the purpose of any suit, action or other proceeding
arising out of or based upon this Agreement, (b) agree not to
commence any suit, action or other proceeding arising out of or
based upon this Agreement except in the federal and state courts
located in Los Angeles County, California, and (c) hereby waive,
and agree not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that
it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or
execution, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court.
WAIVER
OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE
SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY
DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL
NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER
WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
6.11 Delays
or Omissions. No delay or
omission to exercise any right, power, or remedy accruing to any
party under this Agreement, upon any breach or default of any other
party under this Agreement, shall impair any such right, power, or
remedy of such non-breaching or non-defaulting party, nor shall it
be construed to be a waiver of or acquiescence to any such breach
or default, or to any similar breach or default thereafter
occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or
thereafter occurring. All remedies, whether under this Agreement or
by law or otherwise afforded to any party, shall be cumulative and
not alternative
6.12 Acknowledgment.
The Company acknowledges that Toba and certain of the Investors are
in the business of venture capital investing and therefore review
the business plans and related proprietary information of many
enterprises, including enterprises which may have products or
services which compete directly or indirectly with those of the
Company. Nothing in this Agreement shall preclude or in any way
restrict the Investors from investing or participating in any
particular enterprise whether or not such enterprise has products
or services that compete with those of the
Company.
[Signature Pages Follow]
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IN
WITNESS WHEREOF, the parties have executed this Investors’
Rights Agreement as of the date first written above.
COMPANY:
By:
Xxx
Xxxx, CEO & President
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IN
WITNESS WHEREOF, the parties have executed this Investors’
Rights Agreement as of the date first written above.
INVESTOR:
By:
Name:
Title:
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SCHEDULE 1
INVESTORS
Name and Address of Investor
___________________________
___________________________
___________________________
-24-
