INVESTOR’S RIGHTS AGREEMENT
Execution
Version
INVESTOR’S
RIGHTS AGREEMENT
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Page
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1.
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Definitions
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1
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2.
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Registration
Rights
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5
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2.1
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Demand
Registration
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5
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2.2
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Company
Registration
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7
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2.3
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Underwriting
Requirements
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7
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2.4
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Obligations
of the Company
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8
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2.5
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Furnish
Information
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10
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2.6
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Expenses
of Registration
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10
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2.7
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Delay
of Registration
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10
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2.8
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Indemnification
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10
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2.9
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Reports
Under Exchange Act
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12
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2.10
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Limitations
on Subsequent Registration Rights
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13
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2.11
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“Market
Stand-off” Agreement
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13
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2.12
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Restrictions
on Transfer
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14
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2.13
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Termination
of Registration Rights
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15
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3.
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Information
Rights
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15
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3.1
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Delivery
of Financial Statements
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15
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3.2
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Inspection
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17
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3.3
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Termination
of Information Rights
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17
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3.4
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Confidentiality
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17
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4.
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Rights
to Future Stock Issuances
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17
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4.1
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Right
of Participation
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17
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4.2
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Termination
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18
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5.
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Intentionally
Omitted.
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18
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6.
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Miscellaneous
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18
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6.1
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Successors
and Assigns
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18
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6.2
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Governing
Law
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19
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6.3
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Counterparts;
Facsimile
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19
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6.4
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Titles
and Subtitles
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19
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6.5
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Notices
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19
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6.6
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Amendments
and Waivers
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19
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6.7
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Severability
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20
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6.8
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Aggregation
of Stock
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20
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6.9
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Entire
Agreement
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20
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6.10
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Delays
or Omissions
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20
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Schedule
A
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-
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Schedule
of Key Holders
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i
INVESTOR’S
RIGHTS AGREEMENT
THIS
INVESTOR’S RIGHTS AGREEMENT (the “Agreement”)
is
made as of the 25th
day of
July, 2007, by and among
Unity
Business Networks, L.L.C., an Arizona limited liability company (the
“Company”),
Zoom
Technologies, Inc., a Delaware corporation (the “Investor”),
and
each of the holders of the Company’s Common Interests listed on Schedule A
hereto,
each of whom is referred to herein as a “Key
Holder”.
RECITALS
WHEREAS,
the
Company and the Investor are parties to the Series A Preferred Share Purchase
Agreement of even date herewith (the “Purchase
Agreement”);
and
WHEREAS,
in
order to induce the Company to enter into the Purchase Agreement and to induce
the Investor to invest funds in the Company pursuant to the Purchase Agreement,
the Investor and the Company hereby agree that this Agreement shall govern
the
rights of the Investor to cause the Company to register Common Shares issuable
to the Investor, 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 hereby 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,
manager, managing member, officer
or
director of
such
Person.
1.2 “Board
of Managers”
means
the Board of Managers as such term is used in the Operating Agreement.
1.3 “Common
Interests”
means
the Common Shares in the Company representing membership interests in the
Company with the rights, preferences and privileges as set forth in the
Operating Agreement.
1.4 “Common
Shares”
means
(i) for so long as the Company shall remain a limited liability company, the
Common Interests; or (ii) from and after such time as the Company may convert
into, or merge with, or otherwise become, a corporation, the Conversion
Stock.
1.5 “Conversion
Stock”
means
any common stock or other capital stock of a corporation into or with which
the
Company may be converted or merged in connection with the change in form of
the
Company to a corporation and which is received by the holders of the Common
Interests in exchange for the Common Interests in connection with such
conversion or merger.
1
1.6 “Damages”
means
any loss, damage,
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,
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; (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.
1.7 “Derivative
Securities”
means
any securities or rights convertible into, or exercisable or exchangeable
for
(in each
case, directly or indirectly),
Common
Shares, including without limitation options and warrants.
1.8 “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
1.9 “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 Shares being registered are Common Shares
issuable upon conversion of debt securities that are also being
registered.
1.9 “Exempted
Securities”
means
(i)
Common Shares issued or issuable upon conversion or exchange of any Derivative
Securities outstanding on the date hereof; (ii) Common Shares issued or issuable
as a dividend or distribution on Series A Preferred Shares; (iii) Common
Shares issued or issuable by reason of a dividend, stock split, split-up or
other distribution on Common Shares; (iv) Common Shares (or options with respect
thereto), or other interests in the Company issued or issuable to officers,
employees or directors of, or consultants or advisors to, the Corporation
pursuant to a plan or arrangement approved by the Board of Managers of the
Company; (v) Common Shares issued solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its subsidiaries
of
all or substantially all of the stock or assets of any other entity approved
by
the Board of Managers of the Company; and (vi) Common Shares, or warrants
therefor, issued in connection with any present or future borrowing, loan,
line
of credit, leasing or similar financing arrangement approved by the Board of
Managers of the Company.
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.
2
1.11
“Form
S-2”
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.
1.12 “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.
1.13 “GAAP”
means
generally accepted accounting principles in the United States.
1.14 “Holder”
means
any holder of Registrable Securities who is a party to this
Agreement.
1.15 “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.
1.16 “Initiating
Holders”
means,
collectively, Holders who properly initiate a registration request under this
Agreement.
1.17 “IPO”
means
the Company’s first underwritten public offering of its Common Shares under the
Securities Act.
1.17 “Key
Holder Registrable Securities”
means
(i) the Common Shares held by the Key Holders, and (ii) any Common Shares 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 such shares.
1.18 “New
Securities”
means,
collectively, equity securities of the Company, whether or not currently
authorized, as well as 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 for such equity
securities.
1.19 “Operating
Agreement”
means
the Second Amended and Restated Operating Agreement of the Company, as the
same
may be further amended and/or restated from time to time.
1.20 “Person”
means
any individual, corporation, partnership, trust, limited liability company,
association or other
entity.
1.21
“Qualified
IPO”
means an
underwritten public offering of the Company’s Common Shares under the Securities
Act with an offering price per share of at least $0.21 (subject
to appropriate adjustment for stock splits, stock dividends, combinations and
other similar recapitalizations affecting such shares) and resulting in
aggregate proceeds in excess of $25 million.
3
1.22 “Registrable
Securities”
means
(i) the Common Shares issuable or issued upon conversion of the
Series
A
Preferred
Shares;
(ii)
any Common Shares,
or any
Common Shares issued
or
issuable (directly
or indirectly) upon
conversion and/or
exercise of any
other securities of
the
Company,
acquired
by the Investors after the date hereof; (iii) the Key
Holder
Registrable Securities, provided,
however,
that
such Key
Holder Registrable Securities shall
not
be deemed Registrable Securities and the Key Holders shall not be deemed Holders
for the purposes of Sections
2.10
and
6.6;
and
(iv) any
Common Shares 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) and
(ii)
above;
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
2.13 of
this
Agreement.
1.23 “Registrable
Securities then outstanding”
means
the number of shares or membership interests, as applicable, determined by
adding the number
of
shares (or membership interests) of outstanding Common
Shares that
are
Registrable Securities
and
the
number
of shares (or membership interests) of Common
Shares issuable (directly
or indirectly) pursuant
to then exercisable and/or
convertible securities that are Registrable Securities.
1.24 “Restricted
Securities”
means
the securities of the Company required to bear the legend set forth in
Section 2.12(b)
hereof.
1.25 “SEC”
means
the Securities and Exchange Commission.
1.26 “SEC
Rule 144”
means
Rule 144 promulgated by the SEC under the Securities Act.
1.27 “SEC
Rule 144(k)”
means
Rule 144(k) 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, except for
the
fees and disbursements of the Selling Holder Counsel borne and paid by the
Company as
provided in Section
2.6.
1.31 “Series
A Preferred Conversion Stock”
means
any preferred stock or other capital stock of a corporation into or with which
the Company may be converted or merged in connection with the change in form
of
the Company to a corporation and which is received by the holders of the Series
A Preferred Interests in exchange for the Series A Preferred Interests in
connection with such conversion or merger.
4
1.32 “Series
A Preferred Interests”
means
the Series A Preferred Shares of the Company with
the
rights, preferences and privileges as set forth in the Operating
Agreement.
1.33 “Series
A Preferred Shares”
means
(i) for so long as the Company shall remain a limited liability company, the
Series A Preferred Interests; or (ii) from and after such time as the Company
may convert into, or merge with or otherwise become, a corporation, the Series
A
Preferred Conversion Stock.
At
the
time of the execution of this Agreement, the Company is a limited liability
company organized and existing under the laws of the State of Arizona.
Recognizing the possibility that the Company may later convert into or merge
with or otherwise change its legal form to a corporation under the laws of
the
State of Arizona or other state or jurisdiction (whether in anticipation of
or
in connection with the IPO or otherwise), the parties hereto have attempted
to
draft this Agreement in such manner so that the provisions relating to ownership
interests in the Company are flexible enough to accommodate the differences
in
terminology, rights, preferences, privileges, treatment under applicable law,
and the like, between a limited liability company and a corporation. It is
the
parties’ intention that this Agreement and the defined and other terms hereof be
construed broadly with respect to this matter so as to preserve, extend and
apply the rights and obligations set forth herein as equally and similarly
as
possible to both the limited liability company membership interests in the
Company held or to be held by the parties to this Agreement and to any shares
of
capital stock which may be issued to the parties to this Agreement upon any
change in legal form of the Company to a corporation.
2. Registration
Rights.
The
Company covenants and agrees as follows:
2.1 Demand
Registration.
(a) Form
S-1 Demand.
If
at any
time after one hundred eighty (180) days
after
the effective date of the registration statement for the IPO, the Company
receives a request from Holders (other than the Key Holders) of at least
twenty-five percent (25%)
of the
Registrable Securities then outstanding that the Company file
a
Form
S-1
registration
statement with
respect to an offering with an anticipated
aggregate offering price, net of Selling Expenses, of at least $10 million,
then
the Company shall (i) 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 (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 a
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 Section 2.1(c)
and
Section
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 thirty percent (30%) 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 $1 million, 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 forty-five (45) days after the date such request is given by the
Initiating Holders, file a 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 Section
2.1(c)
and
Section 2.3.
5
(c) Notwithstanding
the foregoing obligations, if the Company furnishes to Holders requesting a
registration pursuant to this Section
2.1
a
certificate signed by the Company’s chief executive officer stating that in the
good faith judgment of the Company’s Board of Managers of the Company 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,
and any time periods with respect to filing or effectiveness thereof shall
be
tolled correspondingly, for a period of not more than ninety (90)
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.
(d) The
Company shall not be obligated to effect, or to take any action to effect,
any
registration pursuant to Section
2.1(a)
(i)
during the period that is sixty
(60) 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 Section
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 Section
2.1(b).
The
Company shall not be obligated to effect, or to take any action to effect,
any
registration pursuant to Section
2.1(b)
(i)
during the period that is thirty (30) 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 Section
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
Section
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 demand registration statement pursuant
to Section
2.6,
in which
case such withdrawn registration statement shall be counted as “effected” for
purposes of this Section 2.1(d).
6
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 give each
Holder notice of such registration. Upon the request of each Holder given within
twenty (20) days after such notice is given by the Company, the Company shall,
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.
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 factors require a limitation on the number of shares to be
underwritten, 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 mutually be agreed to by all such selling
Holders;
provided,
however,
(i)
that the number of Registrable Securities held by the Holders to be included
in
such underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting; and (ii) unless the holders of a
majority in interest of Series A Preferred Shares consent otherwise in writing,
any Registrable Securities which
are
not Key Holder Registrable Securities
will not
be excluded from such underwriting unless all Key
Holder Registrable
Securities are first excluded from such offering. 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 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 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 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 (other than securities to be sold by the Company) are first
entirely excluded from the offering, or
(ii) the
number of Registrable Securities included in the offering be reduced below
thirty percent (30%) 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 further if the underwriters make the determination described above
and no other stockholder’s securities are included in such offering or
(iii)
notwithstanding
(ii)
above,
unless the holders of a majority in interest of Series A Preferred Shares
consent otherwise in writing, any Registrable Securities which
are
not Key Holder Registrable Securities
be
excluded from such underwriting unless all Key
Holder Registrable
Securities
are
first excluded from 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.
7
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
(i) 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 Shares (or other securities) of the Company, from selling any
securities included in such registration, and (ii) in the case of any
registration of Registrable Securities on Form S-3 that are intended to be
offered on a continuous or delayed basis, subject to compliance with applicable
SEC rules, such one hundred twenty (120) day period shall be extended for up
to
an additional ninety (90) days, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold;
8
(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;
(h) promptly
make available for inspection by the selling Holders, any managing
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
9
(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.
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 $15,000, 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 Section
2.1(a)
or
Section
2.1(b),
as the
case may be; provided
further
that if,
at the time of such withdrawal, the Holders shall have learned of a material
adverse change in the condition, business, or prospects of the Company from
that
known to the Holders at the time of their request and have withdrawn the request
with reasonable promptness after learning of such information then the Holders
shall not be required to pay any of such expenses and shall not forfeit their
right to one registration pursuant to Section
2.1(a)
or
Section
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.
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.
10
(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.
(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.
11
(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.
(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:
12
(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 (i) 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);
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company; and (iii) such other
information as may be reasonably 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).
2.10 Limitations
on Subsequent Registration Rights.
From
and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the Series A Preferred Shares
then outstanding, enter into any agreement with any holder or prospective holder
of any securities of the Company that (i) would allow such holder or
prospective holder (i) to include such securities in any registration unless,
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of such securities will not reduce the number of the Registrable Securities
of
the Holders that are included.
2.11 “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 for its own behalf of shares of its Common Shares or any other
equity securities under
the
Securities Act on a registration
statement relating
to the IPO, and
ending on the date specified by the Company and the managing underwriter (such
period not to exceed one hundred eighty (180) days, which period may be extended
upon the request of the managing underwriter, to the extent required by any
NASD
rules, for an additional period of up to fifteen (15) days if the Company issues
or proposes to issue an earnings or other public release within fifteen (15)
days of the expiration of the 180-day lockup period, (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
Common Shares or any securities convertible into or exercisable or exchangeable
(directly
or indirectly) for
Common Shares 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 Shares or other securities, in cash, or otherwise. The
foregoing provisions of this Section
2.11 shall
apply only to the IPO,
shall
not apply to the sale of any shares to an underwriter pursuant to an
underwriting agreement, and shall be applicable to the Holders only if all
officers and directors are subject to the same restrictions and the Company
uses
commercially reasonable efforts to obtain a similar agreement from all
stockholders individually owning more than one percent (1%) of the Company’s
outstanding Common Shares. The underwriters in connection with such registration
are
intended third-party beneficiaries of this Section
2.11
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
2.11
or that
are necessary to give further effect thereto. 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.
13
2.12 Restrictions
on Transfer.
(a) The
Series A Preferred
Shares
and the
Registrable Securities shall not be sold, pledged, or otherwise transferred,
and
the Company shall not recognize and shall issue stop-transfer instructions
to
its transfer agent 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
Series A Preferred
Shares
and 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.
(b) Any
certificate or
instrument representing
(i) the Series A Preferred
Shares,
(ii) the Registrable Securities, and (iii) any other securities issued
in respect of the securities referenced in clauses (i) and (ii), upon
any stock split, stock dividend, recapitalization, merger, consolidation, or
similar event, shall (unless otherwise permitted by the provisions of
Section 2.12(c))
be
stamped or otherwise imprinted 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.
14
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 2.12.
(c) The
holder of each certificate representing Restricted Securities, by acceptance
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 (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 2.12.
Each
certificate or
instrument evidencing
the Restricted Securities transferred as above provided shall bear, except
if
such transfer is made pursuant to SEC
Rule 144,
the appropriate restrictive legend set forth in Section 2.12(b),
except
that such certificate shall not bear 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.
2.13 Termination
of Registration Rights. The
right
of any Holder to request registration or inclusion of Registrable Securities
in
any registration pursuant to Section
2.1
or
Section
2.2
shall
terminate upon the
earliest
to occur
of:
(a) the
closing of a Liquidation Event, as such term is defined in the Operating
Agreement;
(b) when
all
of such Holder’s Registrable Securities could be sold within any ninety (90) day
period under SEC Rule 144;
and
(c) the
fifth
anniversary of the Qualified IPO.
3. Information
Rights.
3.1 Delivery
of Financial Statements. The
Company shall deliver to the Investor:
15
(a) as
soon
as practicable, but in any event within ninety (90) days (120 days in the case
of fiscal year 2007) 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 (or, for such periods as the Company
shall be organized as a limited liability company, statement of changes in
member’s capital accounts, or similar statement),
all such
financial statements
audited
and certified by independent public accountants selected by the
Company
and
reasonably acceptable to the Investor;
(b) as
soon
as practicable, but in any event within forty-five (45) days after the end
of
each of the first three (3) quarters of each fiscal year of the Company,
unaudited statements of income and of cash flows for such fiscal quarter, and
an
unaudited balance sheet and an
unaudited statement of stockholders’ equity (or, for such periods as the Company
shall be organized as a limited liability company, statement of changes in
member’s capital accounts, or similar statement) as
of the
end of such fiscal quarter,
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 within thirty (30) days of the end of each
month, an unaudited income statement and
statement of cash flows for such month, and
an
unaudited balance
sheet
and
an
unaudited statement of stockholders’ equity (or, for such periods as the Company
shall be organized as a limited liability company, statement of changes in
member’s capital accounts, or similar statement)
as of
the end of such month, 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);
(d) such
other information
relating
to the financial condition, business, prospects, or corporate affairs of the
Company as the Investor may from time to time reasonably request; provided,
however,
that
the Company shall not be obligated under this Section
3.1(d)
to
provide information (i) that the Company reasonably determines in good faith
to
be a trade secret or confidential information (unless covered by an enforceable
confidentiality agreement, in form acceptable to the Company) or (ii) the
disclosure of which would 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.
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 thirty
(30)
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.
16
3.2 Inspection.
The
Company shall permit the Investor,
at the
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; 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 considers
to be a trade secret or confidential information (unless covered by an
enforceable confidentiality agreement, in form acceptable to the Company) or
the
disclosure of which would adversely affect the attorney-client privilege between
the Company and its counsel.
3.3 Termination
of Information
Rights.
The
covenants set forth in Section
3.1,
Section
3.2,
and
Section
3.3
shall
terminate and be of no further force or effect (i) immediately before the
consummation of the IPO, (ii) when
the Company first becomes subject to the periodic reporting requirements of
Section 12(g) or 15(d) of the Exchange Act, (iii)
upon the occurrence of a Liquidation Event (as such term is defined in the
Operating Agreement), or (iv) upon the conversion of the Series A Preferred
Shares into Common Shares (as set forth in the Operating Agreement), whichever
event occurs first.
3.4 Confidentiality.
The
Investor agrees that it will keep confidential and will not disclose, divulge,
or use
for
any purpose (other than to monitor its investment in the Company and to evaluate
its option to purchase the balance of 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
3.4
by the
Investor), (b) is or has been independently developed or conceived by the
Investor without use of the Company’s confidential information, 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
the 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 and to evaluate its option to purchase the balance of the Company;
(ii)
to any prospective purchaser of any Registrable Securities from the Investor,
if
such prospective purchaser agrees to be bound by the provisions of this
Section
3.4;
(iii) to
any Affiliate,
partner, member, stockholder, or wholly owned subsidiary of such Investor in
the
ordinary course of business, provided
that
the
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.
4. Rights
to Future Stock Issuances.
4.1 Right
of Participation.
Subject
to the terms and conditions of this Section
4.1
and
applicable securities laws, if the Company proposes to offer or sell any New
Securities, the Company shall also offer the Investor the right to participate
in the purchase of such New Securities.
The
Investor shall
be
entitled to apportion the right of participation hereby granted to it among
itself and its Affiliates in such proportions as it deems
appropriate.
17
(a) At
any
time before or within thirty (30) days after the issuance of New Securities,
the
Company shall give notice (the “Offer
Notice”)
to the
Investor, stating (i) its bona fide intention to offer and sell, or the
fact that it has offered and sold, such New Securities, as applicable, (ii)
the
number of such New Securities offered or to be offered, and (iii) the type,
price and terms of the New Securities.
(b) By
notification to the Company within twenty (20) days after the Offer Notice
is
given, the Investor may elect to purchase or otherwise acquire, at the price
and
on the terms specified in the Offer Notice, that portion of the New Securities
that equals the proportion that the Common Shares issued and held, or issuable
(directly
or indirectly) upon
conversion and/or
exercise, as applicable, of
the
Series
A
Preferred Shares and any other Derivative Securities then held, by the Investor
bears to the total Common Shares of the Company then outstanding (assuming
full
conversion and/or
exercise,
as
applicable,
of all
Series
A
Preferred Shares and other Derivative
Securities).
The
closing of any sale pursuant to this Section
4.1(b)
shall
occur within sixty
(60)
days of
the date that the Offer Notice is given.
(c) If
all
New
Securities referred to in the Offer Notice are not elected to be purchased
or
acquired by the Investor as provided in Section
4.1(b),
the
Company may, 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
or Persons at a price not less than, and upon terms no more favorable to the
offeree than, those specified in the Offer Notice.
(d) The
right
of participation in this Section
4.1
shall
not be applicable to
(i)
Exempted
Securities;
and
(ii) Common
Shares issued in the IPO.
4.2 Termination.
The
covenants set forth in Section
4.1
shall
terminate and be of no further force or effect (i) immediately before the
consummation of the IPO,
(ii)
when
the
Company first becomes subject to the periodic reporting requirements of Section
12(g) or 15(d) of the Exchange Act, (iii)
upon the occurrence of a Liquidation Event (as such term is defined in the
Operating Agreement), or (iv) upon the conversion of the Series A Preferred
Shares into Common Shares (as set forth in the Operating Agreement),
whichever
event occurs first.
5. Intentionally
Omitted.
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; (iii)
after
such transfer, holds at least four and one-half percent (4.5%) of the then
outstanding Registrable Securities; or (iv) is the transferee of all of the
Holder’s Registrable Securities; 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
2.11.
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.
18
6.2 Governing
Law.
This
Agreement and any controversy arising out of or relating to this Agreement
shall
be governed by and construed in accordance with the internal laws of the State
of Delaware, without regard to conflict of law principles that would result
in
the application of any law other than the law of the State of Delaware.
6.3 Counterparts;
Facsimile.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed and delivered by facsimile
signature and in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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 deposit
with a nationally recognized overnight courier, freight prepaid, specifying
next-business day delivery, with written verification of receipt. All
communications shall be sent to the respective parties at their addresses as
set
forth on the
signature pages or
Schedule A
(as
applicable) 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 Faegre & Xxxxxx
LLP, 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxxx X.
Xxxxx
and if notice is given to the Investor, a copy shall also be given to Xxxxx,
Xxxxxx-Xxxxx & Xxxxxxxxx, P.C., Reservoir Place, 0000 Xxxxxxx Xxxx, Xxxxxxx,
Xxxxxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxx.
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 a majority of the Registrable Securities then
outstanding; provided
that
the
Company may in its sole discretion waive compliance with Section
2.12(c)
(and the
Company’s failure to object promptly in writing after
notification of
a
proposed assignment allegedly in violation of Section
2.12(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, and the
observance of any term hereof may not be waived, in each case, in any way which
would adversely affect the rights of the Key Holders hereunder in a manner
disproportionate to any adverse effect such amendment or waiver would have
on
the rights of the Investor hereunder, without also the written consent of the
holders of at least a majority of the Registrable Securities held by the Key
Holders. 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.
19
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 (including any Schedules and Exhibits hereto) 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 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 nonbreaching
or
nondefaulting 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.
20
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
| COMPANY: | ||
|
UNITY
BUSINESS NETWORKS, L.L.C.
|
||
| |
|
|
| By: |
/s/
Xxxxxxx Xxxxxxxx
|
|
|
Name:
Xxxxxxx
Xxxxxxxx
|
||
|
Title:
Manager
|
||
|
Address:
0000
Xxxx Xxxxxx Xxxxxx
|
||
|
Xxxxxx, XX 00000
|
||
|
INVESTOR:
ZOOM
TECHNOLOGIES, INC.
|
||
| |
|
|
| By: |
/s/
Xxxxx X. Xxxxxxx
|
|
|
Name:
Xxxxx
X. Xxxxxxx
|
||
|
Title:
Chief
Executive Officer
|
||
|
Address: 000
Xxxxx Xxxxxx
|
||
|
Xxxxxx,
XX 00000
|
||
21
| KEY HOLDERS: | ||
| |
|
|
|
Signature:
|
/s/
Xxxxxxx Xxxxxxxx
|
|
|
Name:
XXXXXXX XXXXXXXX
|
||
|
Signature:
|
/s/
Xxxxxx Xxxxxxx
|
|
|
Name:
XXXXXX
XXXXXXX
|
||
|
Signature:
|
/s/
Xxxxxxx Xxxxxx
|
|
|
Name:
XXXXXXX
XXXXXX
|
||
|
Signature:
|
/s/
Xxxxx Xxxxxxx
|
|
|
Name:
XXXXX
XXXXXXX
|
||
22
