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EXHIBIT 10.10
AMENDED AND RESTATED RIGHT OF
FIRST REFUSAL AND CO-SALE AGREEMENT
This Agreement is made as of February 14, 1997, by and among Internet
Security Systems, Inc., a Georgia corporation (the "COMPANY"), the holders of
shares of the Company's Series A Preferred Stock (the "SERIES A HOLDERS"), the
holders of shares of the Company's Series B Preferred Stock (the "SERIES B
HOLDERS") and those shareholders of the Company listed on Exhibit A hereto (the
"SHAREHOLDERS" and each individually a "SHAREHOLDER"). The Series A Holders and
Series B Holders are referred to collectively herein as the "PREFERRED HOLDERS."
RECITALS
A. The Series A Holders possess co-sale and first refusal rights
pursuant to a Right of First Refusal and Co-Sale Agreement dated as of February
2, 1996, as amended, between the Company, the Series A Holders and certain of
the Shareholders (the "ORIGINAL AGREEMENT").
B. The Series A Holders and the Shareholders desire to amend and
restate the Original Agreement and to accept the rights created pursuant hereto
in lieu of the rights granted to them under the Original Agreement.
C. The Shareholders currently own capital stock and/or stock
options issued by the Company.
D. The Series B Holders intend to purchase from the Company
shares of its Series B Preferred Stock, pursuant to the Series B Preferred Stock
Purchase Agreement between the Company and the Series B Holders dated of even
date herewith (the "SERIES B PURCHASE AGREEMENT").
E. To induce the Series B Holders to enter into this Agreement
and the Series B Purchase Agreement, each Shareholder has agreed to grant the
Holders (as defined below) and the Company certain rights of first refusal with
respect to equity securities owned by each Shareholder and any other equity
securities of the Company hereafter owned or acquired by each Shareholder.
F. To induce the Series B Holders to enter this Agreement and the
Series B Purchase Agreement, each Shareholder has agreed to grant to the Series
B Holders certain rights of co-sale with respect to equity securities owned by
each Shareholder and any other equity securities of the Company hereafter owned
or acquired by each Shareholder (the "STOCK").
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and other consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby amend and restate the Original Agreement
in its entirety and agree as follows:
1. Certain Definitions. For purposes of this Agreement, the
following terms have the following meanings:
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(a) "HOLDER" means the Preferred Holders and the
Shareholders.
(b) "IPO" means the closing of an underwritten public
offering of the Company's securities registered under the Securities Act of
1933, as amended.
(c) "SELLER" means any Shareholder proposing to transfer
Common Stock.
(d) "PREFERRED HOLDER'S SHARE" means, as to the Right of
Co-Sale, the percentage determined by dividing (A) the number of shares of Stock
held by the Preferred Holder by (B) the number of shares of Stock held by the
Seller and all Preferred Holders participating in the Right of Co-Sale.
(e) "OFFERED STOCK" means all Stock proposed to be
Transferred by the Seller.
(f) "RIGHT OF CO-SALE" means the right of co-sale, to
which the Stock held by Xxxxxxxxxxx Xxxxx and Xxxxxx Xxxxxx is subject, provided
to the Preferred Holders in Section 4 of this Agreement.
(g) "RIGHT OF FIRST REFUSAL" means the right of first
refusal over Common Stock provided to the Preferred Holders in Section 3 of this
Agreement.
(h) "TRANSFER" means and includes any sale, assignment,
encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer by
bequest, devise or descent, or other transfer or disposition of any kind,
including but not limited to transfers to receivers, levying creditors, trustees
or receivers in bankruptcy proceedings or general assignees for the benefit of
creditors, whether voluntary or by operation of law, directly or indirectly,
except:
(i) any bona fide pledge if the pledgee executes a
counterpart copy of this Agreement and becomes bound thereby as a Shareholder;
(ii) any transfers of Stock by a Seller to the
Seller's spouse, lineal descendant or antecedent, father, mother, brother or
sister of the Seller, the adopted child or adopted grandchild of the Seller, or
the spouse of any child, adopted child, grandchild or adopted grandchild of the
Seller, or to a trust or trusts for the exclusive benefit of the Seller of the
Seller's family members as described in this Section, or transfers of Stock by
the Seller by devise or descent or transfers of Stock to a general or limited
partner of the Seller; provided that, in all cases, the transferee or other
recipient executes a counterpart copy of this Agreement and becomes bound
thereby as a Shareholder; or
(iii) a bona fide pledge if the pledgee is a
Preferred Holder.
2. Notice of Proposed Transfer. Before any Seller may effect any
Transfer of Stock, the Seller must give at the same time to the Company and to
the Preferred Holders a written notice signed by the Seller (the "SELLER'S
NOTICE") stating (a) the Seller's bona fide intention to Transfer
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such Offered Stock and the name and address of the proposed Transferee; (b) the
number of shares of the Offered Stock; and (c) the bona fide cash price or, in
reasonable detail, other consideration, per share for which the Seller proposes
to Transfer such Offered Stock (the "OFFERED PRICE"). Upon the request of the
Company or any of the Preferred Holders, the Seller will promptly furnish
information, to the Company and to the Preferred Holders, as may be reasonably
requested to establish that the offer and proposed transferee (the "TRANSFEREE")
are bona fide.
3. Holders' Right of First Refusal.
(a) The Right.
(i) Company's Initial Right. The Company has the
right of first refusal to purchase all or any part of the Offered Stock, if the
Company gives written notice of the exercise of such right to the Seller within
thirty (30) days (the "COMPANY'S REFUSAL PERIOD") after the date of the Seller's
Notice to the Company. If the Company desires to purchase less than all of the
Offered Stock, within ten (10) days after expiration of the Company's Refusal
Period, the Company will give written notice to each Holder specifying the
number of shares of Offered Stock that were not subscribed by the Company
exercising its Rights of First Refusal (the "COMPANY'S NOTICE").
(ii) Holders' Right. If the Company desires to
purchase less than all of the Offered Stock, the Holders and their assignees
have the right of first refusal to purchase all or any part of the remaining
Offered Stock; provided, that each Holder gives written notice of the exercise
of such right to the Seller within thirty (30) days (the "HOLDERS' REFUSAL
PERIOD") after the date of the Company's Notice to the Holders. To the extent
the aggregate number of shares the Holders desire to purchase exceeds the
Offered Stock available, each Holder will be entitled to purchase a fraction of
the Offered Stock, the numerator of which is the number of shares of Stock held
by such Holder and the denominator of which is the number of Shares of Stock
held by all Holders exercising their Right of First Refusal. Within ten (10)
days after expiration of the Holders' Refusal Period, the Seller will give
written notice to the Company and each Holder specifying the number of shares of
Offered Stock that was subscribed by the Holders exercising their Rights of
First Refusal (the "CONFIRMATION NOTICE").
(b) Purchase Price. The purchase price for the Offered
Stock to be purchased by the Company or by a Holder exercising its Right of
First Refusal under this Agreement will be the Offered Price, and will be
payable as set forth in Section 3(c) hereof. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration will be determined by the Board of Directors of the Company in
good faith, which determination will be binding upon the Company, each Holder
and the Seller, absent fraud or error.
(c) Payment. Payment of the purchase price for the
Offered Stock purchased by the Company or by a Holder exercising its Right of
First Refusal will be made within thirty (30) days after the later of (i) the
end of the Company's Refusal Period, or (ii) the delivery of the Company's
Notice and the end of the Holders' Refusal Period. Payment of the purchase price
will be made, at the option of the Company or the exercising Holder, (i) in cash
(by check), (ii) by
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cancellation of all or a portion of any outstanding indebtedness of the Seller
to the Company or the Holder, as the case may be, or (iii) by any combination of
the foregoing.
(d) Rights as a Shareholder. If the Company or any Holder
exercises its Right of First Refusal to Purchase the Offered Stock, then, upon
the date the notice of such exercise is given by the Company or any Holder, the
Seller will have no further rights as a holder of the Offered Stock except the
right to receive payment for the Offered Stock from the Company or the Holder,
as the case may be, in accordance with the terms of this Agreement, and the
Seller will forthwith cause all certificate(s) evidencing such Offered Stock to
be surrendered for transfer to the Company or the Holder, as the case may be.
(e) Seller's Right To Transfer. If the Company and each
Holder have not elected to purchase the Offered Stock, then, subject to the
Preferred Holders' Right of Co-Sale as defined in Section 4 hereof, the Seller
may transfer that portion of the Offered Stock permitted to be sold, to any
person named as a purchaser or other Transferee in the Seller's Notice, at the
Offered Price or at a higher price, provided that such Transfer (i) is
consummated within thirty (30) days after the end of the Holders' Refusal
Period, (ii) is on terms no more favorable than the terms proposed in the
Seller's Notice and (iii) is in accordance with all the terms of this Agreement.
If the Offered Stock is not so Transferred during such thirty (30) day period,
then the Seller may not Transfer any of such Offered Stock without complying
again in full with the provisions of this Agreement.
4. Preferred Holders' Right of Co-Sale.
(a) Right of Co-Sale. If the Company and the Holders have
waived or failed to timely exercise their Rights of First Refusal under
paragraph 3 with respect to any portion of the Offered Stock, and if the Seller
is either Xxxxxx Xxxxxx ("XXXXXX") or Xxxxxxxxxxx Xxxxx ("XXXXX") and Xxxxxx or
Xxxxx offers a number of shares of Stock exceeding ten percent (10%) of their
respective total holdings of Stock, then, subject to the Preferred Holders'
Right of Co-Sale, Xxxxxx or Klaus may Transfer to the Transferee such Offered
Stock, as is specified in the Seller's Notice, by giving written notice to each
Preferred Holder within fifteen (15) days after the date of the expiration of
the Preferred Holders' Refusal Period (the "RIGHT OF CO-SALE NOTICE"),
specifying the date of the Transfer of the Offered Stock to such transferee
which shall not occur within fifteen (15) days of the Right of Co-Sale Notice
(the "CLOSING"), and the number of shares and type of Stock that Xxxxxx or Xxxxx
desire to Transfer to the Transferee. If Xxxxxx or Klaus desire to transfer to
the Transferee such Offered Stock, the Preferred Holders shall have the right to
require, as a condition to such sale or transfer, that Xxxxxx or Xxxxx sell to
the Transferee, at the same price per share and on the same terms and conditions
as involved in such sale or disposition by Xxxxxx or Klaus, a number of shares
of the Preferred Holder's shares equal to a percentage of the Offered Stock
(regardless of whether the Offered Stock consists of preferred or common issued
upon conversion of the preferred) equivalent to the Preferred Holder's Share.
This Right of Co-Sale shall not apply with respect to Offered Stock sold or to
be sold to Preferred Holders under the Right of First Refusal.
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(b) Consummation of Co-Sale. A Preferred Holder may
exercise the Right of Co-Sale by delivering to Xxxxxx or Xxxxx at or before the
Closing, one or more certificates, properly endorsed for Transfer, representing
a number of shares not to exceed such Preferred Holder's Share, representing
such Stock to be Transferred by Xxxxxx or Klaus on behalf of the Preferred
Holder. If the Preferred Holder does not hold a certificate in that series,
class or type of stock representing the number of securities to be sold by such
Preferred Holder pursuant to this Section 4, then the Company shall promptly
issue a certificate representing the proper number of shares to be sold pursuant
to this Right of Co-Sale. Following the Closing, the Company shall deliver a
certificate for the remaining balance of the securities held by the Preferred
Holder, if any, to such Preferred Holder. At the Closing, such certificates or
other instruments will be Transferred and delivered to the Transferee as set
forth in the Right of Co-Sale Notice in consummation of the transfer of the
Offered Stock pursuant to the terms and conditions specified in the Right of
Co-Sale Notice, and the Seller will remit, or will cause to be remitted, to each
participating Preferred Holder, within ten (10) days after such Closing, that
portion of the proceeds of the Transfer to which each participating Preferred
Holder is entitled by reason of each Preferred Holder's participation in such
Transfer pursuant to the Right of Co-Sale.
5. Multiple Series, Class or Type of Stock. If the Offered Stock
consists of more than one series, class or type of Stock, the Seller has the
right to Transfer hereunder each such series, class or type; provided, however,
that if, as to the Right of Co-Sale, a Preferred Holder does not hold any of
such series, class or type, and the proposed transferee is not willing, at the
Closing, to purchase some other series, class or type of Stock from such
Preferred Holder, or is unwilling to purchase any Stock from such Preferred
Holder at the Closing, then the Seller may complete the sale of the Offered
Stock to the proposed Transferee and such Preferred Holder will have the put
right (the "PUT RIGHT") set forth in Section 6(b) hereof.
6. Refusal to Transfer: Put Right.
(a) Refusal to Transfer. Any attempt by any Shareholder
to transfer any Stock in violation of any provision of this Agreement will be
void. The Company will not be required (i) to transfer on its books any Stock
that has been sold, gifted or otherwise transferred in violation of this
Agreement, or (ii) to treat as owner of such Stock, or to accord the right to
vote or pay dividends to any purchaser, donee or other transferee to whom such
Stock may have been so transferred.
(b) Put Right. If Xxxxxx or Xxxxx transfers any Stock in
contravention of the Preferred Holders' Right of Co-Sale under this Agreement (a
"PROHIBITED TRANSFER"), or if the proposed transferee of Offered Stock desires
to purchase a class, series or type of stock offered by Xxxxxx or Klaus not held
by a Preferred Holder or is unwilling to purchase any Stock from a Preferred
Holder and Xxxxxx or Xxxxx, as the case may be, completes a transfer to such
proposed Transferee, such Preferred Holder may, by delivery of written notice to
Xxxxxx or Klaus (a "PUT NOTICE") within ten (10) days after (i) the Closing as
defined in subsection 4(a) above, or (ii) the date on which such Preferred
Holder becomes aware of the Prohibited Transfer or the terms thereof, require
Xxxxxx or Xxxxx to purchase from such Preferred Holder, for cash or such other
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consideration as the Shareholder received in the Prohibited Transfer or at the
Closing, a number of shares of Stock (of the same class or type as transferred
in the Prohibited Transfer or at the Closing if such Preferred Holder then owns
Stock of such class or type; otherwise of Series A Preferred Stock, Series B
Preferred Stock or Common Stock) having a purchase price equal to the aggregate
purchase price Xxxxxx or Klaus would have received in the closing of such
Prohibited Transfer if such Preferred Holder had elected to exercise its right
of Co-Sale with respect thereto or in the Closing if the proposed transferee had
been willing to purchase the Stock of the Preferred Holder. The closing of such
sale to Xxxxxx or Xxxxx will occur within ten (10) days after the date of such
Preferred Holder's Put Notice to Xxxxxx or Klaus.
7. Restrictive Legend and Stop-Transfer Orders.
(a) Legend. Each Shareholder understands and agrees that
the Company will cause the legend set forth below, or a legend substantially
equivalent thereto, to be placed upon any certificate(s) or other documents or
instruments evidencing ownership of Stock by the Shareholder:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RIGHTS OF FIRST REFUSAL AND RIGHTS OF CO-SALE AS SET FORTH IN A RIGHT
OF FIRST REFUSAL AND CO-SALE AGREEMENT DATED FEBRUARY 14, 1997, ENTERED
INTO BY THE HOLDER OF THESE SHARES, THE COMPANY AND CERTAIN
SHAREHOLDERS OF THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY. SUCH RIGHTS OF FIRST REFUSAL AND
RIGHTS OF CO-SALE ARE BINDING ON CERTAIN TRANSFEREES OF THESE SHARES.
(b) Stop Transfer Instructions. Each Shareholder agrees,
to ensure compliance with the restrictions referred to herein, that the Company
may issue appropriate "stop transfer" certificates or instructions and that, if
the Company transfers its own securities, it may make appropriate notations to
the same effect in its records.
(c) Transfers. No securities shall be transferred by a
Shareholder unless (i) such transfer is made in compliance with the all of the
terms of this Agreement and in compliance with the terms of applicable federal
and state securities laws and (ii) prior to such transfer, the transferee or
transferees sign a counterpart to this Agreement pursuant to which it or they
agree to be bound by the terms of this Agreement. The Company shall not be
required (a) to transfer on its books any shares that shall have been sold or
transferred in violation of any of the provisions of this Agreement or (b) to
treat as the owner of such shares or to accord the right to vote as such owner
or to pay dividends to any transferee to whom such shares shall have been so
transferred.
8. Termination and Waiver.
(a) Termination. The Right of First Refusal and Right of
Co-Sale will terminate upon the earliest to occur of (i) the IPO, (ii) the date
on which this Agreement is terminated by a writing executed by holders of
66 2/3% of the shares then held by the Preferred Holders, (iii) the
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dissolution of the Company, (iv) the effective date of a consolidation or merger
with or into another corporation as a result of which the shareholders of the
Company immediately prior to such consolidation or merger will own less than
fifty percent (50%) of the outstanding stock of the surviving corporation, or
(v) as to any Holder when such Holder ceases to own, in the aggregate, at least
one-half of the shares of Common Stock or Preferred Stock (or Common Stock
issuable upon conversion of the Preferred Stock) owned by such Holder as of the
date of execution of this Agreement. The Company's Right of First Refusal will
terminate upon the earliest to occur of (a) a written election of the Company
pursuant to an action by the Board of Directors or (b) the occurrence of any of
(i), (iii) or (iv) in the preceding sentence.
(b) Waiver. Any waiver by a party of its rights hereunder
will be effective only if evidenced by a written instrument executed by such
party or its authorized representative.
9. Miscellaneous Provisions.
(a) Notice. Any notice required or permitted to be given
to a party pursuant to the provisions of this Agreement will be in writing and
will be effective and or (ii) the date of delivery by facsimile, or (iii) the
business day after deposit with a nationally-recognized courier or overnight
service, including Express Mail, for United States deliveries or (iii) five (5)
business days after deposit in the United States mail by registered or certified
mail for United States deliveries. All notices not delivered personally or by
facsimile will be sent with postage and other charges prepaid and properly
addressed to the party to be notified at the address set forth below such
party's signature on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice to the other parties hereto.
All notices for delivery outside the United States will be sent by facsimile, or
by nationally recognized courier or overnight service. Any notice given
hereunder to more than one person will be deemed to have been given, for
purposes of counting time periods hereunder, on the date given to the last party
required to be given such notice. Notices to the Company will be marked to the
attention of the President.
(b) Binding on Successors and Assigns: Inclusion Within
Certain Definitions. This Agreement, and the rights and obligations of the
parties hereunder, will inure to the benefit of, and be binding upon, their
respective successors, assigns, heirs, executors, administrators and legal
representatives. Any permitted transferee of a Shareholder who is required to
become a party hereto will be considered a "Shareholder" for purposes of this
Agreement and any permitted transferee of Stock held by the Seller will be
considered a "Seller" for purposes of this Agreement.
(c) Severability. If any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect, such provision will
be enforced to the maximum extent possible and such invalidity, illegality or
unenforceability will not affect any other provision of this Agreement, and this
Agreement will be construed as if such invalid, illegal or unenforceable
provision had (to the extent not enforceable) never been contained herein.
(d) Amendment. This Agreement may be amended only by a
written instrument executed by the Company, a majority in interest of the
Shareholders, and the Preferred Holders.
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(e) Continuity of Other Restrictions. Any Stock not
purchased by the Company or any Preferred Holder under their Right of First
Refusal hereunder will continue to be subject to all other restrictions imposed
upon such Stock by law, including any restrictions imposed under the Company's
Articles of Incorporation or By-laws, or by agreement.
(f) Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of California without regard
to conflict of law rules.
(g) Obligation of Company: Binding Nature of Exercise.
The Company agrees to use its best efforts to enforce the terms of this
Agreement, to inform the Preferred Holders of any breach hereof (to the extent
the Company has knowledge thereof) and to assist the Preferred Holders in the
exercise of its rights and the performance of its obligations hereunder. Any
exercise of the Right of First Refusal or Right of Co-Sale will be binding upon
the party so exercising, and may not be withdrawn without the written consent of
the Company or the Shareholder as to whom it is given, as the case may be,
except that such exercise may be withdrawn unilaterally by the exercising party
if there is any legal prohibition as to a party's consummation of its purchase
or sale hereunder.
(h) Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered will be
deemed an original, and all such counterparts together will constitute one and
the same instrument.
(i) Further Assurances. Each party hereby agrees to
execute and deliver all such further instruments and documents and take all such
other actions as the other party may reasonably request in order to carry out
the intent and purposes of this Agreement.
(j) Conflict. In the event of any conflict between the
terms of this Agreement and the Company's Articles of Incorporation, or its
By-laws, the terms of the Company's Articles of Incorporation, or its By-laws,
as the case may be, will control. In the event of any conflict between the terms
of this Agreement and any other agreement to which a Shareholder is a party or
by which such Shareholder is bound, the terms of this Agreement will control. In
the event of any conflict between the Company's books and records and this
Agreement or any notice delivered hereunder, the Company's books and records
will control absent fraud or error.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
the day and year first above written.
COMPANY:
INTERNET SECURITY SYSTEMS, INC.
By:
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SHAREHOLDERS:
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Xxxxxxxxxxx Xxxxx
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Xxxxxx Xxxxxx
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Xxxxx X'Xxxxxx
***RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT***
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PREFERRED HOLDERS:
AT & T VENTURE FUND II, L.P.
By:
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Name: Xxxxxxx X. Xxxxxx
Title: General Partner
GREYLOCK EQUITY LIMITED PARTNERSHIP
By Greylock Equity GP Limited Partnership
Its General Partner
By:
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Xxxx X. Xxxxx, Xx.
XXXXXXX XXXXXXX XXXXXXXX & XXXXX VIII
By: KPCB VIII Associates
By:
----------------------------------------
Name:
Title:
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II
By: KPCB VII Associates
By:
----------------------------------------
Name:
Title:
***RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT***
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KPCB JAVA FUND
By: KPCB VIII Associates
By:
----------------------------------------
Name:
Title:
SIGMA ASSOCIATES, III, L.P.
By: Sigma Management III, L.P.
By:
----------------------------------------
General Partner
SIGMA INVESTORS III, L.P.
By: Sigma Management III, L.P.
By:
----------------------------------------
General Partner
SIGMA PARTNERS III, L.P.
By: Sigma Management III, L.P.
By:
----------------------------------------
General Partner
VENTURE FUND I, L.P.
By:
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Name: Xxxxxxx X. Xxxxxx
Title: General Partner
***RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT***
