Exhibit 10.6
FANLINK NETWORKS, INC.
INVESTORS' RIGHTS AGREEMENT
November 30, 2000
TABLE OF CONTENTS
Page
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1. REGISTRATION RIGHTS. ...................................................1
1.1 Definitions .......................................................1
1.2 Request for Registration ..........................................2
1.3 Company Registration ..............................................4
1.4 Form S-3 Registration .............................................5
1.5 Obligations of the Company ........................................6
1.6 Information from Holder ...........................................7
1.7 Expenses of Registration ..........................................7
1.8 Delay of Registration .............................................8
1.9 Indemnification ...................................................8
1.10 Reports Under Securities Exchange Act of 1934 ....................10
1.11 Assignment of Registration Rights ................................11
1.12 Limitations on Subsequent Registration Rights ....................11
1.13 "Lock-up" Agreement ..............................................12
1.14 Termination of Registration Rights ...............................12
2. INFORMATION ...........................................................12
2.1 Delivery of Financial Statements .................................12
2.2 Inspection .......................................................13
2.3 Termination of Information and Inspection Covenants ..............13
3. MISCELLANEOUS .........................................................14
3.1 Successors and Assigns ...........................................14
3.2 Governing Law ....................................................14
3.3 Counterparts .....................................................14
3.4 Titles and Subtitles .............................................14
3.5 Notices ..........................................................14
3.6 Entire Agreement; Amendments and Waivers .........................14
3.7 Severability .....................................................14
3.8 Aggregation of Stock .............................................15
Schedule A Schedule of Investors
Schedule B Schedule of Common Holders
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INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made as of
the 30th day of November 2000, by and between Fanlink Networks, Inc., a Delaware
corporation (the "Company"), the investor(s) listed on Schedule A hereto, each
of whom is a holder of the Company's Series A Convertible Preferred Stock, par
value $0.001 per share (such stock, the "Series A Preferred Stock" and each
holder thereof, an "Investor") and certain holders of the Company's Common Stock
(the "Common Stock"), each of whom listed on Schedule B hereto, and each of whom
is herein referred to as a "Common Holder."
RECITALS
WHEREAS, the Company and the holders of the Series A Preferred Stock
are parties to a certain Series A Convertible Preferred Stock Purchase
Agreement, dated as of even date herewith (the "Series A Agreement");
WHEREAS, as an inducement to the Company and the Common Holders to
approve the issuance of the Series A Preferred Stock and to induce the Investors
to invest funds in the Company pursuant to the Series A Agreement, the
Investors, the Common Holders and the Company hereby agree that this Agreement
shall govern the rights of the Investors and the Common Holders to cause the
Company to register shares of Common Stock issued or issuable to them and
certain other matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.12 hereof; provided, however, that the Common Holders
shall not be deemed to be Holders for purposes of Section 1.2, 1.4, 1.12 and 3.8
hereof.
(d) The term "Initial Offering" means the Company's
first firm commitment underwritten public offering of its Common Stock under the
Act.
(e) The term "1934 Act" means the Securities Exchange
Act of 1934, as amended.
(f) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filings a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(g) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Series A Preferred Stock;
(ii) the 9,516,925 shares of Common Stock held by the holders of the Common
Stock; and (iii) any Common Stock of the Company 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 (i) and (ii) above or issued as a
result of the exercise of options or warrants granted with the approval of the
Board of Directors of the Company, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(h) Except as provided in Section 1.1(g) above, the
number of shares of "Registrable Securities" outstanding shall be determined by
the number of shares of Common Stock outstanding that are, and the number of
shares of Common Stock issuable pursuant to then exercisable or convertible
securities that are, Registrable Securities.
(i) The term "SEC" shall mean the Securities and
Exchange Commission.
1.2 Request for Registration.
(a) Subject to the conditions of this Section 1.2, if,
at any time after the earlier of the date which is (i) six (6) months following
the effective date of the Company's Initial Offering or (ii) the third
anniversary of the date hereof, the Company receives a written request therefor
from the record holder or holders of an aggregate of at least 1,400,000 shares
of the Series A Preferred Stock (or the Common Stock issuable or issued upon
conversion of the Series A Preferred Stock), as the same may be adjusted from
time to time to reflect stock splits, spin-offs, recapitalizations, etc. (the
"Initiating Holders") not theretofore registered under the Act and sold pursuant
thereto that the Company file a registration statement (x) for at least twenty
percent (20%) of the Series A Preferred Stock (or the Common Stock issuable or
issued upon conversion of the Series A Preferred Stock) and (y) in connection
with any request for registration made prior to the Company's Initial Offering,
if the aggregate offering price for the Series A Preferred Stock is reasonably
expected to exceed $5 million, the Company shall, within twenty (20) days of the
receipt thereof, give written notice of such request to all Holders, and,
subject to the limitations of this Section 1.2, use its best efforts to effect,
as soon as practicable, the registration under the Act of all Registrable
Securities that the Holders request to be registered in a written request
received by the Company within thirty (30) days of the mailing of the Company's
notice pursuant to this Section 1.2(a); provided, however, that all Series A
Preferred Stock covered by such registration statement shall be converted into
Common Stock prior to sale pursuant to such registration statement.
(b) If 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
this Section 1.2, and the Company shall include such information in the
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written notice referred to in Section 1.2(a). In such event the right of any
Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company (which underwriter or underwriters
shall be reasonably acceptable to a majority in interest of the Initiating
Holders). Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities underwritten (including Registrable Securities), then
the Company shall so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders);
provided, however, that Registrable Securities held by the Common Holders (other
than shares of Series A Preferred Stock) shall be entirely excluded from such
underwriting before any Registrable Securities held by Investors are excluded
from such underwriting. Any Registrable Securities excluded or withdrawn from
such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 1.2:
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, unless the Company is already subject to service in
such jurisdiction and except as may be required under the Act; or
(ii) after the Company has effected two (2)
registrations (other than on Form S-3) pursuant to this Section 1.2 and each of
such registrations has been declared or ordered effective; provided, however,
that if a registration effected pursuant to this Section 1.2 is the Company's
Initial Offering, the Holders shall be entitled to one additional registration
pursuant to this Section 1.2.
(iii) during the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date of the filing
of, and ending on a date one hundred eighty (180) days following the effective
date of, a Company-initiated registration subject to Section 1.3 below, provided
that the Company is actively employing in good faith its best efforts to cause
such registration statement to become effective; or
(iv) if the Initiating Holders propose to dispose of
Registrable Securities that may be registered on Form S-3 pursuant to Section
1.4 hereof; or
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 1.2, a certificate signed by the
Company's Chief Executive Officer or Chairman of the Board stating that in the
good faith judgment of the Board of Directors of the Company, it would be
detrimental to the Company and its stockholders for such registration statement
to be effected at such time, in which event the Company shall have the right to
defer such filing for a period of not more than one hundred eighty (180) days
after receipt of the request of the Initiating Holders, provided that such right
to delay a request shall be exercised by the Company not more than once in any
twelve (12) month period.
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1.3 Company Registration.
(a) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for stockholders other than the holders of Series A Preferred Stock who
hold Registrable Securities) any of its stock or other securities under the Act
in connection with the public offering of such securities (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan, a registration relating to a corporate reorganization or
other transaction under Rule 145 of the Act, 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 a registration in which the only Common Stock being registered is
Common Stock issuable upon conversion of debt securities that are also being
registered), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.3(c), use all its best efforts to cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered. The rights referred to in this Section 1.3 shall not apply to the
Initial Offering.
(b) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 1.3 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The expenses
of such withdrawn registration shall be borne by the Company in accordance with
Section 1.8 hereof.
(c) Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under this Section 1.3 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters) and enter into an
underwriting agreement in customary form with an underwriter or underwriters
selected by the Company, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by the stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
that the underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned pro rata
among the selling Holders according to the total amount of securities entitled
to be included therein owned by each selling Holder or in such other proportions
as shall mutually be agreed to by such selling Holders; provided, however, that
Registrable Securities held by the Common Holders (other than shares of Series A
Preferred Stock) shall be entirely excluded from such underwriting before any
Registrable Securities held by Investors are excluded from such underwriting.
For purposes of the parenthetical above concerning apportionment, for any
selling stockholder that is a Holder of Registrable Securities and that is a
partnership or corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling Holder," and any pro rata reduction with respect
to such "selling Holder" shall be based upon the aggregate amount of Registrable
Securities owned by all such related entities and individuals.
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1.4 Form S-3 Registration. After its Initial Offering, in case
the Company shall receive from the Holders of at least fifty percent (50%) of
the Registrable Securities a written request or requests that the Company effect
a registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company shall:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) use all its best efforts to effect, as soon as
practicable, such registration and all such qualifications and compliances as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Holders' Registrable Securities as are specified
in such request, together with all or such portion of the Registrable Securities
of any other Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice from
the Company, provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 1.4:
(i) if Form S-3 is not available for such offering
by the Holders;
(ii) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $2,500,000;
(iii) if the Company shall furnish to the Holders
a certificate signed by the Chief Executive Officer or Chairman of the Board of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be detrimental to the Company and its stockholders for
such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than one hundred eighty (180) days after
receipt of the request of the Holder or Holders under this Section 1.4;
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period;
(iv) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 1.4; or
(v) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 1.4 shall not be counted as requests for registration effected pursuant
to Section 1.2.
1.5 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
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(a) prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use all its
commercially reasonable best efforts to cause such registration statement to
become effective, and 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;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement;
(c) furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them;
(d) use all its commercially reasonable best efforts to
register and qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions;
(e) in the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering;
(f) notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act or the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the request of any such Holder, prepare and furnish to such Holder a reasonable
number of copies of a supplement or an amendment of such prospectus as may be
necessary so that as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(g) cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(h) provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration;
(i) notify the Holders participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed; and
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(j) advise the Holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose.
1.6 Information from Holder. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.7 Expenses of Registration. All expenses (other than
underwriting discounts and commissions and fees of one counsel to the selling
shareholders exceeding $10,000) incurred in connection with registrations,
filings or qualifications pursuant to Sections 1.2, 1.3, 1.4 and 1.5, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company shall be
borne by the Company. Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 or Section 1.4 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating Holders shall bear
such expenses pro rata based upon the number of Registrable Securities that were
to be requested in the withdrawn registration), unless, in the case of a
registration requested under Section 1.2, the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 1.2 , provided, however, that if at the time of such
withdrawal, the Holders 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 following disclosure by the Company of such material adverse change,
then the Holders shall not be required to pay any of such expenses and shall
retain their rights pursuant to Section 1.2 or Section 1.4.
1.8 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.9 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners or officers, directors and
stockholders of each Holder, legal counsel and accountants for each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the 1934
Act, against any losses, claims, damages or liabilities (joint or several) to
which they may become subject under the Act, the 1934 Act or any state
securities laws, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities laws or any rule or regulation promulgated under the Act, the
1934 Act or any state securities laws; and the Company will reimburse each such
Holder, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with
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investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 1.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation that
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person; provided further, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Holder or underwriter, or any person controlling such
Holder or underwriter, from whom the person asserting any such losses, claims,
damages or liabilities purchased shares in the offering, if a copy of the
prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Holder or underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the shares to
such person, and if the prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, legal counsel and
accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or any state securities laws, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any person intended
to be indemnified pursuant to this Section 1.9(b), for any legal or other
expenses reasonably incurred by such person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 1.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder (which consent
shall not be unreasonably withheld), provided that in no event shall any
indemnity under this Section 1.9(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel reasonably
satisfactory to each party; 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 proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial
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to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 1.9, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.9. After notice from an indemnifying party to such indemnified
party of its election to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party pursuant to the provisions of this
Section 1.9 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless (i) the indemnified party shall have employed
counsel in accordance with the first sentence of this Section 1.9(c), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
(d) If the indemnification provided for in this Section
1.9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under
this Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the Initial Offering;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
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(c) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such form.
1.11 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder of such securities,
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement, including, without
limitation, the provisions of Section 1.13 below; (c) such assignment shall be
effective only if, immediately following such transfer, the further disposition
of such securities by the transferee or assignee is restricted under the Act;
and (d) such assignee or transferee is not a competitor of the Company or one
with a strategic conflict with the Company's business, based on a relationship
(ownership or otherwise) with a competitor of the Company, as determined by the
Company in its reasonable discretion.
1.12 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 Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.3 hereof, unless under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not reduce the amount of the Registrable Securities of the
Holders that are included or (b) to demand registration of their securities.
1.13 "Lock-up" Agreement. If requested by the Company and the
managing underwriter, 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 Company's Initial Offering
and ending on the date specified by the Company and the managing underwriter
(such period not to exceed one hundred eighty (180) days) (i) lend, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (whether such shares or any such securities are
then owned by the Holder or are thereafter acquired), 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 the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
provisions of this Section 1.13 shall apply only to the Company's initial public
offering of equity securities, shall not apply to the sale of any shares to an
underwriter pursuant to an underwriting agreement, and shall only be applicable
to the Holders if all officers and directors of the Company enter into similar
agreements. The underwriters in connection
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with the Company's initial public offering are intended third party
beneficiaries of this Section 1.13 and shall have the right, power and authority
to enforce the provisions hereof as though they were a party hereto.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.14 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1 if, following
consummation of the Initial Offering, all Registrable Securities held by such
Holder (and any affiliate of the Holder with whom such Holder must aggregate its
sales under Rule 144) can be sold in any three (3) month period without
registration in compliance with Rule 144 of the Act.
2. Information
2.1 Delivery of Financial Statements. The Company shall
deliver to each Major Investor (for purposes of this Section 2.1, a "Major
Investor" shall mean any Investor holding at least twenty percent (20%) of the
then outstanding Series A Preferred Stock):
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP"),
and audited and certified by the Company's independent public accountants (who
shall be a firm of national standing). Prior to the commencement of each fiscal
year of the Company, the Investors will be entitled to copies of an annual
budget and strategic plan approved by the Board;
(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each quarter of each fiscal year of the
Company, an unaudited income statement, statement of cash flows for such fiscal
quarter, an unaudited balance sheet as of the end of such fiscal quarter and a
quarterly financial summary signed by the Chief Financial Officer;
(c) as soon as practicable, but in any event within
thirty (30) days of the end of each month, available budgets, monthly financial
statements (which shall compare the Company's actual financial performance to
its budget and to the financial performance of the previous year) and such
operating information as requested by the Investors for so long as the Company
has not completed an IPO;
(d) with respect to the financial statements called for
in Section 2.1(a), an instrument executed by the Chief Financial Officer or
President of the Company certifying that such financials were prepared in
accordance with GAAP consistently applied with prior practice for earlier
periods (with the exception of footnotes that may be required by GAAP) and
fairly present the financial condition of the Company and its results of
operation for the period specified, subject to year-end audit adjustment; and
(e) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request;
provided, however, that the Company shall not be obligated under this Section
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2.1(e) or any other subsection of Section 2.1 of this Agreement to provide
information that it deems in good faith to be a trade secret or similar
confidential information.
2.2 Inspection. The Company shall permit each Major Investor,
at such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times during the
Company's regular business hours as may be requested by the Investor; provided,
however, that the Company shall not be obligated pursuant to this Section 2.2 to
provide access to any information that it reasonably considers to be a trade
secret or similar confidential information.
2.3 Termination of Information and Inspection Covenants. The
covenants set forth in Sections 2.1 and 2.2 shall terminate as to Investors and
be of no further force or effect when the sale of securities pursuant to a
registration statement being filed by the Company under the Act in connection
with the consummation of a Qualifying IPO (as defined in the Stockholders
Agreement of even date herewith between the Company, the Investor and the Common
Holders), or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the Exchange Act, whichever event
shall first occur.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements
between New York residents entered into and to be performed entirely within New
York.
3.3 Counterparts. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission, nationally recognized overnight
courier service, or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days advance
written notice to the other parties.
3.6 Entire Agreement; Amendments and Waivers. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof. Any term of this Agreement may be
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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 Common Stock outstanding on the date hereof and the holders of
a majority of the Series A Preferred Stock.
3.7 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.8 Aggregation of Stock. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
[Remainder Of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Investors'
Rights Agreement on the date first above written.
FANLINK NETWORKS, INC.
By:__________________________________
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
Address: 000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Tel: 000-000-0000
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[Counterpart Signature Page to Investors' Rights Agreement for Common
Stockholders]
COMMON STOCKHOLDERS:
Entity: Firm:
By:
Name:
Title:
Individual:
Name(s):
Address:____________________________________
____________________________________
____________________________________
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[Counterpart Signature Page to Investors' Rights Agreement for Investors]
PLANET ZANETT
CORPORATE INCUBATOR, INC
By:_________________________________
Name: Xxxxxxx Xxxxxxxx
Title: President
Address: Planet Zanett Corporate Incubator,
Inc.
c/o The Zanett Group
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxx Xxxxxxxxx
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[Counterpart Signature Page to Investors' Rights Agreement for Investors]
XXXX I, LLC
By:___________________________________________
Name: Xxxxx Xxxxxxxxx
Title: Member
Address: 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
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