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EXHIBIT 10.4
INVESTORS' RIGHTS AGREEMENT
JULY 30, 1999
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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 Indemnification.....................................................................................8
1.9 Reports Under Securities Exchange Act of 1934......................................................10
1.10 Assignment of Registration Rights.................................................................10
1.11 Limitations on Subsequent Registration Rights.....................................................11
1.12 "Market Stand-Off"Agreement.......................................................................11
1.13 Termination of Registration Rights................................................................11
2. Covenants of the Company.....................................................................................11
2.1 Delivery of Financial Statements...................................................................11
2.2 Inspection.........................................................................................12
2.3 Termination of Information and Inspection Covenants................................................13
2.4 Right of First Offer...............................................................................13
2.5 Key Person Life Insurance..........................................................................14
2.6 Proprietary Information and Inventions Agreement...................................................14
2.7 Employee and Other Stock Arrangements..............................................................14
2.8 Qualified Small Business Stock.....................................................................14
2.9 Termination of Certain Covenants...................................................................15
3. Miscellaneous................................................................................................15
3.1 Successors and Assigns.............................................................................15
3.2 Governing Law......................................................................................15
3.3 Counterparts.......................................................................................15
3.4 Titles and Subtitles...............................................................................15
3.5 Notices............................................................................................15
3.6 Expenses...........................................................................................15
3.7 Entire Agreement: Amendments and Waivers...........................................................15
3.8 Severability.......................................................................................16
3.9 Aggregation of Stock...............................................................................16
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INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT is made as of the 30th day of
July, 1999, by and among XxxxXxxx.xxx, Inc., a Delaware corporation (the
"Company"), the investors listed on Schedule A hereto, each of which is herein
referred to as an "Investor," the holders of Common Stock listed on Schedule B
hereto, each of which is herein referred to as a "Common Holder," and the
founders listed on Schedule C hereto, each of which is herein referred to as a
"Founder."
RECITALS
WHEREAS, the Company and the Investors are parties to the
Series A Preferred Stock Purchase Agreement of even date herewith (the "Series A
Agreement");
WHEREAS, the Company and Let's Talk Cellular & Wireless, Inc.,
a Florida corporation ("LTC"), are parties to a license agreement and a binding
Letter of Intent with the Company which provide for, among other things, the
purchase of shares of Common Stock of the Company by LTC, the license by LTC of
certain technology to the Company and the provision of certain services for the
Company by LTC (collectively, the "LTC Agreements");
WHEREAS, the Company and H.I.G. Brickellbay, Inc., a Cayman
Islands corporation ("HIG"), are parties to a Common Stock Purchase Agreement of
even date herewith (the "Common Stock Purchase Agreement") which provides for,
among other things, the purchase by HIG of shares of Common Stock of the
Company; and
WHEREAS, in order to induce the Company, the Founders and the
Common Holder to approve the issuance of the Series A Preferred Stock to induce
the Investors to invest funds in the Company pursuant to the Series A Agreement,
to provide further inducement to LTC to enter into the LTC Agreements and
purchase shares of Common Stock of the Company thereunder, and to provide
further inducement to HIG to enter into the Common Stock Purchase Agreement and
purchase shares of Common Stock of the Company thereunder, Investors, the
Founders, the Common Holder and the Company hereby agree that this Agreement
shall govern the rights of the Investors and the Common Holder 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
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documents filed by the Company with the SEC; provided, however, that Form S-3
shall not be deemed to include Form S-2 under the Act as in effect on the date
hereof.
(c) The term "Holder" means any person
owning or having the right to acquire Registrable Securities or any assignee
thereof in accordance with Section 1.10 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 filing 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 shares of Common Stock issued to the Common Holder;
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, 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) 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 the Company shall receive at any time six (6) months after the
effective date of the Initial Offering, a written request from the Holders of
fifty percent (50%) or more of the Registrable Securities then outstanding (the
"Initiating Holders") that the Company file a registration statement under the
Act covering the registration of Registrable Securities with an anticipated
aggregate offering price of at least $7,500,000, then 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 all
reasonable 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 twenty (20) days of the mailing
of the Company's notice pursuant to this Section 1.2(a).
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(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 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 only 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). 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 three (3) registrations pursuant to this Section 1.2, and such
registrations have been declared or ordered effective; or
(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 registration subject to Section 1.3 below,
provided that the Company is actively employing in good faith all reasonable
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 seriously detrimental to the Company and its
shareholders 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
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twenty (120) 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.
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 shareholders other than the Holders)
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 reasonable efforts to cause
to be registered under the Act all of the Registrable Securities that each such
Holder has requested to be registered.
(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 1.7 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 shareholders 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),
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below twenty percent (20%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's
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securities, in which case the selling Holders may be excluded if the
underwriters make the determination described above and no other shareholder's
securities are included, (ii) the amount of securities of the selling Holders
included in the offering be reduced until all securities held by employees of
the Company or, after exclusion of all of any such employees' shares, other
stockholders of the Company have first been excluded from such offering, or
(iii) notwithstanding (i) or (ii) above, any shares being sold by a shareholder
exercising a demand registration right similar to that granted in Section 1.2 be
excluded from such offering. For purposes of the preceding parenthetical
concerning apportionment, for any selling shareholder that is a Holder of
Registrable Securities and that is a partnership or corporation, the partners,
retired partners and shareholders 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.
1.4 Form S-3 Registration. In case the Company
shall receive from the Holders of at least fifteen percent (15%) 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 reasonable 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 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 seriously detrimental to the
Company and its shareholders 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
twenty (120) days
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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 month period;
(iv) if the Company has, within
the twelve (12) month period preceding the date of such request, already
effected two 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:
(a) prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use all
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;
(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 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 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, which obligations shall include providing customary
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opinions of legal counsel and letters from accountants and paying certain
customary travel expenses in connection with the underwriters sales efforts;
(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;
(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; and
(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.
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 incurred in connection with
registrations, filings or qualifications pursuant to Sections 1.2, 1.3 and 1.4,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of one counsel for the selling Holders
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 1.4. The
Company shall pay all legal expenses in connection with the preparation of
opinions of counsel necessary for sales of Registrable Securities pursuant to
Rule 144 of the Act unless counsel for the Company provides such opinions.
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1.8 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 shareholders 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 investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection l.8(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
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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 subsection l.8(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 subsection l.8(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 subsection l.8(b) exceed the net proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an
indemnified party under this Section 1.8 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 1.8, 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 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 proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.8, 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 1.8.
(d) If the indemnification provided for
in this Section 1.8 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
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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 1.8 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1, and
otherwise.
1.9 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
(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.
1.10 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 to
a transferee or assignee of such securities that (i) is a subsidiary, parent,
partner, limited partner, retired partner or shareholder of, or partnership
under common control with, a Holder, (ii) is a pledgee, or assignee of such
pledgee, of Holder pursuant to a bona fide loan transaction, (iii) is a Holder's
family member or trust for the benefit of an individual Holder, or (iv) after
such assignment or transfer, holds at least 100,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), 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 1.12 below; and (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.
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1.11 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.
1.12 "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 Company's initial public offering and ending on the
date specified by the Company and the managing underwriter (such period not to
exceed one hundred eighty (l80) 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 underwriters in connection with the
Company's initial public offering are intended third party beneficiaries of this
Section 1.12 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.
Provided, that this Section 1.12 shall not apply to transfers
of securities by Holders to is a pledgee, or assignee of such pledgee, of Holder
pursuant to a bona fide loan transaction existing as of the date of such final
prospectus.
1.13 Termination of Registration Rights. No
Holder shall be entitled to exercise any right provided for in this Section 1
after five (5) years following the consummation of the Initial Offering or, as
to any Holder, such earlier time at which 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. Covenants of the Company.
2.1 Delivery of Financial Statements. The
Company shall deliver to each Investor and Common Holder:
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(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 shareholder'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 independent public accountants of
nationally recognized standing selected by the Company;
(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, an unaudited income statement,
statement of cash flows for such fiscal quarter and an unaudited balance sheet
as of the end of such fiscal quarter.
(c) within thirty (30) days of the end
of each month, an unaudited income statement and statement of cash flows and
balance sheet for and as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any
event at least thirty (30) days prior to the end of each fiscal year, a budget
and business plan for the next fiscal year, prepared on a monthly basis,
including balance sheets, income statements and statements of cash flows for
such months and, as soon as prepared, any other budgets or revised budgets
prepared by the Company;
(e) with respect to the financial
statements called for in subsections (b) and (c) of this Section 2.1, 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
(f) such other information relating to
the financial condition, business, prospects or corporate affairs of the Company
as the Investor or Common Holder or any assignee of thereof may from time to
time request, provided, however, that the Company shall not be obligated under
this subsection (f) or any other subsection of Section 2.1 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
Investor or Common Holder that holds at least 500,000 shares of Series A
Preferred Stock (and/or Common Stock issued upon conversion thereof) or Common
Stock, at such Investor's or Common Holder'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 as may be requested by the Investor or Common Holder; 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.
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2.3 Termination of Information and Inspection
Covenants. The covenants set forth in Sections 2.1 and 2.2 shall terminate and
be of no further force or effect when the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.
2.4 Right of First Offer. Subject to the terms
and conditions specified in this paragraph 2.4, the Company hereby grants to
each Major Investor (as hereinafter defined) a right of first offer with respect
to future sales by the Company of its Shares (as hereinafter defined). For
purposes of this Section 2.4, a Major Investor shall mean any Investor or
transferee that holds at least 100,000 shares of Series A Preferred Stock (or
the Common Stock issued upon conversion thereof) issued pursuant to the Series A
Agreement (as adjusted for stock splits, stock dividends, combinations and other
recapitalizations) or Common Holder or Founder that holds at least 100,000
shares of Common Stock. For purposes of this Section 2.4, Investor or Common
Holder includes any general partners and affiliates of such Investor or Common
Holder. An Investor or Common Holder shall be entitled to apportion the right of
first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exchangeable or exercisable for any shares of,
any class of its capital stock ("Shares"), the Company shall first make an
offering of such Shares to each Major Investor in accordance with the following
provisions.
(a) The Company shall deliver a notice
in accordance with Section 3.5 ("Notice") to the Major Investors stating (i) its
bona fide intention to offer such Shares, (ii) the number of such Shares to be
offered, and (iii) the price and terms upon which it proposes to offer such
Shares.
(b) By written notification received by
the Company, within twenty (20) calendar days after receipt of the Notice, the
Major Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares that equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Series A Preferred Stock then held, by such
Major Investor bears to the total number of shares of Common Stock of the
Company then outstanding (assuming full conversion of all convertible securities
excluding unvested options).
(c) If all Shares that Investors or
Common Holders are entitled to obtain pursuant to subsection 2.4(b) are not
elected to be obtained as provided in subsection 2.4(b) hereof, the Company may,
during the ninety (90) day period following the expiration of the period
provided in subsection 2.4(b) hereof, offer the unsubscribed portion of such
Shares 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 Notice. If the Company does
not enter into an agreement for the sale of the Shares within such period, or if
such agreement is not consummated within ninety (90) days of the execution
thereof, the right provided hereunder shall be deemed to
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be revived and such Shares shall not be offered unless first reoffered to the
Major Investors in accordance herewith.
(d) The right of first offer in this
paragraph 2.4 shall not be applicable to (i) the issuance or sale of up to
5,000,000 shares of Common Stock pursuant to the 1999 Stock Plan (or options
therefor) to employees, directors and consultants for the primary purpose of
soliciting or retaining their services; (ii) the issuance of securities pursuant
to a bona fide, firmly underwritten public offering of shares of Common Stock,
registered under the Act, resulting in proceeds to the Company of at least
$25,000,000 in the aggregate, (iii) the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities, (iv) the
issuance of securities to a seller of a business in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise, or (v) the issuance of
stock, warrants or other securities or rights to persons or entities with which
the Company has business relationships provided such issuances are unanimously
approved by the Company's Board of Directors.
2.5 Key Person Life Insurance. The Company has
as of the date hereof or shall within 90 days of the date hereof use its best
efforts to obtain from financially sound and reputable insurers term life
insurance on the life of Xxxxx Xxxxx in the amount of $1,000,000, except as
otherwise decided in accordance with policies adopted by the Company's Board of
Directors. The Company will cause to be maintained the term life insurance
required by this Section 2.5 hereof, except as otherwise decided in accordance
with policies adopted by the Company's Board of Directors. Such policies shall
name the Company as loss payee and shall not be cancelable by the Company
without prior approval of the Board of Directors.
2.6 Proprietary Information and Inventions
Agreement. The Company will cause each person now or hereafter employed by it or
any subsidiary with access to confidential information to enter into a
proprietary information and inventions agreement substantially in the form
approved by the Board of Directors.
2.7 Employee and Other Stock Arrangements. The
Company will not, without the approval of the Board of Directors, issue any of
its capital stock, or grant an option or rights to subscribe for, purchase or
acquire any of its capital stock, to any employee, consultant, officer or
director of the Company or a subsidiary except for the issuance of up to
5,000,000 shares of Common Stock pursuant to the Company's 1999 Stock Plan. Each
acquisition of any shares of capital stock of the Company or any option or right
to acquire any shares of capital stock of the Company by an employee, officer or
director of the Company will be conditioned upon the execution and delivery by
the Company and such employee, officer or director of an agreement substantially
in a form approved by the Board of Directors of the Company.
2.8 Qualified Small Business Stock. The Company
shall comply with the reporting and record keeping requirements of Section 1202
of the Code, any regulations promulgated thereunder and any similar state laws
and regulations, and agrees not to repurchase any stock of the Company if such
repurchase would constitute a "significant redemption" within the meaning of
Section 1202(c)(3)(B) of the Code with respect to the Series A Preferred Stock
being purchased hereunder without the consent of the Board of Directors of the
Company. In
14
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addition, within thirty days after an Investor's written request therefor, the
Company shall deliver to such Investor a written statement indicating whether
the shares continue to meet the qualifications for "qualified small business
stock" set forth is Section 2.27 of the Series A Agreement.
2.9 Termination of Certain Covenants. The
covenants set forth in Section 2 shall terminate and be of no further force or
effect upon the consummation of the sale of securities pursuant to a bona fide,
firmly underwritten public offering of shares of common stock, registered under
the Act, resulting in proceeds to the Company of at least $25,000,000.
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 California as applied
to agreements among California residents entered into and to be performed
entirely within California.
3.3 Counterparts. 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.
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 Expenses. If any action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
3.7 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
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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. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities each future holder of all such Registrable Securities,
and the Company.
3.8 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.
3.9 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
XXXXXXXX.XXX, INC.
By: /s/ Xxxxx Xxxxx
-------------------------------------
Xxxxx Xxxxx,
President and Chief Executive Officer
000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
20
INVESTORS:
H.I.G. WIRELESS INTERNET, INC.
By: /s/
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
c/o Xxxx Xxxxxx
0000 Xxxxxxxx Xxx Xxxxx
Xxxxxx-Xxxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
c/o Xxxxx Xxxxxxx
0000 Xxxx Xxxx Xxxx
Xxxx. 0, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
21
INVESTORS:
HIG WIRELESS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
c/o Xxxx Xxxxxx
0000 Xxxxxxxx Xxx Xxxxx
Xxxxxx-Xxxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Brentwood Associates IX, LP
By: Brentwood IX Ventures, LLC
Its General Partner
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxx Xxxxx
-----------------------------------
Title: Managing Member
----------------------------------
c/o Xxxxx Xxxxxxx
0000 Xxxx Xxxx Xxxx
Xxxx. 0, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
22
INVESTORS:
HIG WIRELESS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
c/o Xxxx Xxxxxx
0000 Xxxxxxxx Xxx Xxxxx
Xxxxxx-Xxxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Brentwood Affiliates Fund III, LP
By: Brentwood IX Ventures, LLC
Its General Partner
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxx Xxxxx
-----------------------------------
Title: Managing Member
----------------------------------
c/o Xxxxx Xxxxxxx
0000 Xxxx Xxxx Xxxx
Xxxx. 0, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
23
INVESTORS:
G & H Partners
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
By: /s/ Xxxx X. Xxxx
-------------------------------------
Name: Xxxx X. Xxxx
-----------------------------------
Title: Partner
----------------------------------
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
24
INVESTORS:
Accel VII L.P.
By: Accel VII Associates L.L.C.
Its General Partner
By: /s/ X. Xxxxxx Sednaoui
------------------------------------------
X. Xxxxxx Sednaoui
Managing Member
Accel Internet Fund III L.P.
By: Accel Internet Fund III Associates L.L.C.
Its General Partner
By: /s/ X. Xxxxxx Sednaoui
------------------------------------------
X. Xxxxxx Sednaoui
Managing Member
Accel Investors '99 L.P.
By: /s/ X. Xxxxxx Sednaoui
------------------------------------------
X. Xxxxxx Sednaoui
General Partner
Addresses for Notices:
Accel Partners
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxxx Xxxx Ranzetta and
Xxxxx X. Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
and
Accel Partners
Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: X. Xxxxxx Sednaoui
Tel: (000) 000-0000
Fax: (000) 000-0000
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
25
COMMON HOLDER:
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxxxxxx, Xxxxx
-----------------------------------
Title: CEO
----------------------------------
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
26
COMMON HOLDER:
LET'S TALK CELLULAR & WIRELESS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
H.I.G. BRICKELLBAY, INC.
By: /s/
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
0000 Xxxxxxxx Xxx Xxxxx
Xxxxxx-Xxxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
27
FOUNDERS:
/s/ Xxxxx Xxxxx
----------------------------------------
Xxxxx Xxxxx
000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
----------------------------------------
Xxxxx Xxxxxxxxx
000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
28
FOUNDERS:
----------------------------------------
Xxxxx Xxxxx
000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
/s/ Xxxxx Xxxxxxxxx
----------------------------------------
Xxxxx Xxxxxxxxx
0000 Xxxx Xx.
Xxxxx, XX 00000
SIGNATURE PAGE TO XXXXXXXX.XXX, INC.
INVESTORS' RIGHTS AGREEMENT
29
SCHEDULE A
Schedule of Investors
H.I.G. WIRELESS INTERNET, INC.
BRENTWOOD ASSOCIATES IX, LP
BRENTWOOD AFFILIATES FUND III, LP
ACCEL VII L.P.
ACCEL INTERNET FUND III, L.P.
ACCEL INVESTORS '99 L.P.
G & H PARTNERS
30
SCHEDULE B
Holders of Common Stock
LET'S TALK CELLULAR & WIRELESS, INC.
H.I.G. BRICKELLBAY, INC.
31
SCHEDULE C
Schedule of Founders
XXXXX XXXXX
XXXXX XXXXXXXXX
