EXHIBIT 4.3
BLUE NILE, INC.
FOURTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
JUNE 29, 2001
TABLE OF CONTENTS
PAGE
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SECTION 1. Amendment and Restatement of Prior Agreement.................. 1
1.1 Amendment and Restatement..................................... 1
SECTION 2. General....................................................... 2
2.1 Definitions................................................... 2
SECTION 3. Registration; Restrictions on Transfer........................ 3
3.1 Restrictions on Transfer...................................... 3
3.2 Demand Registration........................................... 4
3.3 Piggyback Registrations....................................... 5
3.4 Form S-3 Registration......................................... 6
3.5 Expenses of Registration...................................... 7
3.6 Obligations of the Company.................................... 7
3.7 Termination of Registration Rights............................ 8
3.8 Delay of Registration; Furnishing Information................. 9
3.9 Indemnification............................................... 9
3.10 Assignment of Registration Rights............................. 11
3.11 Amendment of Registration Rights.............................. 11
3.12 Limitation on Subsequent Registration Rights.................. 11
3.13 "Market Stand-Off" Agreement; Agreement to Furnish
Information................................................... 11
3.14 Rule 144 Reporting............................................ 12
SECTION 4. Covenants of the Company...................................... 12
4.1 Basic Financial Information and Reporting..................... 12
4.2 Inspection Rights............................................. 13
4.3 Confidentiality of Records.................................... 13
4.4 Reservation of Common Stock................................... 13
4.5 Key Man Insurance............................................. 13
4.6 Proprietary Information and Inventions Agreement.............. 13
4.7 Qualified Small Business...................................... 13
4.8 Real Property Holding Corporation............................. 14
4.9 Directors' Expenses........................................... 14
4.10 Assignment of Right of First Refusal.......................... 14
TABLE OF CONTENTS
(CONTINUED)
PAGE
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4.12 "Market Stand-Off" Agreement.................................. 14
4.13 Termination of Covenants...................................... 14
SECTION 5. Rights of First Refusal....................................... 15
5.1 Subsequent Offerings.......................................... 15
5.2 Exercise of Rights............................................ 15
5.3 Issuance of Equity Securities to Other Persons................ 15
5.4 Sale Without Notice........................................... 15
5.5 Termination and Waiver of Rights of First Refusal............. 15
5.6 Transfer of Rights of First Refusal........................... 16
5.7 Excluded Securities........................................... 16
SECTION 6. Miscellaneous................................................. 17
6.1 Governing Law................................................. 17
6.2 Survival...................................................... 17
6.3 Successors and Assigns........................................ 17
6.4 Entire Agreement.............................................. 17
6.5 Severability.................................................. 17
6.6 Amendment and Waiver.......................................... 17
6.7 Delays or Omissions........................................... 17
6.8 Notices....................................................... 18
6.9 Attorneys' Fees............................................... 18
6.10 Titles and Subtitles.......................................... 18
6.11 Additional Investors.......................................... 18
6.12 Counterparts.................................................. 18
ii.
BLUE NILE, INC.
FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the
"AGREEMENT") is entered into as of the 29th day of June, 2001, by and among BLUE
NILE, INC., a Delaware corporation (the "COMPANY"), Key Holders (as set forth on
the signature page) and holders of the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
the purchasers of the Company's Series E Preferred Stock ("SERIES E PREFERRED
STOCK") set forth on EXHIBIT A of that certain Series E Preferred Stock Purchase
Agreement of even date herewith (the "PURCHASE AGREEMENT") and EXHIBIT A hereto.
The holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and the purchasers of the Series E
Preferred Stock shall be referred to hereinafter as the "INVESTORS" and each
individually as an "INVESTOR."
RECITALS
WHEREAS, the Company has issued the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock and Series D Preferred Stock to
certain of the Investors and signed the Third Amended Investor Rights Agreement
dated April 4, 2000 (the "PRIOR AGREEMENT") entered into between the Company and
the holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock. The holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock possess certain registration rights, information rights and other rights
under such Prior Agreement;
WHEREAS, the Company and the undersigned holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock desire to terminate the Prior Agreement and to accept the rights created
pursuant hereto in lieu of the rights granted to them under the Prior Agreement;
WHEREAS, the Company proposes to sell and issue up to Eight Million Eight
Hundred Thirty-Eight Thousand Two Hundred Forty-Five (8,838,245) shares of its
Series E Preferred Stock pursuant to the Purchase Agreement; and
WHEREAS, as a condition of entering into the Purchase Agreement, the
purchasers of Series E Preferred Stock have requested that the Company extend to
them registration rights, information rights and other rights as set forth
below.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
SECTION 1. AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENT
1.1 AMENDMENT AND RESTATEMENT. The Prior Agreement is terminated in its
entirety and restated herein. Such termination and restatement is effective upon
execution of this Agreement by the Company and the holders of a majority of the
Registrable Securities (as the term is defined in the Prior Agreement). Upon
such execution, all provisions of, rights granted and covenants made in the
Prior Agreement are hereby waived, released and terminated in their entirety and
shall have no further force or effect, including any notice of or rights under
Section 5 of such Prior Agreement. The rights and covenants contained in this
Agreement set forth the sole and entire agreement among the Company and
1.
the holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock on the
subject matter hereof and supersede any and all rights granted and covenants
made under any prior agreements.
SECTION 2. GENERAL
2.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FORM S-3" means such form under the Securities Act (as hereinafter
defined) as in effect on the date hereof or any successor registration form
under the Securities Act subsequently adopted by the SEC (as hereinafter
defined) which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
"HOLDER" means any person owning of record Registrable Securities
(as hereinafter defined) that have not been sold to the public or any assignee
of record of such Registrable Securities in accordance with Section 3.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its common stock registered under the Securities
Act.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (a) common stock of the Company
issued or issuable upon conversion of the Shares; and (b) any common stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 3 of this Agreement
are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
common stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 3.2, 3.3 and 3.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed twenty-five thousand dollars ($25,000) of a single special counsel for
the Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
2.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean the Company's Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock held by the Investors listed on EXHIBIT A hereto and their
permitted assigns.
SECTION 3. REGISTRATION; RESTRICTIONS ON TRANSFER
3.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (C) to the Holder's family member
or trust for the benefit of an individual Holder; provided that in each case the
transferee will be subject to the terms of this Agreement to the same extent as
if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel
3.
may be counsel to the Company) reasonably acceptable to the Company to the
effect that the securities proposed to be disposed of may lawfully be so
disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
3.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 3.2, if the Company
shall receive a written request from the Holders of a majority of the
Registrable Securities then outstanding (the "INITIATING HOLDERS") that the
Company file a registration statement under the Securities Act covering the
registration of the lesser of (i) at least a majority of the Registrable
Securities then outstanding, and (ii) Registrable Securities having a proposed
aggregate offering price, net of discounts and commissions, of at least
$10,000,000, then the Company shall, within thirty (30) days of the receipt
thereof, give written notice of such request to all Holders, and subject to the
limitations of this Section 3.2, use its best efforts to effect, as soon as
practicable, the registration under the Securities Act of all Registrable
Securities that the Holders request to be registered.
(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 3.2
or any request pursuant to Section 3.4 and the Company shall include such
information in the written notice referred to in Section 3.2(a) or Section
3.4(a), as applicable. 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 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 a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
3.2 or Section 3.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which 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 the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
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 3.2:
(i) prior to the earlier of (A) May 1, 2003 or (B) one hundred
eighty (180) days following the effective date of the registration statement
pertaining to the Initial Offering;
(ii) after the Company has effected two (2) registrations
pursuant to this Section 3.2, and such registrations have been declared or
ordered effective unless such registrations are withdrawn prior to the sale of
the securities because of material adverse developments at the Company;
4.
(iii) during the period starting with the date of filing of,
and ending on the date one hundred eighty (180) days following the effective
date of the registration statement pertaining to a public offering; provided
that the Company makes reasonable good faith efforts to cause such registration
statement to become effective;
(iv) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 3.2(a), the Company gives
notice to the Holders of the Company's intention to make a public offering
within ninety (90) days;
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 3.2, a certificate signed by the
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 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 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; or
(vi) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 3.4 below.
3.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to or in any way related to corporate reorganizations or
other transactions under Rule 145 of the Securities Act) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 3.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 3.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable 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. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any stockholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall (i) except as required by clause (ii) below,
reduce the securities being offered by the Company for its own account to be
included in the registration and underwriting, or
5.
(ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) of the total amount of securities
included in such registration, unless such offering is the Initial Offering and
such registration does not include shares of any other selling stockholders, in
which event any or all of the Registrable Securities of the Holders may be
excluded in accordance with the immediately preceding sentence. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which 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 person shall be deemed to be a single "HOLDER", and any pro rata
reduction with respect to such "HOLDER" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "HOLDER," as defined in this sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 3.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 3.5 hereof.
3.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of at least fifteen percent (15%) of the Registrable
Securities then outstanding a written request or requests that the Company
effect a registration on Form S-3 or any similar short-form registration
statement 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
will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect 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 Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or 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 3.4:
(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 two million dollars ($2,000,000);
(iii) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 3.2(a), the Company gives
notice to the Holders of the Company's intention to make a public offering
within ninety (90) days;
(iv) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors 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 stockholders for
6.
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 ninety (90) days after receipt of the
request of the Holder or Holders under this Section 3.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period;
(v) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected one registration on Form
S-3 for the Holders pursuant to this Section 3.4 unless such registration is
withdrawn prior to the sale of the securities because of material adverse
developments at the Company;
(vi) 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 Form S-3
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 3.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 3.2 or 3.3, respectively.
3.5 EXPENSES OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 3.2 or any registration under
Section 3.3 or Section 3.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 3.2 or
3.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
3.2 or Section 3.4, as applicable, in which event such right shall be forfeited
by all Holders. If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 3.2 or Section
3.4 to a demand registration.
3.6 OBLIGATIONS OF THE COMPANY. Whenever required 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 up to thirty (30) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(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
7.
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement for the
period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its 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(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(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 Securities Act of 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) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
(h) Cause all such Registrable Securities registered pursuant hereto
to be listed on each securities exchange on which similar securities issued by
the Company are listed.
(i) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereto and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
3.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 3 shall terminate and be of no further force and effect three
(3) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (a) such Holder (together with its
affiliates, partners and former partners) holds less than 1% of the Company's
outstanding common stock (treating all share of convertible preferred stock on
an as converted basis) and (b) all Registrable Securities held by and issuable
to such Holder (and its affiliates, partners, former partners, members and
former members) may be sold under Rule 144 during any ninety (90) day period.
8.
3.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) 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 3.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 3.2, 3.3 or 3.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 3.2 or Section 3.4 if, due to the
operation of subsection 3.2(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 3.2 or Section 3.4,
whichever is applicable.
3.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 3.2, 3.3 or 3.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law (including common
law), 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") by the Company: (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 Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will pay as incurred to each such Holder, partner, officer, director,
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 Section 3.9(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 which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's
9.
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law (including common law), 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 under an instrument duly executed by such
Holder and stated to be specifically for use in connection with such
registration; and each such Holder will pay as incurred any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or other Holder, or partner, officer, director
or controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 3.9(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 further, that in no event shall any
indemnity under this Section 3.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 3.9 of written 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 3.9, 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 mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own 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 materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 3.9, 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 3.9.
(d) If the indemnification provided for in this Section 3.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability 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 Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations; provided, that in no event shall any contribution by a Holder
under this Subsection 3.9(d) exceed the net proceeds from the offering received
by such Holder. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law 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; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
10.
(e) The obligations of the Company and Holders under this Section
3.9 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
3.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 3 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, affiliate, general partner, limited partner, retired
partner, member or retired member of a Holder, (b) is a Holder's family member
or trust for the benefit of an individual Holder, or (c) acquires at least one
hundred thousand (100,000) shares of Registrable Securities (as adjusted for
stock splits and combinations); provided, however, (i) the transferor shall,
within ten (10) days after such transfer, furnish to the Company 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 and (ii) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement.
3.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 3 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 3.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 3, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
3.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. 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 then outstanding, enter into
any agreement with any holder or prospective holder of any securities of the
Company that would grant such holder registration rights senior to those granted
to the Holders hereunder.
3.13 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION. Each
Holder hereby agrees that such Holder shall not sell, transfer, make any short
sale of, grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any common stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of common stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act relating to
the Initial Offering, provided that all officers and directors of the Company
enter into similar agreements; provided, further, that such restrictions shall
not apply to shares of common stock (or other securities) purchased in the
Initial Offering or in the open market following the Initial Offering
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of common stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 3.13 shall
not apply to a registration relating solely to employee benefit plans on Form
S-1 or Form S-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a Commission Rule 145 transaction
11.
on Form S-4 or similar forms that may be promulgated in the future. The Company
may impose stop-transfer instructions with respect to the shares of common stock
(or other securities) subject to the foregoing restriction until the end of said
one hundred eighty (180) day period.
3.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 4. COVENANTS OF THE COMPANY
4.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish each Investor a balance sheet of the Company, as at the end
of such fiscal year, and a statement of income and a statement of cash flows of
the Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by a report and opinion
thereon by independent public accountants of national standing selected by the
Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within forty-five (45) days
thereafter, a balance sheet of the Company as of the end of each such quarterly
period, and a statement of income and a statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
12.
(d) So long as an Investor (with its affiliates) shall own not less
than three hundred thousand (300,000) shares of Registrable Securities (as
adjusted for stock splits and combinations) (a "MAJOR INVESTOR"), the Company
will furnish each such Major Investor (i) at least thirty (30) days prior to the
beginning of each fiscal year an annual budget and operating plans for such
fiscal year (and as soon as available, any subsequent revisions thereto); and
(ii) as soon as practicable after the end of each month, and in any event within
twenty (20) days thereafter, a balance sheet of the Company as of the end of
each such month, and a statement of income and a statement of cash flows of the
Company for such month and for the current fiscal year to date, including a
comparison to plan figures for such period, prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
4.2 INSPECTION RIGHTS. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 4.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
4.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, member, subsidiary or
parent of such Investor for the purpose of evaluating its investment in the
Company as long as such partner, member, subsidiary or parent is advised of the
confidentiality provisions of this Section 4.3.
4.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the conversion of the
preferred stock, all common stock issuable from time to time upon such
conversion.
4.5 KEY MAN INSURANCE. Subject to the approval of the Board of Directors,
the Company will use its best efforts to obtain and maintain in full force and
effect term life insurance in the amount of one million ($1,000,000) dollars on
the life of Xxxx Xxxxx, naming the Company as beneficiary.
4.6 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in the form attached to the Purchase
Agreement.
4.7 QUALIFIED SMALL BUSINESS. For so long as any of the Registrable
Securities that qualify as of the date of issuance as Qualified Small Business
Stock as defined in Section 1202(c) of the Internal Revenue Code of 1986, as
amended (the "Code") are held by an Investor (or a transferee in whose hands
such shares of Registrable Securities are eligible to qualify as Qualified Small
Business Stock, the Company will use its reasonable efforts to comply with the
reporting and recordkeeping 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
cause such Registrable Securities to not so qualify as Qualified Small Business
Stock so long as the Company's Board of Directors determines that it is in the
best interests of and not unduly burdensome to comply with the provisions of
Section 1202 of the Code.
13.
4.8 REAL PROPERTY HOLDING CORPORATION. The Company is not and will use its
reasonable efforts to avoid treatment as a real property holding corporation
within the meaning of Code Section 897(c)(2) and any regulations promulgated
thereunder.
4.9 DIRECTORS' EXPENSES. The Company shall reimburse members of the
Company's Board of Directors for reasonable expenses incurred in connection with
the performance of their duties as Directors.
4.10 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. In the event the Company elects
not to exercise any right of first refusal or right of first offer the Company
may have on a proposed transfer of any of the Company's outstanding capital
stock by any Founder (as such term is defined in the Fourth Amended and Restated
Co-Sale Agreement dated June 22, 2001, as amended (the "Amended and Restated
Co-Sale Agreement")) pursuant to the Company's Amended and Restated Bylaws, by
contract or otherwise, the Company shall, to the extent it may do so, assign
such right of first refusal or right of first offer to each Investor in
accordance with the terms of Section 3(b) of the Amended and Restated Co-Sale
Agreement.
4.11 VISITATION RIGHTS. The Company shall allow one representative
designated by each of Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx, Xxxxx Xxxx & Xxxxx
Venture Partners and Vulcan Ventures Incorporated to attend all meetings of the
Company's Board of Directors in a nonvoting capacity, and in connection
therewith, the Company shall give such representatives copies of all notices,
minutes, consents and other materials, financial or otherwise, which the Company
provides to its Board of Directors ("Board Materials"); provided, however, that
the Company reserves the right to exclude such representatives from access to
any material or meeting or portion thereof if the Company believes upon advice
of counsel that such exclusion is reasonably necessary to preserve the
attorney-client privilege, to protect highly confidential proprietary
information or for other similar reasons. The Company shall, at the same time as
such materials are provided to the Board of Directors (if provided in advance of
any meeting), provide to Integral Capital Partners all Board Materials subject
to the limitations set forth in the prior sentence.
4.12 "MARKET STAND-OFF" AGREEMENT. Unless otherwise approved by the Board
of Directors of the Company, all Common Stock issued pursuant to the 1999 Equity
Incentive Plan and the agreements with the Key Holders (as that term is defined
in the Fourth Amended and Restated Voting Agreement) will include restrictions
substantially in the form of the relevant market stand-off provisions in the
founder stock purchase agreements for Xxxx Xxxxx and Xxx Xxxxxxx, the form of
noncompetition agreement executed by Xxxx Xxxxxxxx, the form of stock option
agreement under the Plan, the form of restricted stock purchase agreement under
the Plan or the form of notice of exercise attached to the early exercise
purchase agreement under the Plan.
4.13 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 4 of this Agreement shall expire and terminate as to each Investor upon
the earlier of (a) the effective date of the registration statement pertaining
to the Initial Offering, or (b) upon (i) the sale, lease or other disposition of
all or substantially all of the assets of the Company or (ii) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 4.13(b)(ii) shall not apply to a merger effected exclusively for the
purpose of changing the domicile of the Company (a "CHANGE IN CONTROL").
14.
SECTION 5. RIGHTS OF FIRST REFUSAL
5.1 SUBSEQUENT OFFERINGS. Each Major Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
5.7 hereof. Each Major Investor's pro rata share is equal to the ratio of (a)
the number of shares of the Company's common stock (including all shares of
common stock issued or issuable upon conversion of the Shares) which such Major
Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
common stock (including all shares of common stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"EQUITY SECURITIES" shall mean (a) any common stock, preferred stock or other
security of the Company, (b) any security convertible, with or without
consideration, into any common stock, preferred stock or other security
(including any option to purchase such a convertible security), (c) any security
carrying any warrant or right to subscribe to or purchase any common stock,
preferred stock or other security or (d) any such warrant or right.
5.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase up to its
pro rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Investor who would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or sale.
Each Major Investor shall be entitled to allocate its rights under Section 5
hereof to other affiliated entities, as designated by such Major Investor.
5.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Major Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Major Investors who do so
elect and shall offer such Major Investors the right to acquire such
unsubscribed shares. The Major Investors shall have five (5) days after receipt
of such notice to notify the Company of its election to purchase all or a
portion thereof of the unsubscribed shares. If the Major Investors fail to
exercise in full the rights of first refusal, the Company shall have ninety (90)
days thereafter to sell the Equity Securities in respect of which the Major
Investor's rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to the Major Investors pursuant to 5.2 hereof. If the
Company has not sold such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 5.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to the
Major Investors in the manner provided above.
5.4 SALE WITHOUT NOTICE. In lieu of giving notice to the Major Investors
prior to the issuance of Equity Securities as provided in Section 5.2, the
Company may elect to give notice to the Major Investors within thirty (30) days
after the issuance of Equity Securities. Such notice shall describe the type,
price and terms of the Equity Securities. Each Major Investor shall have twenty
(20) days from the date of receipt of such notice to elect to purchase its pro
rata share of Equity Securities (as defined in Section 5.1, and calculated
before giving effect to the sale of the Equity Securities to the purchasers
thereof). The closing of such sale shall occur within sixty (60) days of the
date of notice to the Investors.
5.5 TERMINATION AND WAIVER OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Section 5 shall not apply to, and shall terminate
upon the earlier of (a) effective date of
15.
the registration statement pertaining to the Company's Initial Offering or (b) a
Change in Control. The rights of first refusal established by this Section 5 may
be amended, or any provision waived with the written consent of Major Investors
holding a majority of the Registrable Securities held by all Major Investors, or
as permitted by Section 6.6.
5.6 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Investor under this Section 5 may be transferred to the same parties,
subject to the same restrictions, as any transfer of registration rights
pursuant to Section 3.10.
5.7 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 5 shall have no application to any of the following Equity Securities:
(a) shares of common stock issued pursuant to Board approval as
required by the Company's 1999 Equity Incentive Plan (and/or options, warrants
or other Common Stock purchase rights issued pursuant to such options, warrants
or other rights) to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) shares of Common Stock and/or options, warrants or other rights
issued to suppliers of the Company pursuant to arrangements approved by the
Board;
(c) stock issued pursuant to any rights, agreements, options or
warrants outstanding as of the date of this Agreement, options and warrants
outstanding as of the date of this Agreement;
(d) stock issued pursuant to rights, agreements, options or warrants
granted after the date of this Agreement; provided that the rights of first
refusal established by this Section 5 applied with respect to the initial sale
or grant by the Company of such rights, agreements, options or warrants;
(e) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
approved by the Board of Directors;
(f) shares of common stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(g) shares of common stock issued upon conversion of the Shares;
(h) any Equity Securities issued pursuant to any equipment leasing
or loan arrangement, or debt financing from a bank or similar financial or
lending institution, approved by the Board of Directors;
(i) any Equity Securities that are issued by the Company pursuant to
a registration statement filed under the Securities Act;
(j) shares of the Company's common stock or preferred stock issued
in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein has been
approved by the Company's Board of Directors, including the representative
designated by the holders of the Shares; or
16.
(k) any Equity Securities issued pursuant to that certain Amendment
of Noncompetition Agreement and Separation Agreement, dated June 25, 2001, by
and between Xxxxxxx X. Xxxxxxxx and the Company.
SECTION 6. MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
6.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, the Purchase
Agreement and the other documents delivered pursuant thereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
6.5 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
6.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least a majority of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.
(c) Notwithstanding the foregoing, (i) this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
Shares as "INVESTORS," "HOLDERS" and parties hereto and (ii) Section 4.11 hereto
shall not be amended or waived without the consent of KPCB Holdings, Inc. or
Xxxxx Xxxx and Xxxxx Venture Partners, as applicable.
17.
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day; (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
EXHIBIT A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
6.9 ATTORNEYS' FEES. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.11 ADDITIONAL INVESTORS. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Series E
Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares
of Series E Preferred Stock may become a party to this Agreement by executing
and delivering an additional counterpart signature page to this Agreement and
shall be deemed an "INVESTOR" hereunder.
6.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
18.
IN WITNESS WHEREOF, the parties hereto have executed this FOURTH AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: INVESTORS:
BLUE NILE, INC. TRINITY VENTURES VI, L.P.
The Market Place Tower Building a California limited partnership
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000 By: Trinity TVL VI, LLC,
Xxxxxxx, XX 00000 a California limited liability company
By: /s/ Xxxx Xxxxx By: /s/ Xxx Xxxxxxx
-------------------------------------- -----------------------------------
Xxxx Xxxxx, Chief Executive Officer Xxx Xxxxxxx, Manager
KEY HOLDERS: TRINITY VI SIDE-BY-SIDE FUND, L.P.
a California limited partnership
By: Trinity TVL VI, LLC,
/s/ Xxxxx Xxxxxxx a California limited liability company
------------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxx Xxxxx By: /s/ Xxx Xxxxxxx
------------------------------------------ -----------------------------------
Xxxx Xxxxx Xxx Xxxxxxx, Manager
/s/ Xxxxxxx Xxxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxxx and Xxxx Xxxxxxxx BESSEMER VENTURE PARTNERS IV L.P.
as Joint Tenants with Right of Survivorship By: Deer IV & Co. LLC, General Partner
/s/ Xxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------ -----------------------------------
Xxxxxxx X. Xxxxxxxx and Xxxx Xxxxxxxx Xxxxxx X. Xxxxxxxx, Manager
as Joint Tenants with Right of Survivorship
BESSEC VENTURES IV L.P.
By: Deer IV & Co. LLC, General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxx, Manager
KPCB HOLDINGS, INC., AS NOMINEE
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
its Senior Vice President
FOURTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
XXXXX, XXXX & XXXXX VENTURE
ASSOCIATES V, L.L.C.
By: WPG VC Fund Adviser II, L.L.C.,
Fund Investment Advisory Member
By: /s/ Xxxxx Xxxx
-----------------------------------
Xxxxx Xxxx, Managing Member
XXXXX, XXXX & XXXXX VENTURE
ASSOCIATES V-A, L.L.C.
By: WPG VC Fund Adviser II, L.L.C.,
Fund Investment Advisory Member
By: /s/ Xxxxx Xxxx
-----------------------------------
Xxxxx Xxxx, Managing Member
XXXXX, XXXX & XXXXX VENTURE
ASSOCIATES V CAYMAN, L.P.
By: WPG VC Fund Adviser II, L.L.C.,
Fund Investment Advisory Partner
By: /s/ Xxxxx Xxxx
-----------------------------------
Xxxxx Xxxx, Managing Member
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND II, L.L.C.
By: WPG VC Fund Adviser II, L.L.C.,
Fund Investment Advisory Member
By: /s/ Xxxxx Xxxx
-----------------------------------
Xxxxx Xxxx, Managing Member
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND II-A, L.L.C.
By: WPG VC Fund Adviser II, L.L.C.,
Fund Investment Advisory Member
By: /s/ Xxxxx Xxxx
-----------------------------------
Xxxxx Xxxx, Managing Member
FOURTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
INTEGRAL CAPITAL PARTNERS IV, L.P.
By: Integral Capital Management IV, LLC
Its: General Partner
By: /s/ Xxxxxx Xxxxxxx
-----------------------------------
Xxxxxx Xxxxxxx, Manager
INTEGRAL CAPITAL PARTNERS IV MS SIDE
FUND, L.P.
By: Integral Capital Partners NBT, LLC
Its: General Partner
By: /s/ Xxxxxx Xxxxxxx
-----------------------------------
Xxxxxx Xxxxxxx, Manager
VULCAN VENTURES INCORPORATED
By: /s/ Xxxxxxx Xxxxx
-----------------------------------
Xxxxxxx Xxxxx, President
/s/ Xxx Xxxxxxxxx
---------------------------------------
Xxx Xxxxxxxxxx
FOURTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
Investor:
XXXX FAMILY 1982 TRUST
---------------------------------------
(Name of Entity)
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Title: Trustee
--------------------------------
Investor:
XXXXXXX XXXX
---------------------------------------
(Name of Entity)
By: /s/ Xxxxxxx Xxxx
--------------------------------
Title:
--------------------------------
FOURTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
