EXHIBIT 1
MOBINETIX SYSTEMS, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "AGREEMENT") is made as of June 9,
1998 by and among MobiNetix Systems, Inc., a Delaware corporation (the
"COMPANY"), the purchaser of shares of Series D Preferred Stock (the "SERIES D
PREFERRED") of the Company (the "SERIES D PURCHASER"), and the founders of the
Company identified on Exhibit A hereto (the "FOUNDERS"; the Founders, and the
Series D Purchaser, collectively, the "STOCKHOLDERS"). Each of the Stockholders
are identified by name and ownership of shares of the Company's capital stock on
Exhibit B hereto.
RECITALS
A. On April 24, 1998, the Company entered into a Series D Preferred Stock
Purchase Agreement (the "SERIES D PURCHASE AGREEMENT") with the Series D
Purchaser pursuant to which the Company agreed to sell 1,273,149 shares of its
Series D Preferred to the Series D Purchaser.
B. The Company and the Founders desire that the Company sell the Series D
Preferred to the Series D Purchaser pursuant to the Series D Purchase Agreement
in order to induce the Series D Purchaser to enter into the Series D Purchase
Agreement, the Company and the Founders have agreed to execute this Agreement.
C. In connection with the purchase of the Series D Preferred, the Series D
Purchaser desires to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, all parties hereto agree as follows:
1. CERTAIN DEFINITIONS. All capitalized terms used and not otherwise
defined herein shall have the meanings given them in the Series D Purchase
Agreement. As used in this Agreement, the following terms shall have the
following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Conversion Stock" means the Common Stock issued or issuable
pursuant to conversion of the Preferred Stock.
"Holder" shall mean (i) any holder of Registrable Securities, and
(ii) any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 5.8 hereof.
"Initiating Holders" shall mean the Holders who in the aggregate
hold not less than fifty percent of the Registrable Securities.
"Preferred Stock" shall mean the Series D Preferred.
"Preferred Stockholder" shall mean a holder of Preferred Stock.
"Registrable Securities" means the Conversion Stock and any Common
Stock of the Company issued or issuable in respect of the Conversion Stock upon
any stock split, stock dividend, recapitalization, or similar event, or any
Common Stock otherwise issuable with respect to the Conversion Stock; provided,
however, that shares of Conversion Stock or other securities shall only be
treated as Registrable Securities if and so long as they have not been sold to
or through a broker or dealer or underwriter in a public distribution or a
public securities transaction.
The terms "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 the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as stated in
Section 5.3 hereof, incurred by the Company in complying with Sections 5.1 and
5.2 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, 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).
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and, except as set forth under "Registration Expenses", all
reasonable fees and disbursements of counsel for any Holder.
2. RESTRICTIONS ON TRANSFERABILITY. The Conversion Stock and any other
securities issued in respect of the Conversion Stock upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall not be
sold, assigned, transferred or pledged except upon the conditions specified in
this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Holder will cause any proposed purchaser,
assignee, transferee, or pledgee of any such shares held by the Holder to agree
to take and hold such securities subject to the provisions and upon the
conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing (i) the Conversion
Stock and (ii) any other securities issued in respect of the Conversion Stock
upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the
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provisions of Section 4 below) be stamped or otherwise imprinted with a legend
in substantially the following form (in addition to any legend required under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE
AGREEMENTS COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
Each Holder consents to the Company's making a notation on its
records and giving instructions to any transfer agent for the Preferred Stock or
the Common Stock in order to implement the restrictions on transfer established
in this Agreement.
4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, or (ii) in transactions
involving the distribution without consideration of Restricted Securities by a
Preferred Stockholder to any of its partners or members, or retired partners or
members, or to the estate of any of its partners or members or retired partners
or members), unless there is in effect a registration statement under the
Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied, at such holder's expense by either
(i) an unqualified written opinion of legal counsel who shall be, and whose
legal opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (ii) a "no
action" letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. It is agreed that the Company will not request an
opinion of counsel for the holder for transactions made in reliance on Rule 144
under the Securities Act except in unusual circumstances, the existence of which
shall be determined in good faith by the Board of Directors of the Company. Each
certificate evidencing the Restricted Securities transferred as above provided
shall bear, except
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if such transfer is made pursuant to Rule 144, the appropriate restrictive
legend set forth in Section 3 above, except that such certificate shall not bear
such restrictive legend if in the opinion of counsel for such holder and the
Company such legend is not required in order to establish compliance with any
provision of the Securities Act.
5. REGISTRATION.
5.1 Requested Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to at least fifty percent
(50%) of the Registrable Securities, the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, prepare and file with the
Commission a registration statement with respect to such security and use its
best efforts to effect such registration, qualification or compliance
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within fifteen
(15) days after receipt of such written notice from the Company;
Provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 5.1:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) Following notice to the Holders by the
Company, during the period starting with the date sixty (60) days prior to the
Company's estimated date of filing of, and ending on the date six (6) months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective;
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(C) After the Company has effected one such
registration pursuant to this subparagraph 5.1(a), and such registrations have
been declared or ordered effective;
(D) If the Company shall furnish to such
Initiating Holders a certificate signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the managing underwriter it
would be seriously detrimental to the Company or its stockholders for a
registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to register, qualify or comply under this
Section 5.1 shall be deferred for a period not to exceed ninety (90) days from
the date of receipt of written request from the Initiating Holders, provided
that the Company may not exercise this deferral right more than once per twelve
(12) month period; or
(E) If such registration, qualification or
compliance is not proposed to be part of a firm commitment underwritten public
offering with underwriters reasonably acceptable to the Company.
Subject to the foregoing clauses (A) through (E), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event of a registration pursuant to Section
5.1, the Company shall advise the Holders as part of the notice given pursuant
to Section 5.1(a)(i) that the right of any Holder to registration pursuant to
Section 5.1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 5.1, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders, but subject to the Company's
reasonable approval. Notwithstanding any other provision of this Section 5.1, if
the managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may exclude some or all of the
Registrable Securities. The Company shall so advise all Holders of Registrable
Securities, and the number of shares of Registrable Securities that may be
included, if any are to be included, in the registration and underwriting shall
be allocated among all Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders at the time of
filing the registration statement. Neither the Company nor any other holders of
Registration Rights may participate in the proposed offering if any Holders have
been cut back pursuant to this Section 5.1(b). No Registrable Securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. To facilitate the allocation
of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
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If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall continue to
be subject to the terms of this Agreement including this Section 5.1 and Section
6 hereof.
5.2 Company Registration.
(a) Notice of Registration. If at any time or from time to
time the Company shall determine to register any of its equity securities,
either for its own account or the account of a security holder or holders, other
than a registration relating solely to employee benefit plans the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) upon the written request of holders of at least
fifty percent (50%) of the Registrable Securities, include in such registration
(and any related qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable Securities specified in
those written request or requests, made within ten (10) days after receipt of
such written notice from the Company, by any Holder.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 5.2(a)(i). In such event the right of any Holder to
registration pursuant to this Section 5.2 shall be conditioned upon such
Holder's participation in such underwriting, and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Section 5.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may exclude
some or all of the Registrable Securities, or securities of other holders of
registration rights other than persons exercising demand registration rights,
from such registration. The Company shall so advise all Holders and other
holders distributing their securities through such underwriting, and the number
of shares of Registrable Securities, if any are included, or securities of other
holders of registration rights other than persons exercising demand registration
rights, that may be included in the registration and underwriting shall be
allocated. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder
or other holder to the nearest 100 shares.
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If any Holder or other holder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall continue
to be subject to the terms of this Agreement including Section 6 hereof.
(c) No stockholder of the Company shall be granted any rights
superior to those granted to the Preferred Stockholders pursuant to this Section
5.2 without the prior consent of more than 50% of (i) the then outstanding
shares of Preferred Stock plus (ii) if some or all of the Preferred Stock has
been converted into Common Stock, the Conversion Stock.
(d) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 5.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
5.3 Expenses of Registration. All Registration Expenses shall be
borne by the Company. Selling expenses shall be borne by the selling
shareholders pro rata in proportion to the number of Registrable Securities
being registered.
5.4 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. The Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least ninety (90)
days or until the distribution described in the registration statement has been
completed, whichever first occurs;
(b) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities.
(c) Use its 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
Holder, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify as a foreign corporation or as a dealer in
securities or to file a general consent to service of process in any such states
or jurisdictions in which it has not already done so and except as may be
required by the Securities Act.
5.5 Indemnification.
(a) The Company will indemnify each Holder, each of such
Holder's officers and directors and partners, and each person controlling such
Holder within the meaning of
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Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of the
Securities Act of 1933, the Securities Exchange Act of 1934, state securities
law or any rule or regulation promulgated under such laws applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of such Holder's officers
and directors, and each person controlling such Holder, each such underwriter
and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred, as such expenses are incurred, in connection with
investigating, preparing or defending of any such claim, loss, damage, liability
or action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use therein;
provided, however, that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement, alleged
untrue statement, omission or alleged omission made in a preliminary prospectus
on file with the Commission at the time the registration statement becomes
effective or the amended prospectus filed with the Commission pursuant to Rule
424(b) (the "FINAL PROSPECTUS"), such indemnity agreement shall not inure to the
benefit of any underwriter or any Holder, if there is no underwriter, if a copy
of the Final Prospectus was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act, and if the Final Prospectus would have cured the defect
giving rise to the loss, liability, claim or damage.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of such Holder's officers and
directors and each person controlling such Holder within the meaning of Section
15 of the Securities Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred, as such expenses are incurred, in connection with
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investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability of
each Holder under this subsection 5.5(b) shall be limited in an amount equal to
the initial public offering price of the shares sold by such Holder.
(c) Each party entitled to indemnification under this Section
5.5 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. 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.
5.6 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
5.7 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, the
Company agrees to use all reasonable efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (at any time after it has become
subject to such reporting requirements); and
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(c) So long as the Holder owns any Restricted Securities to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (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 of the Company and other
information in the possession of or reasonably obtainable by the Company as the
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing the Holder to sell any such securities without
registration.
5.8 Transfer of Registration Rights. The rights to cause the Company
to register securities granted to the Holders under Sections 5.1 and 5.2 may be
assigned to a transferee or assignee in connection with any transfer or
assignment of 100,000 or more shares of Registrable Securities by the Holder
provided that such transfer may otherwise be effected in accordance with
applicable securities laws.
6. STANDOFF AGREEMENT. In connection with a public offering of the
Company's securities, each Holder agrees, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any securities of the Company (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the underwriters (the "STANDOFF PERIOD"), provided that (i) the
officers and directors of the Company who own stock or options of the Company,
as well as the holders of any piggy-back registration rights whose shares are
being registered in the offering, also agree to such restrictions and (ii) the
registration is not pursuant to a request for registration granted to Holders in
Section 5.1. In the event that (i) the Company includes in its registration
equity securities of any of the Holders pursuant to the Holders' rights granted
in Section 5.2, and (ii) the Company or the underwriters requests such a
standoff restriction as set forth above, then the Company use its best efforts
to cause such registration statement to remain effective for at least ninety
(90) days subsequent to the Standoff Period. The Holders agree that the Company
may instruct its transfer agent to place stop-transfer notations in its records
to enforce the provisions of this Section 6.
7. FIRST REFUSAL AND CO-SALE RIGHTS ON CERTAIN STOCK: In the event that
any Founder receives a bona fide offer from any person to purchase any of such
Founder's Common Stock (the "FOUNDER'S SHARES") in a private transaction exempt
from registration under the Act, that Founder (the "SELLING FOUNDER") shall
first give the Preferred Stockholders (the "RIGHTHOLDERS") notice of his
intention to sell Founders Shares, describing the amount of Founder's Shares
proposed to be transferred, the identity of the proposed transferee, and the
price and terms upon which he proposes to make such transfer (the "TRANSFER
NOTICE").
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7.1 First Refusal. Each Rightholder shall have the right to
purchase, at the price and on the terms set forth in the Transfer Notice, such
person's pro rata share (based on the number of shares of Preferred Stock held
by the Rightholders at the date of the Transfer Notice divided by the total
number of shares of Preferred Stock then outstanding) of the Founder's Shares
proposed to be transferred by tendering to the Selling Founder, within fifteen
(15) days of delivery of the Transfer Notice the purchase price therefore as set
forth in the Transfer Notice and complying with the other terms of the offer set
forth in the Transfer Notice. Any Rightholder who exercises any rights under
this Section 7.1 with respect to a transaction shall be deemed to have declined
to exercise its rights under Section 7.2 with respect to that transaction.
7.2 Co-Sale. Within fifteen (15) days after delivery of the Transfer
Notice, each Rightholder may elect to sell up to such person's pro rata share of
the shares to be purchased by the transferee described in the Transfer Notice by
giving written notice thereof to the Selling Founder and tendering to the
Secretary of the Company a certificate representing the shares to be sold,
properly endorsed for transfer, with written instructions to transfer the shares
to the transferee described in the Transfer Notice upon receipt of payment for
such shares from such transferee for the benefit of such Rightholder. The
Selling Founder shall thereupon notify the transferee of the co-sale
arrangements hereunder, and instruct the transferee to deliver payment for the
shares to be purchased from the Rightholders to the Secretary of the Company,
who shall transmit such payment to the Rightholders. For the purpose of the
co-sale right set forth in this Section 7.2, the pro rata share of a Rightholder
shall be determined based on the number of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock held by each Rightholder divided
by the sum of (A) the total number of shares of Common Stock issued or issuable
upon conversion of the Preferred Stock held by all Rightholders exercising the
Co-Sale Right pursuant to this Section 7.2 plus (B) the number of shares of
Common Stock held by the Founder at the date of the Transfer Notice (assuming
conversion of all convertible securities and exercise of all options and
warrants held by such Founder). Any Rightholder who exercises any rights under
this Section 7.2 with respect to a transaction shall be deemed to have declined
to exercise its rights under Section 7.1 with respect to that transaction.
7.3 Failure to Exercise Right. In the event that some or all of the
Founder's Shares proposed to be transferred are not purchased by the Company or
the Rightholders as allowed by Section 7.1, and to the extent the Rightholders
decline to exercise the co-sale right as allowed by Section 7.2, the Selling
Founder may, within ninety (90) days after the date on which Rightholders' first
refusal and co-sale rights lapsed, transfer some or all of the Founder's Shares
which were the subject of the Transfer Notice at a price and on terms no more
favorable to the transferee(s) than specified in the Transfer Notice. Founder's
Shares transferred in accordance with the provisions of this Section 7 shall no
longer be subject to the restrictions on Founder's Shares forth in this Section
7. After the expiration of said ninety (90) day period, the Selling Founder
shall not transfer any of his Founder's Shares without first offering such
securities to the Company and the Rightholders in the manner provided above in
Sections 7.1 and 7.2.
7.4 Permitted Transfers. Any transfer of Founder's Shares without
consideration to a family member of the Founder or a trust or custodian for the
benefit of the Founder or a family member of the Founder and transfers pursuant
to a pledge to secure a bank loan shall not be subject
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to the provisions of this Section 7, provided that the transferee agrees in
writing to be bound by the provisions of this Section 7 with respect to any
subsequent transfer of such shares.
7.5 Assignment. The rights of first refusal and co-sale granted
under this Section 7 may be assigned to a transferee or assignee in connection
with any transfer or assignment of at least 100,000 shares of Registrable
Securities provided that such transfer may otherwise be effected in accordance
with applicable securities laws.
7.6 Termination. The rights of the Rightholders pursuant to this
Section 7 shall terminate and be of no further force or effect upon the
acquisition of all of the capital stock of the Company by any other entity.
7.7 Legends. The share certificate evidencing the Founder's Shares
shall be endorsed with the following legends (in addition to any legends
required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
CERTAIN SHAREHOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE COMPANY."
8. INFORMATION, INSPECTION, AND MANAGEMENT RIGHTS.
8.1 Rights.
(a) As soon as practicable after the end of each fiscal year,
and in any event within ninety (90) days thereafter, the Company will mail to
each Preferred Stockholder the audited consolidated financial statements for the
Company and its consolidated subsidiaries for such year, prepared in accordance
with generally accepted accounting principles.
(b) As soon as practicable after the end of each fiscal
quarter (in any event within sixty (60) days thereafter) or each fiscal year, as
the case may be, the Company will mail to each Preferred Stockholder who (i)
continues to hold 100,000 shares of Series D Preferred (or Common Stock issued
upon conversion of such Series D Preferred) purchased or issued pursuant to the
Series D Purchase Agreement (collectively, all of such holders, the "Information
Rightholders") unaudited quarterly financial statements of the Company.
(c) As soon as practicable after the Company mails any
information to its shareholders, the Company mail to each Preferred Stockholder
a copy of such information.
8.2 Confidentiality. The Series D Preferred Stockholder agrees, and
any representative of such Preferred Stockholder will agree, to hold in
confidence and trust and not use
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or disclose any confidential information provided to or learned by it in
connection with the rights granted in Section 8.1 other than in connection with
the investment in the Company.
8.3 Termination of Covenants. The obligations of the Company set
forth in Section 8.1 shall terminate and be of no further force or effect upon
the acquisition of all of the capital stock of the Company by any other entity.
The confidentiality provisions set forth in Section 8.2 shall survive any such
termination.
8.4 Assignment. The information, inspection and management rights
granted under this Section 8 may be assigned to a transferee or assignee in
connection with any transfer or assignment of at least 100,000 shares of
Registrable Securities provided that such transfer may otherwise be effected in
accordance with applicable securities laws.
9. SUBSEQUENT RIGHTS. From and after the Closing Date, the Company shall
grant the holders of Preferred Stock any registration rights, rights of first
refusal and co-sale, information, inspection, management rights, or any other
similar rights granted to subsequent purchasers of the Company's equity
securities that are, in the good faith judgement of the Company's Board of
Directors, superior to the rights granted to Preferred Stockholders hereunder.
10. AMENDMENT. Any provision of this Agreement may be amended or 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 not less than a majority of the Registrable
Securities then outstanding, provided that if an amendment by its terms affects
the rights of a subset, series or class of securities differently than other
securities, such amendment must be approved by written consent of not less than
a majority of the holders of that subset, class or series of securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Preferred Stockholder and each Holder of Registrable Securities at the
time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company. Any
amendment to Section 7 of this Agreement that, in the good faith judgment of the
Board of Directors, adversely affects the Founders must be approved by a
majority of the Founders.
11. ENTIRE AGREEMENT. This Agreement, together with all Exhibits hereto,
constitute the full and entire understanding and agreement between the parties
regarding the matters set forth herein; provided, however, that the Company and
the Founders remain bound by the exclusivity provisions of Section D of the
letter of intent, dated April 3, 1998, from the Purchaser to the Company. 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.
12. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or three (3) days after deposit
with the United States mail, by registered or certified mail, postage prepaid,
addressed (a) if to a Preferred Stockholder, at such Preferred Stockholder's
address as set forth on the Schedule of Preferred Stockholders attached hereto,
or at such other address as such
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Preferred Stockholder shall have furnished to the Company in writing in
accordance with this Section 12, (b) if to any other holder of Conversion Stock,
at such address as such holder shall have furnished the Company in writing in
accordance with this Section 12, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder thereof
who has so furnished an address to the Company, or (c) if to the Company, at its
principal office.
13. 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.
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The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
MOBINETIX SYSTEMS, INC.
a Delaware corporation
By: _________________________________
Xxxx Xxxxxxxx, President
"FOUNDERS"
XXXX XXXXXXXX
_____________________________________
XXXXX XXXXXXX
_____________________________________
XXXXX XXXXX
_____________________________________
XXXXXX XXXXXXXX
_____________________________________
XXXXX X. XXXXXXX, XX.
_____________________________________
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"SERIES D PURCHASER"
XXXXX XXXXX, INC.
a New York corporation
By: _________________________________
Xxxxxxx X. Stuck,
Vice President, Business
Development
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
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EXHIBIT A
FOUNDERS
Xxxx Xxxxxxxx
0000 Xxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxx Xxxxxxx
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Xxxxx Xxxxx
0000 Xxxxxxxx
Xxx Xxxxx, XX 00000
Xxxxxx Xxxxxxxx
0000 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Xxxxx X. Xxxxxxx, Xx.
000 Xxxxxxxxx Xxx
Xxxxxxxxx, XX 00000
EXHIBIT B
STOCKHOLDERS
The following table lists the number of shares of capital stock of the Company
subject to the provisions of this Agreement as of the date hereof.
NAME SERIES D PREFERRED
--------------------------- ----------------------
Xxxxx Xxxxx, Inc. 1,273,149
0000 Xxxxxx Xxxx
Xxxxxxxxxxx Xxxxx, XX 00000
