Exhibit 10.5
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT made as of November 2, 1999 and amended as of
December 30, 1999 by and among (i) Xxxxx Advisors, Inc., a Delaware corporation
(the "Company"), (ii) the Purchasers listed on Exhibit A hereto (the
"Purchasers"), (iii) The Ashton Technology Group, Inc. a Delaware corporation
("Ashton"), (iv) the Ashton Executives listed on Exhibit B hereto (the "Ashton
Executives") and (v) each of Xxxxx Xxxxx, Xxxx Xxxx and Xxxxxxxxx Xxxxx
(individually a "Founder and collectively the "Founders"). The Purchasers may be
referred to herein individually as an "Investor" and collectively as the
"Investors". The Investors, Ashton and the Ashton Executives may be referred to
herein individually as a "Preferred Stockholder" and collectively as the
"Preferred Stockholders".
WHEREAS, the Company proposes to issue and sell an aggregate of up to Five
Million Eight Hundred Eighty-Two Thousand Three Hundred Fifty-Three shares of
Series C Convertible Preferred Stock, par value $.01 per share (the "Series C
Stock"), to the Investors pursuant to that certain Preferred Stock Purchase
Agreement of even date herewith (the "Purchase Agreement");
WHEREAS, the Investors may become party to the Purchase Agreement from
time to time upon one or more Subsequent Closings (as defined in the Purchase
Agreement);
WHEREAS, as a condition to entering into the Purchase Agreement, the
Investors have requested that the Company extend to them registration rights and
certain other rights and covenants as set forth herein;
WHEREAS, the Company has previously granted registration rights to Ashton,
the Ashton Executives and the Founders pursuant to the Ashton Stockholders
Agreement (as defined herein); and
WHEREAS, the Board of Directors of the Company has determined that it is
in the best interests of the Company that the Company enter into this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the parties hereto
covenant and agree as follows:
1. GENERAL PROVISIONS
1.1 Shares Subject to this Agreement. The Investors expressly agree that the
terms and restrictions of this Agreement shall apply to all shares of capital
stock which any of them now owns or hereafter acquires by any means, including
without limitation by purchase, assignment, conversion of convertible securities
or operation of law, or as a result of any stock dividend, stock split,
reorganization, reclassification, whether voluntary or involuntary, or other
similar transaction, and to any shares of capital stock of any successor in
interest of the Company, whether by sale, merger, consolidation or other similar
transaction (the "Shares").
1.2 No Partnership Relationship. Notwithstanding, but not in limitation of, any
other provision of this Agreement, the parties understand and agree that the
creation, management and operation of the Company shall not create or imply a
general partnership between or among the Investors and shall not make any
Investor the agent or partner of any other Investor for any purpose.
1.3 Additional Investors. Upon the sale of any Additional Shares (as defined in
the Purchase Agreement) to Additional Purchasers (as defined in the Purchase
Agreement) in accordance with the Purchase Agreement, each such Additional
Purchaser shall become a party hereto, be deemed an Investor for all purposes
hereunder and be bound by the provisions of this Agreement, without any further
action by the Company or such Additional Purchaser. Each Additional Purchaser
(as defined in the Purchase Agreement) shall, if requested by the Company,
execute and deliver a counterpart signature page hereto, to further evidence
such agreement.
1.4 Registration of Transfer. The Company shall maintain a register of the
Shares and of their transfer and exchange. When certificates representing Shares
(or an affidavit as to loss thereof, as the case may be) are presented to the
Company with a request (x) to register the transfer of such Shares in accordance
with the terms and conditions of this Agreement or (y) to exchange one or more
certificates for one or more other certificates representing an equal aggregate
number of shares, the Company shall register the transfer or make the exchange
as requested if the Company's reasonable requirements for such transaction are
met; provided that the certificates surrendered for transfer or exchange shall
be duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Company, duly executed by the holder thereof or
his attorney duly authorized in writing.
1.5 Certain Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
"Affiliate" has the meaning ascribed to that term in Rule 12b-2 under the
Exchange Act, or any successor rule.
"Ashton Stockholders Agreement" shall mean the Stockholders Agreement
dated as of January 22, 1999 and as amended as of December 30, 1999 by and among
the Company, Ashton, the Xxxxx Principals (as defined therein) and the Ashton
Executives (as defined therein).
"Commission" shall mean the Securities and Exchange Commission and any
successor agency of the Federal government administering the Securities Act and
the Exchange Act.
"Common Stock" shall mean (i) the common stock, $.0001 par value per
share, of the Company; (ii) any other capital stock of the Company, however
designated, authorized on or after the date hereof, which shall neither be
limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends nor entitled to a preference in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company; and (iii) any other securities into
which or for which any of the securities described in (i) or (ii) may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, consolidation, sale of assets or other similar transaction.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any similar or successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to time.
"Initial Public Offering" shall mean the first underwritten public
offering of Common Stock of the Company, offered on a firm commitment basis
pursuant to a registration statement filed with the Commission under the
Securities Act on Form S-1 or its then equivalent, in which (i) the aggregate
net proceeds to the Company equals or exceeds $20,000,000 and (ii) the initial
public offering price per share equals or exceeds an amount equal to $10.20
(subject to appropriate adjustment for stock splits, stock dividends,
combinations and other similar recapitalization events).
"Person" shall include any individual, a corporation, an association, a
partnership, a trust or estate, a government and any agency or political
subdivision thereof, or any other entity
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement, or, as the context may require, under the Exchange Act
or applicable state securities laws.
"Registrable Securities" shall mean (i) shares of Common Stock or other
securities issued or issuable pursuant to the conversion of the Series C Stock;
and (ii) any shares of Common Stock or other securities issued or issuable
pursuant to the conversion of the Series C Stock upon any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, sale of
assets or similar event, excluding in any event securities which have been (a)
registered under the Securities Act pursuant to an effective registration
statement filed thereunder and disposed of in accordance with the registration
statement covering them or (b) publicly sold pursuant to Rule 144 under the
Securities Act; provided that such shares of Common Stock or other securities
shall cease to be Registrable Securities at such time when such Common Stock or
other securities (other than Common Stock or other securities held by Persons
who are Affiliates of the Company) are eligible for sale pursuant to Rule 144
under the Securities Act. Wherever reference is made in this Agreement to a
request or consent of holders of a certain percentage of Registrable Securities,
the determination of such percentage shall be calculated on the basis of shares
of Common Stock issued or issuable upon conversion of the Series C Stock even if
such exercise has not been effected.
"Registration Expenses" shall mean the expenses so described in Section
4.7.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
any similar or successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Selling Expenses" shall mean the expenses so described in Section 4.7.
"Subsidiary" or "Subsidiaries" shall mean any corporation, partnership,
trust or other entity of which the Company and/or any of its other Subsidiaries
directly or indirectly owns at the time a majority of the outstanding shares of
any class of equity security of such corporation, partnership, trust or other
entity.
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2. PREEMPTIVE RIGHTS
2.1 Notice of New Issuance. Except with respect to "Exempt Issuances" as defined
in Section 2.3, in the event that the Company plans to issue any (i) shares of
Common Stock, (ii) warrants, options or other rights to purchase Common Stock
(collectively, "Rights"), or (iii) any debentures or other securities
convertible into or exchangeable for shares of Common Stock (collectively,
"Convertible Securities"), the Company will deliver to the Investors a notice
(the "Offer Notice"), stating the price and other terms and conditions thereof.
2.2 Right to Purchase Shares, Rights or Convertible Securities. The Company
shall not issue or sell, agree or obligate itself to issue or sell, or reserve
or set aside for issuance or sale any shares of Common Stock, Rights or
Convertible Securities (collectively, "New Issuances"), other than an Exempt
Issuance, unless in the case of each New Issuance, the Company shall have first
offered to sell such securities (the "Offered Securities") to Investors as
follows: the Company shall offer to sell to each Investor that portion of the
Offered Securities as the number of shares of capital stock of the Company then
held by such Investor bears to the total number of shares of capital stock of
the Company held by all Investors, treating each Investor, for the purpose of
such computation, as the holder of the number of shares of Common Stock which
would be issuable to it upon conversion, exercise and exchange of all Rights and
Convertible Securities held by it on the date immediately preceding the New
Issuance and assuming the like conversion, exercise and exchange of all such
securities held by other persons. The rights set forth in this Article 2 shall
be exercised by the Investors, if at all, by written notice to the Company
delivered not later than ten (10) days after the receipt by the Investors of the
Offer Notice in accordance with the terms and conditions stated therein, and
such right shall expire at the end of the tenth day after the day of the receipt
by the Investors of the Offer Notice.
2.3 Exempt Issuances. The issuances referred to in Section 2.1 which will not
give the Investors the rights described in Section 2.2 (the "Exempt Issuances")
are issuances in which shares of Common Stock or Rights or Convertible
Securities of the Company are issued or deemed issued (i) as a dividend or
distribution payable pro rata to all holders of Common Stock or other securities
of the Company; (ii) to employees, consultants, officers and directors of the
Company in the form of options to purchase shares of Common Stock pursuant to
the Company's 1998 Stock Plan, the Company's 1999 Long Term Incentive Plan, the
Company's 1999 Stock Plan or any other equity plan or arrangement approved by
the Company's Board of Directors (a "Stock Plan Issuance"); (iii) in connection
with the conversion or exercise of any options, warrants or other rights to
purchase Common Stock (A) existing on the date hereof or issued to the Investors
pursuant hereto (including any warrants, the Series A Stock and the Company's
Series B Convertible Preferred Stock) or (B) issued in accordance with the
foregoing clause (ii); or (iv) issued pursuant to the acquisition of another
corporation by the Company by merger (where the Company owns no less than 51% of
the voting power of such corporation) or by purchase of substantially all of its
stock or assets.
2.4 Termination. The respective rights and obligations of the parties under this
Article 2 shall terminate immediately prior to the consummation of the Company's
Initial Public Offering.
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3. RESTRICTIONS ON TRANSFER; INVESTOR PARTICIPATION IN SALES
3.1 Restrictions on Transfer by Founders. The Founders hereby agree to the
following provisions with respect to any sale, transfer or other disposition of
Shares, in the event such sale, transfer or disposition is allowed pursuant to
Article 4 hereof:
(a) Non-Complying Transfers Prohibited. Each Founder understands
that he may not sell, assign, transfer, exchange, gift, devise, pledge,
hypothecate, encumber or otherwise alienate or dispose of any Shares, or
any right or interest therein, whether voluntarily or involuntarily, by
operation of law or otherwise, except in accordance with this Agreement.
Any such purported transfer in violation of any provision of this
Agreement and all actions by the purported transferor and transferee in
connection therewith shall be of no force or effect. The Company shall not
be required to recognize such purported transfer for any purpose,
including without limitation for purposes of dividend and voting rights.
If any transfer of Shares is made or attempted contrary to the provisions
of this Agreement or if any Shares are not offered as required by this
Agreement, the Company or the other holders of Shares of the Company shall
have the right to purchase such Shares from each such transferring Founder
or each such transferee at any time before or after each such purported
transfer, as hereinafter provided. In addition to any other legal or
equitable remedies the Company or such other holders may have, the Company
and such other holders may enforce this right by actions for specific
performance, to the extent permitted by law.
(b) Right of First Offer on Voluntary Transfers.
(i) In the event that a Founder (hereafter the "Selling
Founder") desires to sell, assign, transfer or otherwise voluntarily
alienate or dispose of any Shares ("Offered Shares"), other than
transfers to Permitted Transferees (as defined in Section 3.3), the
Selling Founder shall, prior to any such transfer to a third party,
give written notice (the "Selling Founder's Notice") of such desire
to the Company and the Preferred Stockholders. The Company shall
have a right of first offer (the "Company's Right of First Offer")
to purchase, all but not less than all, of the Offered Shares, as
are proposed to be sold in the Selling Founder's Notice, at the
monetary price per share designated in the Selling Founder's Notice,
payable as provided in Section 3.1(b)(iii) hereof, if the Company
gives written notice of the exercise of such right to such Selling
Founder within thirty (30) days (the "Company's Offer Period") after
the date of the Selling Founder's Notice to the Company. If the
Company does not intend to exercise the Company's Right of First
Offer in full or if the Company is not lawfully able to repurchase
the Offered Shares, the Company will send written notice thereof
(the "Company's Expiration Notice") to the Selling Founder and the
Preferred Stockholders at least fifteen (15) days before the
expiration of the Company's Offer Period. The Company's Expiration
Notice will specify the Offered Shares subject to the Preferred
Stockholders' Right of Second Offer described below.
(ii) Preferred Stockholders' Right of Second Offer. If the
Company does not exercise its right of first offer in full, the
Preferred Stockholders will
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have a right of second offer (the "Preferred Stockholders' Right of
Second Offer") to purchase all of the Offered Shares not purchased
by the Company as are proposed to be sold in the Selling Founder's
Notice at the monetary price per share designated in the Selling
Founder's Notice, payable as provided in Section 3.1(b)(iii) hereof.
Not later than thirty (30) days after receipt of the Selling
Founder's Notice (the "Preferred Stockholder Offer Period"), each
Preferred Stockholder shall deliver written notice (such "Preferred
Stockholder's Notice") to the Selling Founder stating whether the
Preferred Stockholder has accepted the offer for its pro rata share
of the Offered Shares stated in the Selling Founder's Notice. Each
Preferred Stockholder may only accept the offer of the Selling
Founder for its pro rata share in whole and may not accept such
offer in part. The Preferred Stockholders shall also have a right of
oversubscription such that if any Preferred Stockholder fails to
accept the offer of the Selling Founder as to its full pro rata
fraction (calculated on an as-converted basis), the remaining
Preferred Stockholders shall, among them, have the right to purchase
up to the balance, of such Offered Shares not so purchased. The
Preferred Stockholders may exercise such right of oversubscription
by accepting the offer of the Selling Founder as to more than their
pro rata share. If, as a result thereof, such oversubscriptions
exceed the total number of the Offered Shares available in respect
of such oversubscription privilege, the oversubscribing Preferred
Stockholders shall be cut back with respect to over subscriptions on
a pro rata basis in accordance with their respective pro rata shares
or as they may otherwise agree among themselves. If any Preferred
Stockholder accepts the offer of the Selling Founder, such Preferred
Stockholder's Notice shall fix a time, location and date for the
closing of such purchase, which date shall be not less than ten (10)
nor more than thirty (30) days after delivery of the Preferred
Stockholder's Notice.
(iii) Closing. The place for the closing of any purchase and
sale described in Section 3.1(b)(i) or Section 3.1(b)(ii) shall be
the principal office of the Company or at such other place as the
parties shall agree. At the closing, the Selling Founder shall
accept payment on the monetary terms contained in the Selling
Founder's Notice. At the closing, the Selling Founder shall deliver
to the Company or the Preferred Stockholder(s), as the case may be,
in exchange for Shares purchased and sold at the closing,
certificates for the number of Shares stated in the Selling
Founder's Notice, accompanied by duly executed instruments of
transfer.
(iv) Transfers to Third Parties. If the Company and the
Preferred Stockholders fail to accept the offer stated in the
Selling Founder's Notice, or if such offer is accepted but the
Company and/or the Preferred Stockholder(s) fails to consummate the
purchase at a closing as hereinabove provided, then the Selling
Founder shall be free, subject to the provisions of Sections 3.1(c)
and 4.2 hereof, to sell all, but not less than all, of the Offered
Shares to any third party (the "Third Party Purchaser") at a price
and on terms no less favorable to the Selling Founder than described
in the Selling Founder's Notice, provided, however, that such sale
is consummated within ninety (90) days after the giving of the
Selling Founder's
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Notice to the Company and the Preferred Stockholders. As a condition
precedent to the effectiveness of a transfer pursuant to this
Section 3.1(b)(iv), the Third Party Purchaser shall agree in writing
prior to such transfer to become a party to this Agreement as a
Founder and bound by the terms of this Agreement as a Founder and
shall thereafter be permitted to transfer Shares only in accordance
with this Agreement.
(c) Right of Co-Sale.
(i) Eligible Preferred Stockholder Co-Sale Right. If any
Preferred Stockholder (each, an "Eligible Preferred Stockholder")
has waived or otherwise failed to timely exercise its respective
rights of first offer to purchase all or any portion of the Offered
Shares as provided under Section 3.1(b), then such Eligible
Preferred Stockholder will have a right to participate in the sale
of the remaining Offered Shares ("Remaining Offered Shares") to the
Third Party Purchaser in a manner set forth herein ("Right of
Co-Sale"). Each Eligible Preferred Stockholder shall have the right
to sell to the Third Party Purchaser, at the same price per Share
and on the same terms and conditions as the Selling Founder is
selling to the Third Party Purchaser (the "Co-Sale Terms"), such
number of Shares (the "Co-Sale Shares") as is equal to the number of
Remaining Offered Shares multiplied by the Co-Sale Pro Rata Fraction
(as defined below), if such Eligible Preferred Stockholder gives
written notice of the exercise of such right to such Selling Founder
within forty-five (45) days (the "Co-Sale Refusal Period") after the
date of such Eligible Preferred Stockholder's receipt of the Selling
Founder's Notice. For purposes of this Section 3.1(c), the "Co-Sale
Pro Rata Fraction" shall be defined as a fraction, the numerator of
which is the number of Shares on an as-converted basis then owned by
such Eligible Preferred Stockholder and the denominator of which is
the number of Shares on an as-converted basis then owned by the
Founders plus the number of Shares on an as-converted basis then
owned by all of the Eligible Preferred Stockholders who have elected
to exercise the Right of Co-Sale.
(ii) Notices of Offer and Intent to Participate. If an
Eligible Preferred Stockholder wishes to participate in any sale
pursuant to this Section 3.1(c), the Eligible Preferred Stockholder
shall notify the Selling Founder in writing of such intention as
soon as practicable after such Eligible Preferred Stockholder's
receipt of the notice from the Selling Founder and in any event
within the Preferred Stockholder Offer Period. If the Selling
Founder does not receive such notice from an Eligible Preferred
Stockholder within the Preferred Stockholder Offer Period, the
Selling Founder shall be free to consummate the proposed transaction
without any obligation to include such Eligible Preferred
Stockholder's Shares in such transaction.
(iii) Sale of Co-Sale Shares. The Selling Founder and, if
participating, the Eligible Preferred Stockholder(s), shall sell,
subject to the provisions of Section 4.2 hereof, to the Third Party
Purchaser all, or at the option of the Third Party Purchaser, any
part of the shares proposed to be sold by them at not less
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than the price and upon other terms and conditions, if any, not less
favorable to the Eligible Preferred Stockholder(s) than the Co-Sale
Terms; provided that any purchase of less than all of such shares by
the Third Party Purchaser shall be made from the Selling Founder and
the Eligible Preferred Stockholders pro rata based upon the relative
amount of the shares that the Selling Founder and the Eligible
Preferred Stockholders are otherwise entitled to sell pursuant to
Section 3.1(c). If Co-Sale Shares are transferred under this Section
3.1 to any Third Party Purchaser who is not a party to this
Agreement, as a condition precedent to the effectiveness of such
transfer pursuant to this Section 3.1(c)(iii), such Third Party
Purchaser shall agree in writing prior to such transfer to become a
"Founder" party to and bound by the terms of this Agreement as a
Founder and shall thereafter be permitted to transfer Shares only in
accordance with this Agreement.
3.2 Restrictions on Transfer by Preferred Stockholders. The Preferred
Stockholders hereby agree to the following provisions with respect to any sale,
transfer or other disposition of Shares, in the event such sale, transfer or
disposition is allowed pursuant to Article 4 hereof:
(a) Non-Complying Transfers Prohibited. Each Preferred Stockholder
understands that it may not sell, assign, transfer, exchange, gift,
devise, pledge, hypothecate, encumber or otherwise alienate or dispose of
any Shares, or any right or interest therein, whether voluntarily or
involuntarily, by operation of law or otherwise, except in accordance with
this Agreement. Any such purported transfer in violation of any provision
of this Agreement and all actions by the purported transferor and
transferee in connection therewith shall be of no force or effect. The
Company shall not be required to recognize such purported transfer for any
purpose, including without limitation for purposes of dividend and voting
rights. If any transfer of Shares is made or attempted contrary to the
provisions of this Agreement or if any Shares are not offered as required
by this Agreement, the Company or the other holders of Shares of the
Company shall have the right to purchase such Shares from each such
transferring Preferred Stockholder or each such transferee at any time
before or after each such purported transfer, as hereinafter provided. In
addition to any other legal or equitable remedies the Company or such
other holders may have, the Company and such other holders may enforce
this right by actions for specific performance, to the extent permitted by
law.
(b) Rights of First Offer on Voluntary Transfers.
(i) Rights of First Offer. In the event that a Preferred
Stockholder (hereafter the "Selling Stockholder") desires to sell,
assign, transfer or otherwise voluntarily alienate or dispose of any
Shares, other than transfers to Permitted Transferees, the Selling
Stockholder shall, prior to any such transfer, give written notice
(the "Selling Stockholder's Notice") of such desire to the Company
and to each Preferred Stockholder. The Selling Stockholder's Notice
shall include a proposed purchase price per share and proposed terms
of payment of such purchase price. The Selling Stockholder's Notice
shall constitute a binding offer by the Selling Stockholder to sell
pro rata to the Preferred Stockholders such number of Shares (the
"Preferred Offered Shares") then owned by the Selling
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Stockholder as are proposed to be sold in the Selling Stockholder's
Notice at the monetary price per share designated in the Selling
Stockholder's Notice, payable as provided in Section 3.2(b)(ii)
hereof. Not later than thirty (30) days after receipt of the Selling
Stockholder's Notice, each Preferred Stockholder may elect to
purchase its pro rata share of the Preferred Offered Shares by
delivering written notice (the "Preferred Stockholder's Notice") to
the Selling Stockholder (with a copy to the Company). The Preferred
Stockholders shall also have a right of oversubscription such that
if any Preferred Stockholder fails to accept the offer of the
Selling Stockholder as to its full pro rata fraction, the remaining
Preferred Stockholders shall, among them, have the right to purchase
up to the balance of such Preferred Offered Shares not so purchased.
The Preferred Stockholders may exercise such right of
oversubscription by accepting the offer of the Selling Stockholder
as to more than their pro rata share. If, as a result thereof, such
oversubscriptions exceed the total number of the Preferred Offered
Shares available in respect of such oversubscription privilege, the
oversubscribing Preferred Stockholders shall be cut back with
respect to over subscriptions on a pro rata basis in accordance with
their respective pro rata shares or as they may otherwise agree
among themselves. If any Preferred Stockholder accepts the offer of
the Selling Stockholder, the Preferred Stockholder's Notice shall
fix a time, location and date for the closing of such purchase,
which date shall be not less than ten (10) nor more than thirty (30)
days after delivery of such notice.
(ii) Closing. The place for the closing of any purchase and
sale described in Section 3.2(b)(i) shall be the principal office of
the Company or at such other place as the parties shall agree. At
the closing, the Selling Stockholder shall accept payment on the
terms contained in the Selling Stockholder's Notice. At the closing,
the Selling Stockholder shall deliver to the accepting Preferred
Stockholder(s), in exchange for Shares purchased and sold at the
closing, certificates for the number of Shares stated in the Selling
Stockholder's Notice, accompanied by duly executed instruments of
transfer.
(iii) Transfers to Third Parties. If the Preferred
Stockholders fail to accept the offer stated in the Selling
Stockholder's Notice, or if such offer is accepted but the accepting
Preferred Stockholder(s) fail to consummate the purchase at a
closing as hereinabove provided, then the Selling Stockholder shall
be free, subject to the provisions of Sections 3.2(c) and 4.2
hereof, to sell all, but not less than all, of the Preferred Offered
Shares to a third party (the "Preferred Third Party Purchaser") at a
price and on terms no less favorable to the Selling Stockholder than
described in the Selling Stockholder's Notice; provided, however,
that such sale is consummated within ninety (90) days after the
giving of the Selling Stockholder's Notice to the Company and the
Preferred Stockholders. Notwithstanding anything to the contrary
contained in this Section 3.2(b), in the event Ashton is the Selling
Stockholder and the Preferred Stockholders do not elect to purchase
all of the Preferred Offered Shares desired to be sold by Ashton,
then Ashton shall be free, subject to the provisions of Sections
3.2(c) and 4.2 hereof, to sell all, but not less than all, of the
Preferred
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Offered Shares to a Preferred Third Party Purchaser only if such
Preferred Third Party Purchaser is a reputable institutional
investor approved by holders of at least a majority of outstanding
Shares held by the Investors, which approval shall not be
unreasonably withheld at, a price and on terms no less favorable to
Ashton than described in Ashton's Selling Stockholder's Notice;
provided, however, that such sale is consummated within ninety (90)
days after the giving of the Selling Stockholder's Notice by Ashton
to the Company and the Preferred Stockholders. As a condition
precedent to the effectiveness of a transfer pursuant to this
Section 3.2(b)(iii), the Preferred Third Party Purchaser shall agree
in writing prior to such transfer to become a party to and bound by
the terms of this Agreement as an Investor or as a Preferred
Stockholder, as the case may be, and shall thereafter be permitted
to transfer Shares only in accordance with this Agreement.
(c) Right of Co-Sale.
(i) Preferred Stockholder Co-Sale Right. If any Preferred
Stockholders (the "Declining Preferred Stockholders") have waived or
otherwise failed to timely exercise their respective rights of first
offer to purchase all or any portion of the Preferred Offered Shares
as provided under Section 3.2(b), such Declining Preferred
Stockholders will have a right to participate in the sale of any
remaining Preferred Offered Shares (the "Remaining Prefered Offered
Shares") to the Preferred Third Party Purchaser in a manner set
forth herein ("Preferred Right of Co-Sale"). Each Declining
Preferred Stockholder shall have the right to sell to the Preferred
Third Party Purchaser, at the same price per Share and on the same
terms and conditions as the Selling Stockholder is selling to the
Preferred Third Party Purchaser (the "Preferred Co-Sale Terms"),
such number of Shares (the "Preferred Co-Sale Shares") as is equal
to the number of Remaining Preferred Offered Shares multiplied by
the Co-Sale Pro Rata Fraction (as defined below), if such Declining
Preferred Stockholder gives written notice of the exercise of such
right to such Selling Stockholder within forty-five (45) days (the
"Co-Sale Offer Period") after the date of such Declining Preferred
Stockholder's receipt of the Selling Stockholder's Notice. For
purposes of this Section 3.2(c), the "Co-Sale Pro Rata Fraction"
shall be defined as a fraction, the numerator of which is the number
of Shares on an as-converted basis then owned by such Declining
Preferred Stockholder and the denominator of which is the number of
Shares on an as-converted basis then owned by the Founders plus the
number of Shares on an as-converted basis then owned by all of the
Declining Preferred Stockholders who have elected to exercise the
Preferred Right of Co-Sale.
(ii) Notices of Offer and Intent to Participate. If a
Declining Preferred Stockholder wishes to participate in any sale
pursuant to this Section 3.2(c), the Declining Preferred Stockholder
shall notify the Selling Stockholder in writing of such intention as
soon as practicable after such Declining Preferred Stockholder's
receipt of the notice from the Selling Stockholder and in any event
within the Co-Sale Offer Period. If the Selling Stockholder does not
receive such notice from a Declining Preferred Stockholder within
the Co-Sale Offer Period, the Selling Stockholder shall be free to
consummate the proposed transaction without any
10
obligation to include such Declining Preferred Stockholder's Shares
in such transaction.
(iii) Sale of Preferred Co-Sale Shares. The Selling
Stockholder and, if participating, the Declining Preferred
Stockholder(s), shall sell, subject to the provisions of Section 4.2
hereof, to the Preferred Third Party Purchaser all, or at the option
of the Preferred Third Party Purchaser, any part of the shares
proposed to be sold by them at not less than the price and upon
other terms and conditions, if any, not less favorable to the
Declining Preferred Stockholder(s) than the Co-Sale Terms; provided,
however, that any purchase of less than all of such shares by the
Preferred Third Party Purchaser shall be made from the Selling
Stockholder and the Declining Preferred Stockholders pro rata based
upon the relative amount of the shares that the Selling Stockholder
and the Declining Preferred Stockholders are otherwise entitled to
sell pursuant to Section 3.2(c). If Preferred Co-Sale Shares are
transferred under this Section 3.2 to any Preferred Third Party
Purchaser who is not a party to this Agreement, as a condition
precedent to the effectiveness of such transfer pursuant to this
Section 3.2(c)(iii), such Preferred Third Party Purchaser shall
agree in writing prior to such transfer to become party to and bound
by the terms of this Agreement as an Investor, Ashton or as Ashton
Executive as the case may be, and shall thereafter be permitted to
transfer Shares only in accordance with this Agreement.
3.3 Transfers to Permitted Transferees. The restrictions on transfer contained
in this Article 3 shall not apply to (a) transfers by a Preferred Stockholder to
an Affiliate of such Preferred Stockholder, (b) if such Preferred Stockholder is
a partnership, transfers to a partner or retired partner of such partnership,
(c) if such Preferred Stockholder is a corporation, transfers to the
stockholders of such corporation pursuant to a duly declared dividend, (d)
transfers to any nominee of such Preferred Stockholder made solely for internal
administrative purposes, (e) transfers by a Founder or an Ashton Executive to
such person's spouse, children or other member of such person's immediate
family, or to a trust for the benefit of such persons, (f) transfers by a
Founder or an Ashton Executive to the trustee or trustees of a trust revocable
solely by such person, (g) transfers by a Founder or an Ashton Executive to such
person's guardian or conservator or (h) transfers by a Founder or an Ashton
Executive in the event of such person's death to such person's executor(s) or
administrator(s) or to trustee(s) under such person's will (collectively,
"Permitted Transferees"); provided, however, that in any such event the Shares
so transferred in the hands of each such Permitted Transferee shall remain
subject to the provisions of this Article 3, and each such Permitted Transferee
shall so acknowledge in writing as a condition precedent to the effectiveness of
such transfer.
3.4 Termination. The respective rights and obligations of the parties under this
Article 3 shall terminate upon the consummation of the Company's Initial Public
Offering.
4. TRANSFER OF REGISTRABLE SECURITIES; REGISTRATION
4.1 Restrictive Legend. Each certificate representing Registrable Securities
shall, except as otherwise provided in this Section 4.1 or in Section 4.2, be
stamped or otherwise imprinted with a
11
legend substantially in the following form (in addition to any legend required
under applicable state securities laws):
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or any other securities laws. These
securities have been acquired for investment and not with a view to
distribution or resale. Such securities may not be offered for sale, sold,
delivered after sale, transferred, pledged or hypothecated in the absence
of an effective registration statement covering such securities under the
Securities Act of 1933 and any other applicable securities laws, unless
the holder shall have obtained an opinion of counsel reasonably
satisfactory to the corporation that such registration is not required or
the transferee is an Affiliate of the holder."
Upon request of a holder of such a certificate, the Company shall remove
the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if there is an effective
registration statement covering the securities represented by such certificate
or, with such request, the Company shall have received either the opinion
referred to in Section 4.2(i) or the "no-action" letter referred to in Section
4.2(ii).
4.2 Notice of Proposed Transfer. Subject to the provisions of Article 3, prior
to any proposed sale, pledge, hypothecation or other transfer of any Registrable
Securities (other than under the circumstances described in Section 4.3, 4.4 or
4.5), the holder thereof shall give written notice to the Company of its
intention to effect such sale, pledge, hypothecation or other transfer. Each
such notice shall describe the manner of the proposed sale, pledge,
hypothecation or other transfer and, if requested by the Company shall be
accompanied by either (i) an opinion of counsel reasonably satisfactory to the
Company to the effect that the proposed sale, pledge, hypothecation or other
transfer may be effected without registration under the Securities Act or (ii) a
"no action" letter from the Commission to the effect that the distribution 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 stock shall be entitled to transfer such stock in accordance with
the terms of its notice; provided, however, that no such opinion of counsel
shall be required for a distribution to one or more partners of the transferor
(in the case of a transferor that is a partnership) or to a stockholder (in the
case of a transferor that is a corporation) in each case in respect of the
beneficial interest of such partner or stockholder. Each certificate for
Registrable Securities transferred as above provided shall bear the appropriate
restrictive legend set forth in Section 4.1, except that such certificate shall
not bear such legend if (i) such transfer is in accordance with the provisions
of Rule 144 (or any other rule permitting public sale without registration under
the Securities Act) or (ii) the opinion of counsel or "no-action" letter
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act or that such legend is not required to establish compliance with
any provisions of the Securities Act. Notwithstanding any other provision
hereof, the restrictions provided for in this Section 4.2 shall not apply to
securities which are not required to bear the legend prescribed by Section 4.1
in accordance with the provisions of that Section.
12
4.3 Required Registration.
(a) Upon the earlier to occur of (i) 180 days after consummation of the
Initial Public Offering and (ii) December 30, 2001, one or more of the holders
of Registrable Securities constituting at least a majority of the total shares
of Registrable Securities then outstanding may request the Company to register
for sale under the Securities Act all or any portion of the shares of
Registrable Securities held by such requesting holder or holders for sale in the
manner specified in such notice.
(b) Following receipt of any notice under this Section 4.3, the Company
shall immediately notify all holders of Registrable Securities from whom notice
has not been received and such holders shall then be entitled within thirty (30)
days after receipt of such notice from the Company to request the Company to
include in the requested registration all or any portion of their shares of
Registrable Securities. The Company shall use reasonable best efforts to
register under the Securities Act, for public sale in accordance with the method
of disposition specified in the notice from requesting holders described in
paragraph (a) above, the number of shares of Registrable Securities specified in
such notice (and in all notices received by the Company from other holders
within thirty (30) days after the receipt of such notice by such holders). The
Company shall be obligated to register the Registrable Securities pursuant to
this Section 4.3 on two (2) occasions only, provided, however, that such
obligation shall be deemed satisfied only when a registration statement covering
all shares of Registrable Securities specified in notices received as aforesaid
(except to the extent reduced (but not by more than 25%) by the managing
underwriter, if any, pursuant to Section 4.3(d)), for sale in accordance with
the method of disposition specified by the requesting holders, shall have become
effective and, if such method of disposition is a firm commitment underwritten
public offering, all such shares shall have been sold pursuant thereto.
Notwithstanding anything to the contrary contained herein, no request may be
made under this Section 4.3 after the effective date of a registration statement
filed by the Company covering a firm commitment underwritten public offering and
prior to the later to occur of the completion of the period of distribution for
such offering or 180 days after the effective date of such registration
statement.
(c) If the holders requesting such registration 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 4.3 and the Company shall include such information in the written
notice referred to in paragraph (b) above. The right of any holder to
registration pursuant to this Section 4.3 shall be conditioned upon such
holder's agreeing to participate in such underwriting and to permit inclusion of
such holder's Registrable Securities in the underwriting. If such method of
disposition is an underwritten public offering, the Company shall designate the
managing underwriter of such offering, which managing underwriter shall be
reasonably acceptable to holders of at least a majority in interest of the
shares of Registrable Securities to be sold in such offering. A holder may elect
to include in such underwriting all or a part of the Registrable Securities it
holds.
(d) A registration statement filed pursuant to this Section 4.3 may,
subject to the following provisions, include (i) shares of Common Stock for sale
by the Company for its own account, (ii) shares of Common Stock held by officers
or directors of the Company and (iii) shares of Common Stock held by persons who
are entitled to include such shares in such registration (the
13
"Other Shareholders"), in each case for sale in accordance with the method of
disposition specified by the requesting holders. If such registration shall be
underwritten, the Company, such officers and directors and Other Shareholders
proposing to distribute their shares through such underwriting shall enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting on terms no less
favorable to such officers, directors or Other Shareholders than the terms
afforded the holders of Registrable Securities. If and to the extent that the
managing underwriter determines that marketing factors require a limitation on
the number of shares to be included in such registration, then the shares of
Common Stock held by officers or directors or by Other Shareholders (other than
Registrable Securities) and shares of Common Stock to be sold by the Company for
its own account shall be excluded from such registration to the extent so
required by such managing underwriter, and unless the holders of such shares and
the Company have otherwise agreed in writing, such exclusion shall be applied
first to the shares held by the directors and officers of the Company and the
Other Shareholders to the extent required by the managing underwriter, then to
the shares of Common Stock of the Company to be included for its own account to
the extent required by the managing underwriter. If the managing underwriter
determines that marketing factors require a limitation of the number of
Registrable Securities to be registered under this Section 4.3, then Registrable
Securities shall be excluded in such manner that the securities to be sold shall
be allocated pro rata among the selling holders pro rata based on their
ownership of Registrable Securities. In any event all securities to be sold
other than Registrable Securities will be excluded prior to any exclusion of
Registrable Securities. No Registrable Securities or any other security excluded
from the underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. If any holder of Registrable Securities,
officer, director or Other Shareholder who has requested inclusion in such
registration as provided above, disapproves of the terms of the underwriting,
such holder of securities may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. The securities so withdrawn shall also
be withdrawn from registration. Except for registration statements on Form X-0,
X-0 or any comparable form or successor thereto, the Company will not file with
the Commission any other registration statement with respect to its Common
Stock, whether for its own account or that of other stockholders, from the date
of receipt of a notice from requesting holders pursuant to this Section 4.3
until the completion of the period of distribution of the registration
contemplated thereby or 180 days after the effective date of such registration,
whichever is later.
(e) If at the time of any request to register Registrable Shares by
holders pursuant to this Section 4.3, the Company is engaged or has plans to
engage in a registered public offering or is engaged in any other activity
which, in the good faith determination of the Company's Board of Directors,
would be adversely affected by the requested registration, then the Company may
at its option direct that such request be delayed for a period not in excess of
90 days from the date of such request, such right to delay a request to be
exercised by the Company not more than twice in any 12-month period.
4.4 Incidental Registration. If the Company at any time (other than pursuant to
Section 4.3) proposes to register any of its securities under the Securities Act
for sale to the public, whether for its own account or for the account of other
security holders or both (except with respect to registration statements on
Forms X-0, X-0 or any successor to such forms or another form not available for
registering the Registrable Securities for sale to the public), each such time
it will promptly give written notice to all holders of the Registrable
Securities of its intention so to do.
14
Upon the written request of any such holder, received by the Company within
thirty (30) days after the giving of any such notice by the Company, to register
any or all of its Registrable Securities, the Company will use reasonable best
efforts to cause the Registrable Securities as to which registration shall have
been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
requisite to permit the sale or other disposition by the holder (in accordance
with its written request) of such Registrable Securities so registered. 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 of
Registrable Securities as a part of the written notice given pursuant to this
Section 4.4. In such event the right of any holder of Registrable Securities to
registration pursuant to this Section 4.4 shall be conditioned upon such
holder's participation in such underwriting to the extent provided herein. All
holders of Registrable Securities proposing to distribute their securities
through such underwriting shall (together with the Company and the Other
Shareholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company. Notwithstanding any other provision of
this Section 4.4, if the underwriter determines that marketing factors require a
limitation on the number of shares to be underwritten, the Company shall so
advise all holders of securities requesting registration of any limitations on
the number of shares to be underwritten, and the number of shares of securities
that are entitled to be included in the registration and underwriting shall be
allocated (i) first to the Company with respect to shares of Common Stock being
sold for its own account and (ii) second, to holders of Registrable Securities
and to Other Stockholders requesting registration in proportion, as nearly as
practicable, to the respective amounts of securities owned by them.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 4.4 without thereby incurring
any liability to the holders of Registrable Securities. If any holder of
Registrable Securities disapproves of the terms of any such underwriting, it may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
4.5 Registration on Form S-3.
(a) In addition to the rights provided in Sections 4.3 and 4.4, subject to
a limit of one (1) registration hereunder in any twelve (12) month period, if at
any time (i) any holder or holders of the Registrable Securities request that
the Company file a registration statement on Form S-3 or any comparable or
successor form thereto for a public offering of all or any portion of the shares
of Registrable Securities held by such requesting holder or holders, the
reasonably anticipated aggregate price to the public of which would be at least
$2,000,000, and (ii) the Company is a registrant entitled to use Form S-3 or any
comparable or successor form thereto to register such shares, then the Company
shall use reasonable best efforts to register under the Securities Act on Form
S- 3 or any comparable or successor form thereto, for public sale in accordance
with the method of disposition specified in such request, the number of shares
of Registrable Securities specified in such request. Whenever the Company is
required by this Section 4.5 to use reasonable best efforts to effect the
registration of Registrable Securities, each of the procedures and requirements
of Section 4.3, including but not limited to the requirement that the Company
notify all holders of Registrable Securities from whom notice has not been
received and provide them with the opportunity to participate in the offering,
shall apply to such registration, provided, however, that except as provided
above, there shall be no limitation on the number of registrations on Form S-
15
3 which may be requested and obtained under this Section 4.5. Notwithstanding
any other provision of this Section 4.5, if the underwriter determines that
marketing factors require a limitation on the number of shares to be
underwritten, such limitation will be imposed pro rata with respect to all
Registrable Securities whose holders have requested inclusion in such
registration pursuant to this Section 4.5.
(b) The Company shall use reasonable best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Exchange Act in accordance with the provisions of
that Act following the effective date of the first registration of any
securities of the Company on Form S-1 or any comparable or successor form.
4.6 Registration Procedures. If and whenever the Company is required by the
provisions of Section 4.3, 4.4 or 4.5 to use reasonable best efforts to effect
the registration of any Registrable Securities under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement (which,
in the case of an underwritten public offering pursuant to Section 4.3, shall be
on Form S-1 or other form of general applicability satisfactory to the managing
underwriter selected as therein provided) with respect to such securities
including executing an undertaking to file post-effective amendments and use
reasonable best efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated thereby;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for the period
specified herein and comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement in accordance with the sellers' intended method of
disposition set forth in such registration statement for such period;
(c) furnish to each seller of Registrable Securities and to each
underwriter such number of copies of the registration statement and each such
amendment and supplement thereto (in each case including all exhibits) and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such registration
statement;
(d) use reasonable best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registrable Securities or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction, unless the Company is
already subject to service in such jurisdiction;
(e) use reasonable best efforts to list the Registrable Securities covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
16
(f) comply with all applicable rules and regulations under the Securities
Act and Exchange Act;
(g) immediately notify each seller of Registrable Securities and each
underwriter under 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 of which the Company has knowledge as a result of which
the prospectus contained 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 light of the circumstances then existing, and promptly prepare
and furnish to such seller a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(h) if the offering is underwritten and at the request of any seller of
Registrable Securities, use reasonable best efforts to furnish on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration: (i) an opinion dated such date of counsel representing the
Company for the purposes of such registration, addressed to the underwriters to
such effects as reasonably may be requested by counsel for the underwriters, and
(ii) a letter dated such date from the independent public accountants retained
by the Company, addressed to the underwriters stating that they are independent
public accountants within the meaning of the Securities Act and that, in the
opinion of such accountants, the financial statements of the Company included in
the registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five (5) business days prior to the date of such
letter) with respect to such registration as such underwriters reasonably may
request;
(i) make available for inspection by each seller of Registrable
Securities, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, reasonable access to all financial and other
records, pertinent corporate documents and properties of the Company, as such
parties may reasonably request, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;
(j) cooperate with the selling holders of Registrable Securities and the
managing underwriter, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold, such
certificates to be in such denominations and registered in such names as such
holders or the managing underwriter may request at least two business days prior
to any sale of Registrable Securities; and
(k) permit any holder of Registrable Securities which holder, in the sole
and exclusive judgment, exercised in good faith, of such holder, might be deemed
to be a controlling person of the Company, to participate in good faith in the
preparation of such registration or comparable
17
statement and to require the insertion therein of material, furnished to the
Company in writing, which in the reasonable judgment of such holder and its
counsel should be included.
For purposes of this Agreement, the period of distribution of Registrable
Securities in a firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution of Registrable Securities in any
other registration shall be deemed to extend until the earlier of the sale of
all Registrable Securities covered thereby or 180 days after the effective date
thereof, provided, however, in the case of any registration of Registrable
Securities on Form S-3 or a comparable or successor form which are intended to
be offered on a continuous or delayed basis, such 180 day-period shall be
extended, if necessary, to keep the registration statement effective until all
such Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Securities Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Securities Act
governing the obligation to file a post-effective amendment, permit, in lieu of
filing a post-effective amendment which (y) includes any prospectus required by
Section 10(a)(3) of the Securities Act or (z) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (y) and (z) above contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the registration
statement.
In connection with each registration hereunder, the sellers of Registrable
Securities will furnish to the Company in writing such information requested by
the Company with respect to themselves and the proposed distribution by them as
shall be reasonably necessary in order to assure compliance with Federal and
applicable state securities laws.
4.7 Expenses.
(a) All expenses incurred by the Company in complying with Sections 4.3,
4.4 and 4.5, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, costs of any insurance which might be obtained
by the Company with respect to the offering by the Company, and fees and
disbursements (not to exceed $35,000) of one counsel selected by a majority in
interest of the sellers of Registrable Securities, but excluding any Selling
Expenses (defined below), are called "Registration Expenses". All underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities are called "Selling Expenses".
(b) The Company will pay all Registration Expenses in connection with each
registration statement under Section 4.3, 4.4 or 4.5; provided, that, in the
event of a registration pursuant to Section 4.3 hereof which is withdrawn at the
request of the Investors other than as a result of the Company's failure to
perform its obligations hereunder and other than as a result of a cutback by the
underwriter of such registration in the amount of Registrable Securities which
may be included in such registration by more than 25%, the Investors shall pay
the Registration Expenses with respect to such registration. All Selling
Expenses in connection with each registration statement under Section 4.3, 4.4
or 4.5 shall be borne by the participating sellers in
18
proportion to the number of shares registered by each, or by such participating
sellers other than the Company (except to the extent the Company shall be a
seller) as they may agree.
4.8 Indemnification and Contribution.
(a) In the event of a registration of any of the Registrable Securities
under the Securities Act pursuant to Section 4.3, 4.4 or 4.5, the Company will
indemnify and hold harmless each holder of Registrable Securities, its officers,
directors and partners, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such holder or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such holder, officer,
director, partner, underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any prospectus, offering circular or other document incident to such
registration (including any related notification, registration statement under
which such Registrable Securities were registered under the Securities Act
pursuant to Section 4.3, 4.4 or 4.5, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof), (ii) any
blue sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information herein called a "Blue Sky Application"), (iii) any
omission or alleged omission to state in any such registration statement,
prospectus, amendment or supplement or in any Blue Sky Applications executed or
filed by the Company, a material fact required to be stated therein or necessary
to make the statements therein not misleading, (iv) any violation by the Company
or its agents of the Securities Act or any rule or regulation promulgated under
the Securities Act applicable to the Company or its agents and relating to
action or inaction required of the Company in connection with such registration,
or (v) any failure to register or qualify the Registrable Securities in any
state where the Company or its agents has affirmatively undertaken or agreed in
writing that the Company (the undertaking of any underwriter chosen by the
Company being attributed to the Company) will undertake such registration or
qualification (provided that in such instance the Company shall not be so liable
if it has used reasonable best efforts to so register or qualify the Registrable
Securities) and will reimburse each such seller, and such officer, director and
partner, each such underwriter and each such 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, promptly after
being so incurred, provided, however, that the Company will not be liable in any
such case if and to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with written information
furnished by any such holder, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus.
(b) In the event of a registration of any of the Registrable Securities
under the Securities Act pursuant to Section 4.3, 4.4 or 4.5, each seller of
such Registrable Securities thereunder, severally and not jointly, will
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, each officer of the Company
who signs the registration statement, each director of the Company, each other
seller of Registrable Securities, each underwriter and each person who controls
any underwriter within the meaning of
19
the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer, director, other seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any prospectus, offering
circular or other document incident to such registration (including any related
notification, registration statement under which such Registrable Securities
were registered under the Securities Act pursuant to Section 4.3, 4.4 or 4.5,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof), or any Blue Sky Application or arise out of or
are based upon 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, and will reimburse the Company and each such officer, director,
other seller, underwriter and 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, promptly after being so incurred,
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus; and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the
securities sold by such seller under such registration statement bears to the
total public offering price of all securities sold thereunder, but not in any
event to exceed the net proceeds received by such seller from the sale of
Registrable Securities covered by such registration statement. Not in limitation
of the foregoing, it is understood and agreed that the indemnification
obligations of any seller hereunder pursuant to any underwriting agreement
entered into in connection herewith shall be limited to the obligations
contained in this subparagraph (b).
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 4.8 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 4.8 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 4.8 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or that the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the
20
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred. No indemnifying party,
in the defense of any such claim or action, 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 action. Each indemnified party shall
furnish such information regarding itself or the claim in question as an
indemnifying party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Securities exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 4.8 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 4.8 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 4.8, then, and in each such case, the Company and
such holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any such
case, (A) no such holder of Registrable Securities will be required to
contribute any amount in excess of the proceeds received from the sale of all
such Registrable Securities offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(e) The indemnities and obligations provided in this Section 4.8 shall
survive the transfer of any Registrable Securities by such holder.
4.9 Changes in Common Stock. If, and as often as, there is any change in the
Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
4.10 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 Registrable Securities to the public without registration, except as
provided in paragraph (c) below, at all times after ninety (90) days after any
registration statement covering a public offering of securities of the Company
under the Securities Act shall have become effective, the Company agrees to:
21
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act (or any successor
rule);
(b) use reasonable best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Registrable Securities forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 (or any successor rule) and, at any time
after it has become subject to such reporting requirements, of the Securities
Act and the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the Company as
such holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such holder to sell any Registrable Securities
without registration.
4.11 "Market Stand-Off" Agreement. Each of the Investors agrees, severally and
not jointly, if requested by the Company and an underwriter of Common Stock (or
other securities) of the Company, not to sell or otherwise transfer or dispose
of any Common Stock (or other securities) of the Company held by such Purchaser
during a period not to exceed one hundred and eighty (180) days following the
effective date of the first registration statement of the Company filed under
the Securities Act, and to enter into an agreement to such effect; provided that
(A) all officers and directors of the Company, and all Persons known by the
Company to own 1% or more of the Company's outstanding capital stock, shall
enter into similar agreements and (B) this restriction shall not apply to shares
of Common Stock being sold by any Investor under any such registration
statement.
The Company may impose stop-transfer instructions with respect to the
shares (or securities) subject to the foregoing restriction until the end of
said period.
4.12 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 4 may be assigned (but
only with all related obligations under this Agreement) by a holder of
Registrable Securities to a transferee or assignee of such securities (y) who is
not engaged in a business activity competitive with the Company (as reasonably
determined by the Company's Board of Directors) and who after such assignment or
transfer, holds at least 50,000 shares of Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and
similar recapitalization events) or (z) who is an Affiliate or a constituent
partner of such holder; provided the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if (i) immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act and (ii) the transferee or assignee shall acknowledge
in writing that the transferred or assigned Registrable Securities shall remain
subject to this Agreement. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
22
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 4.
5. BOARD OF DIRECTORS
5.1 Election of Directors. Each Preferred Stockholder and each Founder shall
take or cause to be taken such actions as may be required from time to time to
establish and maintain the number of persons comprising the Board of Directors
of the Company at seven (7) or at such other number as the Board of Directors
may determine from time to time, and to elect as directors (i) two
representatives of the Series C Stock designated for election by holders of at
least a majority of the Series C Stock issued and outstanding (the "Series C
Directors"), (ii) one representative of the Company's Series A Convertible
Voting Preferred Stock, par value $.01 per share (the "Series A Stock")
designated for election by holders of at least a majority of the Series A Stock
issued and outstanding (the "Class A Director"), (iii) two representatives of
the Founders designated for election by the Founders (the "Founder Directors")
and (iv) two independent directors designated for election by both (A) at least
a majority of the Series C Stock issued and outstanding, voting as a separate
class, and (B) at least a majority of the Series A Stock issued and outstanding,
voting as a separate class; provided that each such independent director shall
be a person that is not a director, officer, employee, agent, representative or
Affiliate of any Investor or of Ashton. Without limiting the generality of the
foregoing, at each annual meeting of the stockholders and at each special
meeting of the stockholders called for the purpose of electing directors of the
Company, and at any time at which the stockholders have the right to, or shall,
elect directors of the Company, then, and in each event, the Preferred
Stockholders and the Founders shall vote all Shares owned by them (or shall
consent in writing in lieu of a meeting of stockholders, as the case may be) to
set the number of, and to elect persons as, directors of the Company in
accordance with the preceding sentence.
5.2 Removal of Directors; Filling of Vacancies. Each Preferred Stockholder and
each Founder shall take all action necessary to remove forthwith any director
when such removal is requested for any reason, with or without cause, by the
Persons that designated such director for election. In the case of the death,
resignation or removal as herein provided of a director, each Preferred
Stockholder and each Founder shall vote all Shares owned by him, her or it to
elect another person designated by the Persons that designated the deceased,
resigning or removed director if, at the time such vacancy occurs, such Persons
shall have the right to have a person designated by him elected as a director
pursuant to Section 5.1.
5.3 Board Committees. The Board of Directors shall have a Compensation Committee
and an Audit Committee, and at least one Series C Director shall be a member of
each such committee. In addition, a Series C Director shall serve as Chairman of
the Compensation Committee of the Board of Directors.
5.4 Board Observer Rights. The Company shall permit one (1) authorized
representative of Ashton to attend all, but not vote at any, meetings of the
Board of Directors of the Company, and shall provide such notice of and other
information to Ashton with respect to such meetings as are delivered to the
Directors of the Company; provided that such representative may be excluded from
any "executive session" of the Board of Directors at which, in the reasonable
opinion of the
23
Board of Directors, such exclusion is necessary to preserve or protect the
proper functioning of the Board of Directors and the exercise of its fiduciary
duties. Such representative shall be strictly an observer at each meeting of the
Board of Directors and nothing in this paragraph shall be construed as to confer
any other function, position or title on such representative. The Company shall
promptly reimburse in full each observer of the Company for all of his or her
reasonable out-of-pocket expenses incurred in attending each meeting of the
Board of Directors of the Company.
5.5 Termination of Article. The provisions of this Article 5 shall be of no
further force or effect upon the consummation of the Company's Initial Public
Offering.
6. AFFIRMATIVE COVENANTS OF THE COMPANY
The Company covenants and agrees that, from the date of the Closing under the
Purchase Agreement and thereafter so long as any Investor owns Registrable
Securities, it will perform and observe the following covenants and provisions,
and will cause each Subsidiary, if and when such Subsidiary exists, to perform
and observe the following covenants and provisions as applicable to such
Subsidiary.
6.1 Financial Statements; Other Reports. The Company and each Subsidiary will
maintain proper books of account and records in accordance with generally
accepted accounting principles applied on a consistent basis, and will deliver
to each Investor and its Affiliates jointly owning at least fifty thousand
(50,000) shares of the Company's capital stock, treating all preferred stock on
an as converted basis but excluding any unexercised options, warrants or
purchase rights (each, a "Rights Holder"):
(a) as soon as available and in any event within forty-five (45) days
after the end of each of the first three quarters of each fiscal year of the
Company, a consolidated balance sheet of the Company and its Subsidiaries as of
the end of such quarter and the related statements of income and stockholders'
equity and of cash flows of the Company for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter, setting forth
in each case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year and the budget for such current year, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles consistently applied, and duly certified (subject to year-end audit
adjustments) by the chief financial officer of the Company;
(b) as soon as available and in any event within ninety (90) days after
the end of each fiscal year of the Company, a copy of the annual audit report
for such year for the Company, including therein a consolidated balance sheet of
the Company and its Subsidiaries as of the end of such fiscal year and
statements of income and stockholders' equity and of cash flows of the Company
for such fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, all duly certified by
independent public accountants of recognized standing acceptable to the Rights
Holders;
(c) as soon as available and, in any event, within twenty (20) days after
the last day of each month, financial statements, including a balance sheet as
of the last date of such month, a statement of income (or monthly operating
expenses) for such month, together with a cumulative
24
statement of income from the first day of the current year to the last day of
such month, and a cash flow analysis, together with cumulative cash flow
analyses from the first day of the current year to the last day of such month;
(d) as soon as available and, in any event at least prior to the start of
each fiscal year, a copy of the business plan for such year, including operating
budgets, operating expenses and profit and loss projections, cash flow
projections and capital expenditure budgets, as prepared for the Board of
Directors and as approved by the Board of Directors; and
(e) promptly after sending, making available, or filing the same, such
reports and financial statements as the Company shall send or make available to
the stockholders of the Company.
Neither the foregoing provisions of this Section nor any other provision
of this Agreement shall be in limitation of any rights which an Investor may
have with respect to the books and records of the Company and its Subsidiaries,
or to inspect their properties or discuss their affairs, finances and accounts,
under the laws of the jurisdictions in which they are incorporated.
6.2 Inspection and Other Information. Each Rights Holder and such agents,
advisors and counsel as such Rights Holder may designate, may, at its expense,
visit and inspect any of the properties of the Company and each Subsidiary,
examine the books of account of the Company and each Subsidiary, take extracts
therefrom and discuss the affairs, finances and accounts of the Company and each
Subsidiary with its officers and employees and public accountants (and by this
provision the Company and each Subsidiary hereby authorizes said accountants to
discuss with such Rights Holder and such persons its finances and accounts), at
reasonable times and with reasonable prior notice during normal business hours.
All such visits and inspections shall be conducted in a manner which will not
unreasonably interfere with the normal business operations of the Company and
each Subsidiary. The Company and each Subsidiary will furnish to each such
Rights Holder such other information as it from time to time may reasonably
request.
6.3 Independent Accountants. The Company will retain independent public
accountants approved by the Company's Board of Directors who shall certify the
Company's consolidated financial statements at the end of each fiscal year.
6.4 Preservation of Corporate Existence. The Company and each Subsidiary will
preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its incorporation and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
of its properties.
6.5 Availability of Common Stock. The Company will, from time to time, in
accordance with the laws of the State of Delaware, increase the authorized
amount of Common Stock if at any time the number of shares of Common Stock
remaining unissued and available for issuance shall be insufficient to permit
conversion of all then outstanding shares of convertible securities and exercise
of all then outstanding options, warrants and similar purchase rights.
6.6 Termination of Affirmative Covenants. The covenants set forth in this
Article shall be of no further force or effect upon the consummation of the
Company's Initial Public Offering.
25
7. Small Business Investment Company Covenants.
7.1 SBIC Covenants.
(a) Without the consent of each Investor that is a Small Business
Investment Company ("SBIC") licensed by the United States Small Business
Administration (each an "SBIC Investor"), the Company will not issue securities
to any SBIC in the future if such issuance would cause such SBIC Investor to be
deemed to be a member of an "Investor Group" in "Control" of the Company (as
such terms are defined in 13 CFR ss. 107.865).
(b) The Company shall permit representatives of the Small Business
Administration and each SBIC Investor access to the Company's records. Upon the
request of an SBIC Investor or any of its affiliates, the Company will furnish
to such person all information reasonably requested by it in order for it to
comply with its recordkeeping, reporting and other obligations under the SBIA or
any SBIC Regulation.
(c) For a period of one year following the last Closing hereunder, neither
the Company nor any of its Subsidiaries (if any) will change its business
activity if such change would render the Company ineligible to receive financial
assistance from an SBIC under the SBIA and the regulations thereunder (within
the meanings of 13 CFR xx.xx. 107.720 and 107.760(b)).
(d) The Company will at all times comply with the non-discrimination
requirements of 13 C.F.R., Parts 112, 113 and 117.
7.2 Regulatory Compliance Cooperation.
(a) In the event that an SBIC Investor determines that it has a Regulatory
Problem (as defined below), such SBIC Investor shall have the right to transfer
its shares of Series C Stock without regard to any restriction on transfer
hereunder, and the Company shall (i) take all such actions as are reasonably
requested by such SBIC Investor in order to effectuate and facilitate any
transfer by such SBIC Investor of any securities of the Company then held by
such SBIC Investor to any Person designated by such SBIC Investor or (ii) use
its best efforts to take all actions reasonably necessary to address and cure
such Regulatory Problem.
(b) For purposes of this Agreement, a "Regulatory Problem" means any set
of facts or circumstances wherein it has been asserted by any governmental
regulatory agency (or an SBIC Investor believes that there is a substantial risk
of such assertion) that such SBIC Investor is not entitled to hold, or exercise
any significant right with respect to, the underlying Common Sock of the
Company.
7.3 Termination of Covenants. The covenants set forth in this Article 7 shall be
of no further force or effect upon the consummation of the Initial Public
Offering.
8. MISCELLANEOUS
8.1 Notices. All notices, requests, consents and other communications hereunder
shall be in writing, shall be addressed to the receiving party's address set
forth below or to such other
26
address as a party may designate by notice hereunder, and shall be either (i)
delivered by hand, (ii) made by telecopy or facsimile transmission, (iii) sent
by overnight courier, or (iv) sent by registered or certified mail, return
receipt requested, postage prepaid.
If to an Investor: To its address set forth on Exhibit A:
If to the Company: Xxxxx Advisors, Inc
00 Xxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: General Counsel
With a copy to: Mintz Xxxxx Xxxx Xxxxxx Xxxxxxx and Xxxxx. P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telecopy or facsimile transmission, at the time that receipt
thereof has been acknowledged by electronic confirmation or otherwise, (iii) if
sent by overnight courier, on the next business day following the day such
notice is delivered to the courier service, or (iv) if sent by registered or
certified mail, on the fifth business day following the day such mailing is
made.
8.2 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement of any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms and
provisions of this Agreement.
8.3 Modifications and Amendments. This Agreement may not be amended or modified,
and no provision hereof may be waived, without the written consent of the
Company and the holders of at least a majority of the outstanding shares of
Series C Stock. Any waiver or consent hereunder shall be effective only in the
specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent.
8.4 Assignment. The rights and obligations under this Agreement may not be
assigned by the Company without the prior written consent of at least a majority
of the holders of Registrable Securities, unless specifically permitted by the
terms hereof, except that the Company may assign this Agreement and its rights
and obligations hereunder to any purchaser of all or substantially all of its
assets or to any successor corporation resulting from any merger or
consolidation of the Company.
27
8.5 Benefit. All statements, representations, warranties, covenants and
agreements in this Agreement shall be binding on the parties hereto and shall
inure to the benefit of the respective successors and permitted assigns of each
party hereto. Nothing in this Agreement shall be construed to create any rights
or obligations except among the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
8.6 Governing Law. This Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the law of The
Commonwealth of Massachusetts, without giving effect to the conflict of law
principles thereof.
8.7 Jurisdiction and Service of Process. Any legal action or proceeding with
respect to this Agreement shall be brought in the courts of The Commonwealth of
Massachusetts or of the United States of America for the District of
Massachusetts. By execution and delivery of this Agreement, each of the parties
hereto accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each of the parties
hereto irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by certified mail, postage prepaid, to the party at its address set
forth in Section 8.1 hereof.
8.8 Severability. In the event that any court of competent jurisdiction shall
determine that any provision, or any portion thereof, contained in this
Agreement shall be unenforceable in any respect, then such provision shall be
deemed limited to the extent that such court deems it enforceable, and as so
limited shall remain in full force and effect. In the event that such court
shall deem any such provision, or portion thereof, wholly unenforceable, the
remaining provisions of this Agreement shall nevertheless remain in full force
and effect.
8.9 Interpretation. The parties hereto acknowledge and agree that: (i) each
party and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the rule of construction to
the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto
and not in favor of or against any party, regardless of which party was
generally responsible for the preparation of this Agreement.
8.10 Headings and Captions. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and shall
in no way modify or affect the meaning or construction of any of the terms or
provisions hereof.
8.11 Enforcement. Each of the parties hereto acknowledges and agrees that the
rights acquired by each party hereunder are unique and that irreparable damage
would occur in the event that any of the provisions of this Agreement to be
performed by the other parties were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, in addition to any other
remedy to which the parties hereto are entitled at law or in equity, each party
hereto shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement by any other party and to enforce specifically the terms and
provisions hereof in any federal or state court to which the parties have agreed
hereunder to submit to jurisdiction.
28
8.12 No Waiver of Rights, Powers and Remedies. No failure or delay by a party
hereto in exercising any right, power or remedy under this Agreement, and no
course of dealing among the parties hereto, shall operate as a waiver of any
such right, power or remedy of the party. No single or partial exercise of any
right, power or remedy under this Agreement by a party hereto, nor any
abandonment or discontinuance of steps to enforce any such right, power or
remedy, shall preclude such party from any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The election of any
remedy by a party hereto shall not constitute a waiver of the right of such
party to pursue other available remedies. No notice to or demand on a party not
expressly required under this Agreement shall entitle the party receiving such
notice or demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.
8.13 Counterparts. This Agreement may be executed in one or more counterparts,
and by different parties hereto on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed by their duly authorized representatives,
as of the date first written above.
XXXXX ADVISORS, INC.
By: /s/ Xxxxx Xxxxx
------------------------
Name: Xxxxx Xxxxx
Title: CEO
THE ASHTON TECHNOLOGY GROUP, INC.
By: /s/ Xxxxxxx Xxxxxxxxxxx
--------------------------
Name: Xxxxxxx Xxxxxxxxxxx
Title: President & CEO
/s/ Xxxxx Xxxxx
-------------------------------
XXXXX XXXXX
/s/ Xxxx X. Xxxx
-------------------------------
XXXX X. XXXX
/s/ Xxxxxxxxx X. Xxxxx
-------------------------------
XXXXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxxxxxxxx
------------------------------
XXXXXXX X. XXXXXXXXXXX
/s/ K. Xxxx X. Xxxxxxx
------------------------------
K. XXXX X. XXXXXXX
30
/s/ Xxxxxx X. Xxxxx
------------------------------
XXXXXX X. XXXXX
/s/ Xxxxxxx Xxxxxxxx
------------------------------
XXXXXXX XXXXXXXX
/s/ Xxxxxxx Xxxxxx
------------------------------
XXXXXXX XXXXXX
/s/ Xxxx Xxxxxxxx
------------------------------
XXXX XXXXXXXX
Counterpart Signature Pages Begin on Next Page
31
Counterpart Signature Page For Investors
The undersigned hereby agrees to become a party to that certain Investor
Rights Agreement dated as of November 2, 1999 and amended as of December 30,
1999 (the "Agreement") among Xxxxx Advisors, Inc. (the "Company") and others.
From and after the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement and the shares
of Series C Stock purchased by the undersigned shall be deemed to be "Shares"
for all purposes of the Agreement.
______________________________________
Printed Name of Purchaser
______________________________________
Signature of Purchaser
32
EXHIBIT A
PURCHASERS
INITIAL CLOSING:
Xxxx Xxxxxxxxxx
c/o Intercontinental Developers, Inc.
0000 Xxxxxxxx Xxxxx Xxxx
Xxxxxx, XX 00000
Xxxxx Xxxxxxxxxx
c/o Intercontinental Developers, Inc.
0000 Xxxxxxxx Xxxxx Xxxx
Xxxxxx, XX 00000
Xxxx Xxxxxxxxxx
c/o Intercontinental Developers, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Xxxxx-Xxxxxx Xxxxxxxxxx
c/o Intercontinental Developers, Inc.
0000 Xxxxxxxx Xxxxx Xxxx
Xxxxxx, XX 00000
Xxxxxx X. Xxxxx
c/o Intercontinental Developers, Inc.
0000 Xxxxxxxx Xxxxx Xxxx
Xxxxxx, XX 00000
Xxxxxxx XxXxxxxxx
00 Xxx Xxxxxx xx Xxxx Xxxxx
00000 Xxxxxxxxx, Xxxxxx
West End Venture Partners, LLC
0 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxxx
Xxxx Xxxxxxx Global Technology Fund
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Attn: Xx Xxxxxxxxx
Sakura Holdings Limited
33
The Tropic Isle Building
Wickams Cay, Tortola
British Virgin Islands
Attn: Xxxxxxxx Xxx
SUBSEQUENT CLOSING (12/30/99):
BancBoston Ventures, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
With a copy to: Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx, Esq.
Private Equity Portfolio Fund II, LP
c/o BancBoston Ventures, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
XXXXXXX Xx. 0 Xxxxxxxxxx
Xxxxxxxxxx Partnership
0-00 Xxxxx-Xxxxxxxxx
Xxxxxxx-xx, Xxxxx 000-0000
XXXXX
Phone - (000) 0000-0000
Fax - (000) 0000-0000
Attn: Xxxxxxxxx Xxxxxx
With a copy to: Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxx, Esq.
Xxxxxxxxxx X. X'Xxxx
Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxx Xxxxxxxxx
c/x Xxxxxx Brothers
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Tel: 212/000-0000
34
Fax: 212/000-0000
Xxxx Xxxxxx
c/x Xxxxxx Brothers
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Tel: 212/000-0000
Fax: 212/000-0000
Xxxx Xxxxxxxx
c/x Xxxxxx Brothers
3 World Financial Center
Xxx Xxxx, XX 00000
Tel: 212/000-0000
Fax: 212/000-0000
Nir Yarden
c/x Xxxxxx Brothers
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Tel: 212/000-0000
Fax: 212/000-0000
Xxxxx Xxxxxx
00 Xxxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxx Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxxx Xxxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
SUBSEQUENT CLOSING (2/15/00)
HarbourVest Partners VI --
Direct Fund, L.P.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxx
35
BancBoston Ventures, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Phone - 000-000-0000
Fax: - 000- 000-0000
With a copy to: Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
Dolphin Communications Fund, L.P.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx.
Dolphin Communications Parallel Fund, L.P.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx.
With a copy to: Xxxxxxxx & Xxxxx
000 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
36
EXHIBIT B
ASHTON EXECUTIVES
Xxxxxxx X. Xxxxxxxxxxx
Xxxxxx X. Xxxxx
K. Xxxx X. Xxxxxxx
Xxxxxxx Xxxxxxxx
Xxxxxxx Xxxxxx
Xxxx Xxxxxxxx
Each:
c/o The Ashton Technology Group
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to: Kronish Xxxx Xxxxxx &
Hellmen, LLP
000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, Esq.
37
