INVESTOR RIGHTS AGREEMENT
Exhibit 10.1
EXECUTION COPY
INVESTOR RIGHTS AGREEMENT (the “Agreement”) is entered into as of the 22nd
day of February 2005, by and among BuyDomains Holdings, Inc., a Delaware corporation (the
“Company”), the holders of shares of Series A Preferred Stock, par value $0.001 per share
(the “Series A Preferred Stock”), of the Company listed on the Schedule of Holders annexed
hereto (collectively the “Series A Investors”), and the holders of shares of Series Z
Preferred Stock, par value $0.001 per share (the “Series Z Preferred Stock”), of the
Company listed on the Schedule of Holders annexed hereto (collectively, the “Series Z
Investors” and together with the Series A Investors, the “Investors”).
WHEREAS, on the date hereof, the Series A Investors are purchasing from the Company shares of
its Series A Preferred Stock pursuant to the terms of a certain Series A Preferred Stock Purchase
Agreement (the “Purchase Agreement”), dated as of the date hereof, by and among the Company
and the Series A Investors; and
WHEREAS, on the date hereof, the Series Z Investor is contributing its assets to the Company
in exchange for, among other things, shares of Series Z Preferred Stock pursuant to the terms of a
certain Contribution and Merger Agreement (the “Contribution and Merger Agreement”), dated
as of the date hereof, by and among the Company, the Series Z Investor and the other parties
thereto; and
WHEREAS, one of the conditions to the obligations of the Series A Investors under the Purchase
Agreement and the Series Z Investors under the Contribution and Merger Agreement is the execution
of this Agreement, and the Company is willing to enter into this Agreement and be bound by the
provisions hereof.
NOW THEREFORE, in consideration of the mutual covenants herein contained and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Certain Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:
“Board of Directors” shall mean the board of directors of the Company as constituted
from time to time.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
“Commission” shall mean the Securities and Exchange Commission, or any other federal
agency at the time administering the Securities Act.
“Computer Program(s)” means (i) any and all computer programs (consisting of sets of
statements or instructions to be used directly or indirectly in a computer in order to bring about
a certain result) and portions thereof, and (ii) all associated data and compilations of data,
regardless of their form or embodiment. “Computer Programs” shall include, without limitation,
Investor Rights Agreement — Page 2
all source code, object code, natural language code, all versions, all screen displays and
designs, all component modules, all descriptions, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing, and all documentation, including without
limitation user manuals and training materials, relating to any of the foregoing.
“Conversion Shares” shall mean shares of Common Stock issued or issuable upon
conversion of the Preferred Stock then held by the Investors.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any
similar federal statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
“Indebtedness” shall mean all obligations, contingent and otherwise, which should, in
accordance with generally accepted accounting principles, be classified upon the obligor’s balance
sheet (or the notes thereto) as liabilities, but in any event including liabilities secured by any
mortgage on property owned or acquired subject to such mortgage, whether or not the liability
secured thereby shall have been assumed, and also including (i) all guaranties, endorsements and
other contingent obligations, in respect of Indebtedness of others, whether or not the same are or
should be so reflected in said balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (ii) the present value of any lease payments due under leases
required to be capitalized in accordance with applicable Statements of Financial Accounting
Standards, determined by discounting all such payments at the interest rate determined in
accordance with applicable Statements of Financial Accounting Standards.
“Initial Public Offering” shall mean the Company’s first firm commitment underwritten
public offering pursuant to an effective registration statement under the Securities Act on Form
S-1 (or successor form).
“Intellectual Property Right(s)” means any and all of the following in any and all
legal jurisdictions around the world: (i) patents, patent applications, patent disclosures and
all related continuations, continuations-in-part, divisionals, reissues, re-examinations and
renewals (together “Patents”), (ii) trademarks, service marks, trade dress, logos, trade names,
service names, domain names and corporate names, and registrations and applications for
registration thereof (together “Trademarks”), (iii) copyrights, and registrations and applications
for registration thereof, (iv) mask works, and registrations and applications for registration
thereof, (v) trade secrets and confidential business information, including without limitation,
know-how, manufacturing and product processes and techniques, biomaterials, research and
development information, financial, marketing and business data, pricing and cost information,
technical data, business and marketing plans, and customer and supplier lists and information
(together “Trade Secrets”), (vi) Computer Programs, (vii) other proprietary rights relating to any
of the foregoing (including without limitation associated goodwill and remedies against
infringements thereof and rights of protection of an interest therein under the laws of all
jurisdictions) and (viii) copies and tangible embodiments thereof.
Investor Rights Agreement — Page 3
“Key Employee” means and includes the Company’s President, chief executive officer,
chief financial officer, chief operating officer, chief technology officer and vice presidents of
operations, research, development, sales and marketing, or any other individual who performs a
significant role in the operations of the Company as may be reasonably designated by the Board of
Directors of the Company.
“Person or Persons” shall mean an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or political subdivision
thereof.
“Preferred Stock” shall mean the Series A Preferred Stock and the Series Z Preferred
Stock, collectively.
“Qualified Public Offering” shall mean the completion of a fully underwritten, firm
commitment public offering pursuant to an effective registration under the Securities Act covering
the offering or sale by the Company of its Common Stock in which (x) the gross proceeds received by
the Company shall be at least $75 million, and (y) the price paid by the public for such shares
shall be at least $30.00 per share (as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, stock dividend, or similar event).
“Registration Expenses” shall mean the expenses so described in Section 6.
“Reserved Employee Shares” shall mean shares of Common Stock not to exceed an
aggregate number of shares equal to 915,000 (appropriately adjusted to reflect any stock split,
stock dividend, combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capitalization of the Company) reserved by the Company from time to
time for (i) the sale of shares of Common Stock to employees, consultants or non-employee directors
of the Company or (ii) the issuance and/or exercise of options to purchase Common Stock granted to
employees, consultants or non-employee directors of the Company, in each case pursuant to any stock
plan approved by the Board of Directors. The foregoing number of Reserved Employee Shares may be
increased by vote or written consent of at least seventy percent (70%) of the then outstanding
shares of Series A Preferred Stock.
“Restricted Stock” shall mean the Conversion Shares, excluding Conversion Shares which
(a) have been 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) have been sold on the open market in accordance with Rule 144 under the Securities Act.
“Securities Act” shall mean the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all as the same shall
be in effect at the time.
“Selling Expenses” shall mean the expenses so described in Section 6.
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“Subsidiary” or “Subsidiaries” shall mean any corporation or trust of which
the Company and/or any of its other Subsidiaries (as herein defined) directly or indirectly owns at
the time outstanding shares of every class of such corporation or trust other than directors’
qualifying shares comprising at least fifty percent (50%) of the voting power of such corporation
or trust.
2. Required Registration.
(a) At any time after the earlier of (i) three (3) years from the date hereof and (ii) six (6)
months after the Company’s Initial Public Offering, the holders of more than seventy percent (70%)
of the then outstanding shares of Restricted Stock may request the Company to register under the
Securities Act all or any portion of the shares of Restricted Stock held by such requesting holder
or holders having an aggregate offering price (based on the market price or fair value at the time
of such request) of at least $15,000,000 for sale in the manner specified in such notice. The only
securities which the Company shall be required to register pursuant hereto shall be shares of
Common Stock; provided, however, that, in any underwritten public offering contemplated by this
Section 2 or Sections 3 and 4, the holders of the Preferred Stock shall be entitled to sell such
Preferred Stock to the underwriters for conversion and sale of the shares of Common Stock issued
upon conversion thereof.
(b) Following receipt of any notice under this Section 2, the Company shall promptly notify
all holders of Restricted Stock from whom notice has not been received and such holders shall then
be entitled within thirty (30) days thereafter to request the Company to include in the requested
registration all or any portion of their shares of Restricted Stock; provided, however, that if in
the opinion of the managing underwriter the inclusion of all of the Restricted Stock requested to
be registered under this Section 2 would adversely affect the marketing of such shares, shares to
be sold by the holders of Restricted Stock, if any, shall be excluded only after any shares to be
sold by the Company have been excluded, in such manner that the shares to be sold shall be
allocated among the selling holders pro rata based on their ownership of Restricted Stock. The
Company shall use its best efforts to register under the Securities Act, for public sale in
accordance with the method of disposition described in paragraph (a) above, the number of shares of
Restricted Stock specified in such notice (and in all notices received by the Company from other
holders within thirty (30) days after the giving of such notice by the Company), subject to the
underwriters right to scale back as above. The Company’s obligation to register the shares of
Restricted Stock shall be deemed satisfied only when a registration statement covering all shares
of Restricted Stock specified in notices received as aforesaid 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 (not including shares eligible for sale pursuant to the underwriters’
over-allotment option). Notwithstanding anything to the contrary contained herein, no request may
be made under this Section 2 after the effective date of a registration statement filed by the
Company and prior to the later to occur of the completion of the period of distribution for such
offering or 90 days after the effective date of such registration statement.
(c) The Company shall be entitled to include in any registration statement referred to in this
Section 2 shares of Common Stock to be sold by the Company for its own
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account and for the account of other holders of Stock, except as and to the extent that, in the
opinion of the managing underwriter, such inclusion would adversely affect the marketing of the
Restricted Stock to be sold. Except for registration statements on Form X-0, X-0 or any successor
forms 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 requesting sale pursuant to an underwritten
offering pursuant to this Section 2 until the completion of the period of distribution of the
registration contemplated thereby.
(d) In connection with any underwritten public offering pursuant to this Section 2 or Section
4, holders of a majority of the outstanding shares of Restricted Stock requesting the registration
of shares may designate the managing underwriter of such offering, subject to the approval of the
Company which approval shall not be unreasonably withheld, delayed or conditioned. The right of
any holder to include its Restricted Stock in such registration statement pursuant to Section 2 or
Section 3 as the case may be, shall be conditioned upon such holder’s participation in such
underwriting on the terms set forth herein.
3. Incidental Registration. If the Company at any time (other than pursuant to
Section 2 or Section 4) 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 forms
thereto or another form not available for registering the Restricted Stock for sale to the public),
each such time it will give written notice to all holders of outstanding Restricted Stock of its
intention so to do. Upon the written request of any such holder, received by the Company within
30 days after the giving of any such notice by the Company, to register any of its Restricted
Stock, the Company will use its best efforts to cause the Restricted Stock 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 of such Restricted Stock so registered. In the event that any
registration pursuant to this Section 3 shall be, in whole or in part, an underwritten public
offering of Common Stock, the number of shares of Restricted Stock to be included in such an
underwriting may be reduced pro rata among the other requesting holders based upon the number of
shares of Restricted Stock owned by such holders if and to the extent that the managing underwriter
shall be of the opinion that such inclusion would adversely affect the marketing of the securities
to be sold by the Company therein, provided, that such number of shares of Restricted Stock shall
not be reduced if any shares are to be included in such underwriting for the account of any person
other than the Investors (including any of their respective successors and assigns), and provided,
further, however, that in no event may less than thirty-five percent (35%) of the total number of
shares of Common Stock to be included in such underwriting be made available for shares of
Restricted Stock unless the managing underwriter shall in good faith advise the holders proposing
to distribute their securities through such underwriting that such level of participation would, in
its opinion, materially adversely affect the offering price or its ability to complete the offering
and shall specify the number of shares of Restricted Stock which, in its opinion, can be included
in the registration and underwriting without such an effect.
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4. Registration on Form S-3. If at any time (i) a holder or holders of Restricted
Stock request that the Company file a registration statement on Form S-3 or any successor thereto
for a public offering of all or any portion of the shares of Restricted Stock held by such
requesting holder or holders having an aggregate purchase price (based on the market price or fair
value at the time of such request) of at least $1,000,000, and (ii) the Company is a registrant
entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall
use its best efforts to register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such notice, the number of
shares of Restricted Stock specified in such notice. Whenever the Company is required by this
Section 4 to use its best efforts to effect the registration of Restricted Stock, each of the
procedures and requirements of Section 2 (including but not limited to the requirement that the
Company notify all holders of Restricted Stock 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 the requirements contained in the first sentence of Section 2(a) shall not
apply to any registration on Form S-3 which may be requested and obtained under this Section 4.
Notwithstanding anything to the contrary in this Section 4, the Company shall not be required to
effect more than one (1) registration pursuant to this Section 4 in any six-month period.
5. Registration Procedures. If and whenever the Company is required by the provisions
of Sections 2, 3 or 4 to use its best efforts to effect the registration of any shares of
Restricted Stock 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 2, 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 and use its best efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated thereby (determined as hereinafter
provided);
(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 in paragraph (a) above and comply with
the provisions of the Securities Act with respect to the disposition of all Restricted Stock
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 Restricted Stock and to each underwriter such number of copies
of the registration statement 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 Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock covered by such
registration statement under the securities or “blue sky” laws of such jurisdictions as the sellers
of Restricted Stock 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
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jurisdiction where it is not so qualified or to consent to general service of process in any such
jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such registration statement
with any securities exchange on which the Common Stock of the Company is then listed;
(f) provide a transfer agent and registrar for all such Restricted Stock, not later than the
effective date of such registration statement;
(g) immediately notify each seller of Restricted Stock 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;
(h) if the offering is underwritten and at the request of any seller of Restricted Stock, use
its best efforts to furnish on the date that Restricted Stock is 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 and to such seller of
Restricted Stock, in form and substance as is customarily given to underwriters in an underwritten
public offering and (ii) a letter dated such date from the independent public accountants retained
by the Company, addressed to the underwriters and to such seller of Restricted Stock, in form and
substance as is customarily given to underwriters in an underwritten public offering;
(i) make available for inspection by each seller of Restricted Stock, any underwriter
participating in any distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, 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) advise each selling holder of Restricted Stock, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the
effectiveness of such registration statement or the initiation or threatening of any proceeding for
such purpose and promptly use all reasonable efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(k) cooperate with the selling holders of Restricted Stock and the managing underwriters, if
any, to facilitate the timely preparation and delivery of certificates representing Restricted
Stock to be sold, such certificates to be in such denominations and registered in such names as
such holders or the managing underwriters may request at least two business days prior to any sale
of Restricted Stock; and
Investor Rights Agreement — Page 8
(l) permit any holder of Restricted Stock 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 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, subject to review by the
Company and its counsel after consultation with such holder.
For purposes of Section 5(a) and 5(b) and of Section 2(c), the period of distribution of
Restricted Stock 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 Restricted Stock in any other registration shall be deemed to extend until the
earlier of (i) the sale of all Restricted Stock covered thereby and (ii) 180 days after the
effective date thereof.
In connection with each registration hereunder, the sellers of Restricted Stock will furnish
to the Company in writing such information with respect to themselves and the proposed distribution
by them as reasonably shall be necessary in order to assure compliance with federal and applicable
state securities laws.
In connection with each registration pursuant to Sections 2, 3 or 4 covering an underwritten
public offering, the Company and each selling holder of Restricted Stock agree to enter into a
written agreement with the managing underwriter selected in the manner herein provided in such form
and containing such provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company’s size and investment stature.
6. Expenses.
(a) All expenses incurred by the Company in complying with Sections 2, 3 and 4, 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 insurance, and fees and disbursements of one counsel for the sellers of
Restricted Stock, but excluding any Selling Expenses, are called “Registration Expenses”.
All underwriting discounts and selling commissions applicable to the sale of Restricted Stock are
called “Selling Expenses”.
(b) The Company will pay all Registration Expenses in connection with an aggregate of three
(3) registration statements under Sections 2, 3 or 4; provided, however, if any registration
requested pursuant to Section 2 or 4 is withdrawn at the request of the holders initiating such
registration, such holders may elect to (i) have the Company pay the Registration Expenses for such
withdrawn registration but such withdrawn registration shall count as a completed registration
toward the Company’s obligation to pay Registration Expenses pursuant to this Section 5(b) or
(ii) pay the Registration Expenses for such withdrawn registration but such
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withdrawn registration shall not count as a completed registration toward the Company’s obligation
to pay Registration Expenses under this Section 5(b); provided further, however, if a registration
is withdrawn after the holders of Restricted Stock initiating such registration have learned of an
adverse change in the financial condition or prospects of the Company or have learned of other
adverse information relating to the Company, in either case not known to such holders at the time
of their request for such registration, then all Registration Expenses related to such withdrawn
registration shall be borne by the Company and such withdrawn registration shall not be counted as
a completed registration under for purposes of this Section 5(b). All Selling Expenses in
connection with each registration statement under Section 2, 3 or 4 shall be borne by the
participating sellers in proportion to the number of shares sold 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.
7. Indemnification and Contribution.
(a) In the event of a registration of any of the Restricted Stock under the Securities Act
pursuant to Sections 2, 3 or 4, the Company will indemnify and hold harmless each seller of such
Restricted Stock thereunder, each underwriter of such Restricted Stock thereunder and each other
person, if any, who controls such seller or underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which such 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
registration statement under which such Restricted Stock was registered under the Securities Act
pursuant to Sections 2, 3 or 4, any preliminary prospectus or final prospectus contained therein,
or any amendment or supplement thereof, 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 each such seller, 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,
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 information
furnished by any such seller, 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 Restricted Stock under the Securities Act
pursuant to Sections 2, 3 or 4, each seller of such Restricted Stock 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 underwriter and each person who controls
any underwriter within the meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director, 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)
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arise out of or are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock was registered under
the Securities Act pursuant to Sections 2, 3 or 4, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, 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, 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, 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 shares 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 Restricted
Stock covered by such registration statement.
(c) No indemnifying party, in the defense of any such claim or action, shall, except with the
consent of each indemnified party (which consent shall not be unreasonably withheld or delayed),
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, and the indemnification agreements
contained in Sections 7(a) and 7(b) shall not apply to any settlement entered into in violation of
this sentence. 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) 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 failure to
so notify the indemnifying party shall not relieve it from any liability which it may have to such
indemnified party other than under this Section 7 and shall only relieve it from any liability
which it may have to such indemnified party under this Section 7 if and to the extent the
indemnifying party is prejudiced by such failure. 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 reasonably 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 7 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
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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 if 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 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.
(e) 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 Restricted Stock exercising rights
under this Agreement, or any controlling person of any such holder, makes a claim for
indemnification pursuant to this Section 7 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 7 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 7; 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 Restricted Stock 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 will be required to contribute any amount in excess of the net
proceeds received by such holder from the sale of Restricted Stock covered by 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.
8. Changes in Common Stock or Preferred Stock. If, and as often as, there is any
change in the Common Stock or the Preferred 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 and the Preferred Stock as so changed.
9. Rule 144 Reporting; Trading. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the sale of the
Restricted Stock to the public without registration, 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:
(a) make and keep public information available, as those terms are understood and defined in
Rule 144 under the Securities Act;
Investor Rights Agreement — Page 12
(b) use its 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 Restricted Stock forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of such Rule 144 and 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 Restricted Stock without registration.
In addition, the Company shall ensure that, at all times after any registration statement covering
a public offering of securities of the Company under the Securities Act shall have become
effective, its xxxxxxx xxxxxxx policy shall provide that the members of the Board of Directors of
the Company may implement a trading program under Rule 10b5-1 of the Exchange Act.
10. Mergers, Etc. The Company shall not, directly or indirectly, enter into any
merger, consolidation or reorganization in which the Company shall not be the surviving company
unless the proposed surviving corporation shall, prior to such merger, consolidation or
reorganization, agree in writing to assume the obligations of the Company under this Agreement.
11. Right of First Refusal by Investors on Future Issuances by the Company.
(a) Right of First Refusal. The Company shall not issue, sell or exchange, agree or
obligate itself to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
any (i) shares of Common Stock, (ii) any other equity security of the Company, including, without
limitation, Preferred Stock, (iii) any debt security of the Company which by its terms is
convertible into or exchangeable for any equity security of the Company, (iv) any security of the
Company that is a combination of debt and equity, or (v) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any such equity security or any such debt security of
the Company, unless in each case the Company shall have first offered to sell such securities (the
“Offered Securities”) to the Investors (each an “Offeree” and collectively, the
“Offerees”) as follows: each Offeree shall have the right to purchase (x) that number of
the Offered Securities as shall be equal to the aggregate Offered Securities multiplied by a
fraction, the numerator of which is the number of shares of capital stock of the Company then owned
by such Offeree (calculated on an as-converted basis with respect to any issued and outstanding
convertible securities) and the denominator of which is the aggregate number of shares of capital
stock then issued and outstanding (calculated on an as-converted basis with respect to any issued
and outstanding convertible securities) (the “Basic Amount”), and (y) such additional
portion of the Offered Securities as such Offeree shall indicate it will purchase should the other
Offerees subscribe for less than their Basic Amounts (the “Undersubscription Amount”), at a
price and on such other terms as shall have been specified by the Company in writing delivered to
such Offeree (the “Offer”), which Offer by its terms shall remain open and irrevocable for
a period of 30 days from receipt of the offer. Each Offeree shall have the right to transfer its
right to purchase Offered Securities or part thereof to any person (i) who is an Investor, (ii) who
is an “affiliated person”, as that term is defined in the Investment Company Act of 1940, as
amended,
Investor Rights Agreement — Page 13
of an Investor, (iii) who is a partner or member of an Investor, or (iv) who acquires at least
500,000 of the outstanding shares of Preferred Stock (as adjusted for stock splits, stock
dividends, reclassifications, recapitalizations or other similar events).
(b) Notice of Acceptance. Notice of each Offeree’s intention to accept, in whole or
in part, any Offer made pursuant to Section 11(a) shall be evidenced by a writing signed by such
Offeree and delivered to the Company prior to the end of the 30 day period of such offer, setting
forth such of the Offeree’s Basic Amount as such Offeree elects to purchase and, if such Offeree
shall elect to purchase all of its Basic Amount, such Undersubscription Amount as such Offeree
shall elect to purchase (the “Notice of Acceptance”). If the Basic Amounts subscribed for
by all Offerees are less than the total Offered Securities, then each Offeree who has set forth
Undersubscription Amounts in its Notice of Acceptance shall be entitled to purchase, in addition to
the Basic Amounts subscribed for, all Undersubscription Amounts it has subscribed for; provided,
however, that should the Undersubscription Amounts subscribed for exceed the difference between the
Offered Securities and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), each Offeree who has subscribed for any Undersubscription Amount shall be entitled to
purchase only that portion of the Available Undersubscription Amount as the Undersubscription
Amount subscribed for by such Offeree bears to the total Undersubscription Amounts subscribed for
by all Offerees, subject to rounding by the Board of Directors to the extent it reasonably deems
necessary.
(c) Conditions to Acceptances and Purchase.
(i) Permitted Sales of Refused Securities. In the event that Notices of Acceptance
are not given by the Offerees in respect of all the Offered Securities, the Company shall have 60
days from the expiration of the period set forth in Section 11(a) to close the sale of all or any
part of such Offered Securities as to which a Notice of Acceptance has not been given by the
Offerees (the “Refused Securities”) to the Person or Persons specified in the Offer, but
only for cash and otherwise in all respects upon terms and conditions, including, without
limitation, unit price and interest rates, which are no more favorable, in the aggregate, to such
other Person or Persons or less favorable to the Company than those set forth in the Offer.
(ii) Reduction in Amount of Offered Securities. In the event the Company shall
propose to sell less than all the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 11(c)(i) above), then each Offeree may, at its sole option and in its
sole discretion, reduce the number of, or other units of the Offered Securities specified in its
respective Notices of Acceptance to an amount which shall be not less than the amount of the
Offered Securities which the Offeree elected to purchase pursuant to Section 11(b) multiplied by a
fraction, (i) the numerator of which shall be the amount of Offered Securities which the Company
actually proposes to sell, and (ii) the denominator of which shall be the amount of all Offered
Securities. In the event that any Offeree so elects to reduce the number or amount of Offered
Securities specified in its respective Notices of Acceptance, the Company may not sell or otherwise
dispose of more than the reduced amount of the Offered Securities until such securities have again
been offered to the Offerees in accordance with Section 11(a).
Investor Rights Agreement — Page 14
(iii) Closing. Upon the closing, which shall include full payment to the Company, of
the sale to such other Person or Persons of all or less than all the Refused Securities, the
Offerees shall purchase from the Company, and the Company shall sell to the Offerees, the number of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 11(c)(ii)
if the Offerees have so elected, upon the terms and conditions specified in the Offer. The
purchase by the Offerees of any Offered Securities is subject in all cases to the preparation,
execution and delivery by the Company and the Offerees of a purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to the Offerees and their
respective counsel.
(d) Further Sale. In each case, any Offered Securities not purchased by the Offerees
or other Person or Persons in accordance with Section 11(c) may not be sold or otherwise disposed
of until they are again offered to the Offerees under the procedures specified in Sections 11(a),
11(b) and 11(c).
(e) Termination of Right of First Refusal; Waiver. The rights of the Offerees under
this Section 11 shall terminate upon the consummation of a Qualified Public Offering. The rights
of the Investors pursuant to this Section 11 to participate in any given transaction subject to
this Section 11 may be waived as to all Investors as to such transaction by the affirmative vote or
written consent of holders of at least seventy percent (70%) in interest of the then outstanding
shares of Preferred Stock (voting or acting together as a single class on an as-converted to Common
Stock basis), and any such waiver shall be binding on all Investors as to such transaction, even if
any Investors do not execute such waiver.
(f) Exception. The rights of the Investors under this Section 11 shall not apply to:
(i) Preferred Stock issued pursuant to the Purchase Agreement or the Contribution Agreement;
(ii) Common Stock issued or issuable upon conversion of the Preferred Stock;
(iii) Common Stock or Preferred Stock issued or issuable as a stock dividend to holders of
Preferred Stock or upon any subdivision or combination of shares of Stock provided that such stock
dividend or subdivision are limited to additional shares of Common Stock;
(iv) any Reserved Employee Shares or options for any Reserved Employee Shares;
(v) the repurchase of securities from former employees, officers, directors, consultants or
other persons who performed services for the Corporation or any subsidiary in connection with the
cessation of such employment or service at the lower of the original purchase price or the
then-current fair market value thereof;
Investor Rights Agreement — Page 15
(vi) any securities issued pursuant to the acquisition of another entity by the Company by
merger, consolidation, reorganization or similar transaction (whereby the Company owns no less than
a majority of the voting power of such corporation) or purchase of substantially all of such
entity’s stock or assets, if such acquisition is previously approved by the Board of Directors; or
(vii) securities issued in connection with a Qualified Public Offering.
12. Covenants of the Company.
(a) Affirmative Covenants of the Company Other Than Reporting Requirements. Without
limiting any other covenants and provisions hereof, and except to the extent the following
covenants and provisions of this Section 12(a) are waived in any instance by the holders of at
least seventy percent (70%) in interest of the then outstanding shares of Preferred Stock (on an
as-converted to Common Stock basis), the Company covenants and agrees that, until the consummation
of a Qualified Public Offering, it will perform and observe the following covenants and provisions,
and will cause each Subsidiary to perform and observe such of the following covenants and
provisions as are applicable to such Subsidiary:
(i) Payment of Taxes and Trade Debt. Pay and discharge, and cause each Subsidiary to
pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or
upon its income, profits or business, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might become a lien or
charge upon any properties of the Company or any Subsidiary; provided, however, that neither the
Company nor any Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim
which is being contested in good faith and by appropriate proceedings if the Company or any
Subsidiary shall have set aside on its books sufficient reserves, if any, with respect thereto.
Pay and cause each Subsidiary to pay, when due, or in conformity with customary trade terms, all
lease obligations, all trade debt, and all other Indebtedness incident to the operations of the
Company or its Subsidiaries, except such as are being contested in good faith and by proper
proceedings if the Company or Subsidiary concerned shall have set aside on its books sufficient
reserves, if any, with respect thereto.
(ii) Maintenance of Insurance. Except with the prior approval of the Board of
Directors, obtain and maintain from responsible and reputable insurance companies or associations a
term life insurance policy in the amount of $2,000,000 on the life of the Company’s chief executive
officer, which proceeds will be payable to the order of the Company. The Company will not cause or
permit any assignment of the proceeds of the life insurance policies specified above and will not
borrow against such policies. Except with the prior approval of the Board of Directors, maintain,
and cause each Subsidiary to maintain, insurance, including directors and officers liability
insurance with a total policy limit of at least $2,000,000, with responsible and reputable
insurance companies or associations in such amounts and covering such risks as is customarily
carried by companies engaged in similar businesses and owning similar properties in the same
general areas in which the Company or such Subsidiary operates, but in any event in amounts
sufficient to prevent the Company or Subsidiary from becoming a co-insurer.
Investor Rights Agreement — Page 16
(iii) Preservation of Corporate Existence. Preserve and maintain, and, unless the
Company deems it not to be in its best interests, cause each Subsidiary to preserve and maintain,
its corporate and/or legal existence, rights, franchises and privileges in the jurisdiction of its
incorporation or organization, as applicable, and qualify and remain qualified, and cause each
Subsidiary to qualify and remain qualified, as a foreign corporation or limited liability company,
as applicable, in each jurisdiction in which such qualification is necessary or desirable in view
of its business and operations or the ownership or lease of its properties.
(iv) Compliance with Laws, Charter and By-Laws. Comply, and cause each Subsidiary to
comply, with the requirements of (A) all applicable laws, rules, regulations and orders of any
governmental authority, where noncompliance would have a Material Adverse Effect (as defined in the
Purchase Agreement), (B) its certificate of incorporation or operating agreement, as applicable,
and (C) its by-laws, if applicable.
(v) Inspection. Permit, upon reasonable request and notice, each of the Series A
Investors or any agents or representatives thereof, to examine and make copies of and extracts from
the books of account of, and visit and inspect the properties of the Company and any Subsidiary, to
discuss the affairs, finances and accounts of the Company and any Subsidiary with any of its
officers, directors or Key Employees and independent accountants, and consult with and advise such
officers, directors and Key Employees as to their affairs, finances and accounts, all at reasonable
times during normal business hours.
(vi) Keeping of Records and Books of Account. Keep, and cause each Subsidiary to
keep, adequate records and books of account in which complete entries will be made in accordance
with generally accepted accounting principles consistently applied, reflecting all financial
transactions of the Company and any Subsidiary, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, returns of merchandise, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made.
(vii) Maintenance of Properties. Maintain and preserve, and cause each Subsidiary to
maintain and preserve, all of its properties and assets, necessary for the proper conduct of its
business, in good repair, working order and condition, ordinary wear and tear excepted.
(viii) Budgets Approval. Not later than 30 days prior to the commencement of each
fiscal year, prepare and submit to, and obtain the approval by the Board of Directors of, a
business plan and monthly operating budgets in detail for the upcoming fiscal year, including
capital and operating expense budgets, cash flow projections and profit and loss projections, all
itemized in reasonable detail (including itemization of provisions for officers’ compensation).
Review the budget and business plan periodically, and resubmit all changes therein and all material
deviations therefrom to the Board of Directors. The Company shall not enter into any activity not
in the ordinary course of business and not envisioned by the budget and business plan, unless
approved by the Board of Directors.
Investor Rights Agreement — Page 17
(ix) Financings. Inform the Board of Directors of any negotiations, offers or
contracts relating to possible financings of any nature for the Company, whether initiated by the
Company or any other Person, except for (A) arrangements with trade creditors, and (B) utilization
by the Company or any Subsidiary of commercial lending arrangements with financial institutions.
(x) By-Laws. At all times, cause the by-laws of the Company to provide that, unless
otherwise required by the laws of the State of Delaware, (i) any two (2) directors and (ii) any
holder or holders of at least twenty-five percent (25%) of the outstanding Preferred Stock (voting
together as a single class on an as-converted to Common Stock basis), shall have the right to call
a meeting of the Board of Directors or stockholders. At all times maintain provisions in the
by-laws or certificate of incorporation of the Company indemnifying all directors against liability
to the maximum extent permitted under the laws of State of Delaware.
(xi) Non-Competition, Non-Solicitation, Nondisclosure and Developments Agreements.
The Company will obtain a duly executed Non-Competition, Non-Solicitation Nondisclosure and
Developments Agreement in a form approved by the Board of Directors from each Key Employee of the
Company and each Subsidiary. The Company will obtain a duly executed Non-Solicitation,
Nondisclosure and Developments Agreement in a form approved by the Board of Directors from each
employee and consultant of the Company and each Subsidiary (other than Key Employees).
(xii) New Developments. Where reasonably practicable, (A) cause all technological
developments, patentable or unpatentable inventions, discoveries or improvements by the Company’s
or any Subsidiary’s officers or employees to be documented in accordance with the appropriate
professional standards, (B) cause all officers, Key Employees and, to the best of the Company’s or
any Subsidiary’s ability, consultants of the Company or any Subsidiary to execute Non-Competition,
Non-Solicitation Nondisclosure and Developments Agreement or Non-Solicitation, Nondisclosure and
Developments Agreement in a form approved by the Board of Directors in favor of the Company or any
Subsidiary, and (C) where possible and deemed by management to be commercially appropriate based on
the advice of legal counsel and other considerations, file and prosecute U.S. and foreign patent or
copyright applications relating to and protecting such developments on behalf of the Company or any
Subsidiary.
(xiii) Meetings of Directors. Hold meetings of the Company’s Board of Directors not
less than quarterly.
(xiv) Expenses of Directors. Promptly reimburse in full, each director of the Company
who is not an employee of the Company for all of his reasonable out-of-pocket expenses incurred in
attending each meeting of the Board of Directors of the Company or any committee thereof.
(xv) Continued Business Operations. Use commercially reasonable efforts to cause its
officers and Key Employees to refrain from carrying on any for profit business activity outside of
the Company and its Subsidiaries.
Investor Rights Agreement — Page 18
(xvi) Stock Option Plans. Any stock option or stock purchase agreement involving
employees, directors or consultants of the Company granted or approved by the Company from time to
time after the date hereof shall provide that each option granted or restricted stock purchased
thereunder shall vest (A) with respect to twenty-five percent (25%) of the shares subject to such
grant or purchase, one (1) year after the date of such grant or purchase and (B) with respect to
the remaining shares subject to such grant or purchase, on a monthly basis over a period of three
(3) years thereafter, except with the prior approval of the Compensation Committee of the Board of
Directors. No stock option agreement or stock purchase agreement entered into on or after the date
hereof shall provide for acceleration in the vesting schedule of unexercised options or restricted
stock subject to restrictions in the event of a Change of Control (as defined below) of the
Company, except with the prior approval of the Board of Directors. Each form of stock option
agreement or stock purchase agreement shall be subject to the approval of the Compensation
Committee of the Board of Directors and shall contain a right of first refusal on transfers of
shares in favor of the Company. In addition, upon a grant of an option to or purchase of
restricted by each employee, director consultant of the Company, such employee, director or
consultant shall be required to execute an Instrument of Accession to that Stock Restriction
Agreement dated as of the date hereof by and among the Company, the Investors and the Holders
listed therein.
(xvii) U.S. Real Property Interest Statement. Provide prompt written notice to each
Investor following any “determination date” (as defined in United States Treasury Regulation
Section 1.897-2(c)(1)) on which the Company becomes a United States real property holding
corporation. In addition, upon a written request by any Investor, the Company shall provide such
Investor with a written statement informing the Investor whether such Investor’s interest in the
Company constitutes a U.S. real property interest. The Company’s determination shall comply with
the requirements of United States Treasury Regulation Section 1.897-2(h)(1) or any successor
regulation, and the Company shall provide timely notice to the Internal Revenue Service, in
accordance with and to the extent required by United States Treasury Regulation Section
1.897-2(h)(2) or any successor regulation, that such statement has been made. The Company’s
written statement to any Investor shall be delivered to such Investor within ten (10) days of such
Investor’s written request therefor. The Company’s obligation to furnish a written statement
pursuant to this Section 12(a)(xvii) shall continue notwithstanding the fact that a class of the
Company’s stock may be traded on an established securities market.
(xviii) Qualified Small Business Stock. Upon request, submit to its stockholders
(including the Investors) and to the Internal Revenue Service any reports that may be required
under Section 1202(d)(1)(C) of the Code and any related Treasury Regulations. In addition, within
ten (10) days after any Investor has delivered to the Company a written request therefor, the
Company shall deliver to such Investor a written statement informing the Investor whether such
Investor’s interest in the Company constitutes “qualified small business stock” as defined in
Section 1202(c) of the Code. The Company’s obligation to furnish a written statement pursuant to
this Section 12(a)(xviii) shall continue notwithstanding the fact that a class of the Company’s
stock may be traded on an established securities market.
Investor Rights Agreement — Page 19
(b) Negative Covenants of the Company. Without limiting any other covenants and
provisions hereof, the Company covenants and agrees that, until the consummation of a Qualified
Public Offering or, while this Agreement remains outstanding, it will comply with and observe the
following covenants and provisions, and will cause each Subsidiary, if and when such Subsidiary
exists, to comply with and observe such of the following covenants and provisions as are applicable
to such Subsidiary, and will not, without the written consent or waiver of at least seventy percent
(70%) in interest of the holders of Preferred Stock (on an as-converted to Common Stock basis):
(i) Restrictions on Indebtedness. Create, or authorize the creation of, or issue, or
authorize the issuance of, any debt security of the Company which by its terms is convertible into
or exchangeable for any equity security of the Company, including without limitation any security
of the Company which is a combination of debt and equity; or create, incur, assume or suffer to
exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any liability with
respect to Indebtedness for money borrowed which (a) exceeds, in the aggregate, $50,000; and (b) is
not convertible into or exchangeable for any equity securities of the Company or is not a security
that is a combination of debt and equity, unless such Indebtedness has been approved by the Board
of Directors.
(ii) Assumptions or Guaranties of Indebtedness of Other Persons. Assume, guarantee,
endorse or otherwise become directly or contingently liable on, or permit any Subsidiary to assume,
guarantee, endorse or otherwise become directly or contingently liable on (including, without
limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds
for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss) any Indebtedness of any other Person, except for guaranties by endorsement
of negotiable instruments for deposit or collection in the ordinary course of business, and except
for the guaranties of the permitted obligations of any wholly-owned Subsidiary unless such
guarantee, endorsement or liability is previously approved by the Board of Directors.
(iii) Distributions. Purchase or redeem any shares of capital stock other than the
Preferred Stock as expressly provided in the Company’s certificate of incorporation (provided, that
any such redemption of shares of Preferred Stock by the Company pursuant to its certificate of
incorporation shall be no earlier than as provided in the Company’s certificate of incorporation as
of the date hereof), or permit any Subsidiary of the Company to take any such action, except for
dividends or other distributions payable on the Common Stock of the Company, solely in the form of
additional shares of Common Stock and other than securities repurchased from former employees,
officers, directors, consultants or other persons who performed services for the Company or any
Subsidiary in connection with the cessation of such employment or service at the lower of the
original purchase price or the then current fair market value thereof.
(iv) Ownership of Subsidiaries. Purchase or hold beneficially any stock, other
securities or evidences of Indebtedness in, or make any investment in any other Person, excluding a
wholly-owned Subsidiary of the Company, if the aggregate financial commitment of the Company
related to all such commitments involves more than $50,000 in any
Investor Rights Agreement — Page 20
12-month period, unless such purchase, ownership or investment is made pursuant to operating
and/or capital plans previously approved by the Board of Directors.
(v) Issuance of Reserved Employee Shares. Grant to any of its employees options or
other rights to purchase Reserved Employee Shares unless authorized by the Board of Directors of
the Company or its Compensation Committee.
(vi) Dealings with Affiliates and Others. Other than (A) as contemplated by this
Agreement or (B) transactions in the ordinary course of business involving less than $50,000, enter
into, after the date of this Agreement, any transaction, including, without limitation, any loans
or extensions of credit or royalty agreements, with any officer, director or affiliate of the
Company or any Subsidiary or any member of their respective immediate families or any corporation
or other entity directly or indirectly affiliated with one or more of such officers, directors or
members of their immediate families unless such transaction is approved in advance by a majority of
the disinterested members of the Board of Directors.
(vii) Maintenance of Ownership of Subsidiaries. Sell or otherwise dispose of any
shares of capital stock or membership interests of any Subsidiary, except to another Subsidiary, or
permit any Subsidiary to issue, sell or otherwise dispose of any shares of its capital stock or
membership interests or the capital stock or membership interests of any Subsidiary, except to the
Company or another Subsidiary; provided, however, that the Company may liquidate, merge or
consolidate any Subsidiary or Subsidiaries into or with itself, provided that the Company is the
surviving entity, or into or with another Subsidiary or Subsidiaries.
(viii) Acquisition or Disposition of Assets. Acquire or dispose of any assets of
$50,000 in value (other than by way of granting in the ordinary course of business and on
arms-length terms a license to use intellectual property or products of the Company), unless such
acquisition or disposition is made pursuant to operating and/or capital plans previously approved
by the Board of Directors.
(ix) Capital Expenditures. Enter into any contract, arrangement or commitment
involving expenditure on capital account other than in accordance with, or not more than $50,000 in
excess of, the Company’s aggregate annual capital expenditure budget, unless such expenditure is
made pursuant to operating and/or capital plans previously approved by the Board of Directors. For
the purposes of this paragraph, the aggregate amount payable under any agreement for hire, hire
purchase or purchase on credit sale or conditional sale terms shall be deemed to be capital
expenditure incurred in the year in which such agreement is executed by the parties thereto.
(x) Transfers of Technology. Transfer any ownership or interest in, or material
rights relating to, any of its Intellectual Property Rights to any Person or entity which is not a
member of the consolidated group of the Company and its Subsidiaries; provided, however, that this
Section 12(b)(x) shall not apply to transfers of Intellectual Property Rights accomplished in the
ordinary course of business.
Investor Rights Agreement — Page 21
(c) Reporting Requirements. As long as there are shares of Preferred Stock
outstanding or until the consummation of a Qualified Public Offering, the Company will furnish the
following to each holder that owns at least twenty percent (20%) of the then outstanding shares of
Preferred Stock (calculated on an as-converted to Common Stock basis):
(i) Monthly Reports: as soon as available and in any event within 30 days after the
end of each calendar month, consolidated unaudited financial statements of the Company and its
Subsidiaries in accordance with generally accepted accounting principles as of the end of such
month and statements of income and retained earnings of the Company and its Subsidiaries for such
month and for the period commencing at the end of the previous fiscal year and ending with the end
of such month, setting forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, and including comparisons to monthly budgets, a
headcount of the Company’s employees, a cash flow analysis for such month, a schedule showing each
expenditure of a capital nature during such month, and a summary discussion of the Company’s
principal functional areas, all in reasonable detail;
(ii) Quarterly Reports: as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Company, financial statements of
the Company and its Subsidiaries as of the end of such quarter and statements of income and cash
flows of the Company and its Subsidiaries for such quarter and 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 including comparisons to quarterly budgets and a summary discussion of the Company’s
principal functional areas, all in reasonable detail and duly certified by the chief financial
officer of the Company as having been prepared in accordance with generally accepted accounting
principles consistently applied (subject to year-end audit adjustments);
(iii) Annual Reports: as soon as available and in any event within 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 and its Subsidiaries, including therein consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year and consolidated statements of income and of the
Company and its Subsidiaries for such fiscal year, setting forth in each case in comparative form
the corresponding figures for the preceding fiscal year, all such consolidated statements to be in
accordance with generally accepted accounting principles and to be duly certified by the chief
financial officer of the Company and by a nationally recognized independent public accountant;
(iv) Budgets: as soon as available after approval by the Board of Directors, a
business plan and monthly operating budgets for the forthcoming fiscal year, including a balance
sheet, cash flow statement and profit and loss statement;
(v) Notice of Adverse Changes: promptly after the occurrence thereof and in any event
within ten (10) days after each occurrence, notice of any material adverse change in the business,
operations, affairs or financial condition (financial or otherwise) of the
Investor Rights Agreement — Page 22
Company or any material default in any other material agreement to which the Company is a
party;
(vi) Written Reports: promptly upon receipt or publication thereof, any written
reports submitted to the Company by independent public accountants in connection with an annual or
interim audit of the books of the Company and its Subsidiaries made by such accountants or by
consultants or other experts in connection with such consultant’s or other expert’s review of the
Company’s operations or industry, and written reports prepared by the Company to comply with other
investment or loan agreements;
(vii) Notice of Proceedings: promptly after the commencement and notice thereof,
notice of all actions, suits, litigations and proceedings pending or, to the knowledge of the
Company, threatened against the Company affecting any of its respective properties or assets, or
against any officer, director, Key Employee or holder of more than five percent (5%) of the capital
stock of the Company relating to such person’s performance of duties for the Company or relating to
his stock ownership in the Company or otherwise relating to the business of the Company including,
without limiting their generality, actions pending or, to the knowledge of the Company, threatened
involving the prior employment of any of the Company’s officers or employees in their use in
connection with the Company’s business of any information or techniques allegedly proprietary to
any of their former employees, or any event or condition on the basis of which such litigation,
proceeding or investigation might properly be instituted before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting
the Company or any Subsidiary;
(viii) Stockholders’ and SEC Reports: promptly upon sending, making available, or
filing the same, such reports and financial statements as the Company or any Subsidiary shall send
or make available to the stockholders of the Company or file with the Securities and Exchange
Commission; and
(ix) Other Information: such other information respecting the business, properties or
the condition or operations, financial or other, of the Company or any of its Subsidiaries as any
such Investor may from time to time reasonably request.
The holders of Preferred Stock hereby covenant and agree that, subject to the disclosure of
information of a non-technical nature, including financial information, which such holder discloses
to its partners and/or shareholders generally, all of the information disclosed to such holders
pursuant to the provisions of this Section 12(c) will be kept confidential and such holder will not
disclose or divulge any confidential, proprietary or secret information which such holder may
obtain from the Company pursuant to this Section 12(c) unless (a) such information is or becomes
known to such holder from a source other than the Company or is or becomes publicly known (other
than as a result of a breach by such holder of this provision), (b) the holder is required by law,
court order or a governmental agency to disclose such information, or (c) unless the Company gives
its written consent to such holder’s release of such information, except that no such written
consent shall be required (and the Investor shall be free to release such information to such
recipient) if such information is to be provided to the holder’s counsel or accountant, or to an
officer, director or partner of such holder, provided that such holder shall
Investor Rights Agreement — Page 23
inform the recipient of the confidential nature of such information, and shall instruct the
recipient to treat the information as confidential.
(d) Additional Information Requirements. As long as there are shares of Preferred
Stock outstanding or until the consummation of a Qualified Public Offering, the Company will
furnish to each Investor that is not entitled to receive information pursuant to Section 12(c)
above copies of the Company’s quarterly and annual financial statements, including the consolidated
balance sheet and consolidated statements of income and cash flows of the Company and its
Subsidiaries as of the end of each such period, as well as a brief management summary of such
financial statements. Notwithstanding the foregoing, in no event shall the Company be obligated to
provide any information pursuant to this Section 12(d) to any Investor that the Company’s Board of
Directors determines, in its sole discretion, to be a competitor, directly or indirectly, of the
Company or any of its Subsidiaries. Notwithstanding anything to the contrary in this Agreement,
the right of any Investor to receive information pursuant to this Section 12(d) may not be assigned
or otherwise transferred, whether by operation of law or otherwise, to any third-party, including a
successor in interest to the shares of Preferred Stock owned by such Investor.
The holders of Preferred Stock hereby covenant and agree that, subject to the disclosure of
information of a non-technical nature, including financial information, which such holder discloses
to its partners and/or shareholders generally, all of the information disclosed to such holders
pursuant to the provisions of this Section 12(d) will be kept confidential and such holder will not
disclose or divulge any confidential, proprietary or secret information which such holder may
obtain from the Company pursuant to this Section 12(d) unless (a) such information is or becomes
known to such holder from a source other than the Company or is or becomes publicly known (other
than as a result of a breach by such holder of this provision), (b) the holder is required by law,
court order or a governmental agency to disclose such information, or (c) unless the Company gives
its written consent to such holder’s release of such information, except that no such written
consent shall be required (and the Investor shall be free to release such information to such
recipient) if such information is to be provided to the holder’s counsel or accountant, or to an
officer, director or partner of such holder, provided that such holder shall inform the recipient
of the confidential nature of such information, and shall instruct the recipient to treat the
information as confidential.
13. Representations and Warranties of the Company. The Company represents and
warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the Company have been duly
authorized by all requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the certificate of incorporation or by-laws of the
Company or any provision of any indenture, agreement or other instrument to which it or any or its
properties or assets is bound, conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such indenture, agreement or other instrument or
result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever
upon any of the properties or assets of the Company.
Investor Rights Agreement — Page 24
(b) The Company has full power and authority to enter into this Agreement and this Agreement
has been duly executed and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms.
14. Transfers.
(a) Restrictive Legend. Each certificate representing Restricted Stock shall, except
as otherwise provided in Section 14, be stamped or otherwise imprinted with a legend substantially
in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933 AND APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM
THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
SECURITIES LAWS.
A certificate shall not bear such legend if in the opinion of counsel satisfactory to the Company
(it being agreed that Xxxxxxx Procter LLP shall be satisfactory) the securities represented thereby
may be publicly sold without registration under the Securities Act and any applicable state
securities laws.
(b) Notice of Proposed Transfer. Prior to any proposed transfer of any Restricted
Stock (other than under the circumstances herein described in Sections 2, 3, 4 or 5), the holder
thereof shall give written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by a written opinion of counsel satisfactory to the Company (it being agreed
that without limitation Xxxxxxx Procter LLP shall be satisfactory) to the effect that the proposed
transfer may be effected without registration under the Securities Act and any applicable state
securities laws, whereupon the holder of such stock shall be entitled under the securities laws 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 transfer to one or more partners of the transferor (in
the case of a transferor that is a partnership), one or more members of the transferor (in the case
of a transferor that is a limited liability corporation) or to an affiliated corporation (in the
case of a transferor that is a corporation). Each certificate for Restricted Stock transferred as
above provided shall bear the legend set forth in Section 14(a), 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
written opinion of counsel referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be
Investor Rights Agreement — Page 25
entitled to transfer such securities in a public sale without registration under the
Securities Act. The restrictions provided for in this Section 14(b) shall not apply to securities
which are not required to bear the legend prescribed by Section 14(a) in accordance with the
provisions of Section 14(a).
15. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, executors, personal representatives, successors and permitted assigns and
shall be binding upon any person, firm, company or other entity to whom any shares of Restricted
Stock and Preferred Stock are transferred (even if in violation of the provisions of this
Agreement) and the heirs, executors, personal representatives, successors and assigns of such
person, firm, company or other entity. No provision of this Agreement shall be construed to
provide a benefit to any party hereto who no longer owns any Restricted Stock.
(b) All notices and other communications hereunder shall be in writing and shall be deemed to
have been given when delivered or three (3) days after mailing by first class, registered or
certified mail (air mail if to or from outside the United States), return receipt requested,
postage prepaid, if to an Investor at its respective address set forth on Schedule of Holders
hereto or to such other address as the addressee shall have furnished to the other parties hereto
in the manner prescribed by this Section 15(b) or if to any subsequent holder of Preferred Stock,
Conversion Shares or Restricted Stock, to it at such address as may have been furnished to the
Company in writing by such holder;
(c) This Agreement shall be construed and enforced in accordance with and governed by the
internal laws of the State of Delaware, without regard to its principles of conflicts of laws.
(d) Except as otherwise provided herein, 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 seventy percent (70%) in interest of the outstanding Conversion Shares issued or issuable
upon conversion of the Preferred Stock. Notwithstanding anything to the contrary contained herein,
no amendment which increases any Investor’s obligations hereunder shall be effective against such
Investor unless the Investor has approved such amendment in writing. Any such amendment or
modification effected in accordance with this Agreement shall be binding on all parties hereto,
even if they do not execute such amendment, modification or consent.
(e) This Agreement may be executed and delivered (including by facsimile transmission) in more
than one counterpart, each of which shall be deemed to be an original and which, together, shall
constitute one and the same instrument.
(f) The obligations of the Company to register shares of Restricted Stock under Sections 2, 3,
or 4 shall terminate on the fifth anniversary of the date of a Qualified Public Offering.
Investor Rights Agreement — Page 26
(g) If requested in writing by the underwriters for the initial underwritten public offering
of securities of the Company, each holder of Restricted Stock who is a party to this Agreement
hereby agrees not to sell any shares of Restricted Stock or any other shares of Common Stock (other
than shares of Restricted Stock or other shares of Common Stock being registered in such offering
or purchased in the offering or in the open market following the offering), without the consent of
such underwriters, for a period of one hundred eighty (180) days following the effective date of
the registration statement relating to such offering; provided, however, that all persons entitled
to registration rights with respect to shares of Common Stock who are not parties to this
Agreement, all other persons selling shares of Common Stock in such offering, all persons holding
in excess of one percent (1%) of the capital stock of the Company on a fully-diluted basis and all
executive officers and directors of the Company shall also have agreed not to sell publicly their
Common Stock under the circumstances and pursuant to the terms set forth in this Section 15(g); and
provided, further, however, that any such lock-up agreement shall provide that if the managing
underwriter releases any shares from the lock-up with respect to such offering prior to the
scheduled expiration date, the managing underwriter shall contemporaneously release a pro rata
portion of the shares of Restricted Stock from such lock-up. 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. Each Investor agrees to sign such agreements or documents reasonably
requested by the Company and/or the managing underwriters relating to and consistent with the
provisions of this section.
(h) Notwithstanding the provisions of Section 5(a), the Company’s obligation to file a
registration statement, or cause such registration statement to become and remain effective, shall
be suspended for a period not to exceed 30 days from the date of the request by a holder of
Restricted Stock, such right to delay a request to be exercised by the Company not more than once
in any 12-month period, if there exists at the time material non-public information relating to the
Company which, in the good faith determination of the Company’s Board of Directors, should not be
disclosed.
(i) The Company shall not enter into any agreement granting any holder or prospective holder
of any securities of the Company registration rights with respect to such securities unless such
new registration rights, including market stand-off obligations, are subordinate to the
registration rights granted to holders hereunder.
(j) The provisions of this Agreement are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or part of a
provision contained in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement; but this Agreement shall be reformed and
construed as if such invalid or illegal or unenforceable provision, or part of a provision, had
never been contained herein, and such provisions or part reformed so that it would be valid, legal
and enforceable to the maximum extent possible.
(k) All shares of Restricted Stock held or acquired by affiliates of Investors shall be
aggregated together for purposes of determining availability of any rights under this Agreement.
Investor Rights Agreement — Page 27
(l) Article, Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement for any other
purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as of the date first
above written.
| BUYDOMAINS HOLDINGS, INC. | ||||
By: |
/s/ Xxxxxx X. Xxxxx | |||
| Title: | ||||
Signature Page to Investor Rights Agreement
| SERIES A INVESTORS: | ||||
| HIGHLAND CAPITAL PARTNERS VI LIMITED PARTNERSHIP | ||||
| By: | Highland Management Partners VI Limited Partnership | |||
| its General Partner | ||||
By:
|
Highland Management Partners VI, Inc. | |||
| its General Partner | ||||
By: |
/s/ Xxxxx Nova | |||
| HIGHLAND CAPITAL PARTNERS VI-B LIMITED PARTNERSHIP | ||||
| By: | Highland Management Partners VI Limited Partnership | |||
| its General Partner | ||||
By:
|
Highland Management Partners VI, Inc. | |||
| its General Partner | ||||
By: |
/s/ Xxxxx Nova | |||
| HIGHLAND ENTREPRENEURS’ FUND VI LIMITED PARTNERSHIP | ||||
By:
|
HEF VI Limited Partnership | |||
| its General Partner | ||||
By:
|
Highland Management Partners VI, Inc. | |||
| its General Partner | ||||
By: |
/s/ Xxxxx Nova | |||
Signature Page to Investor Rights Agreement
| SERIES A INVESTORS (CONTINUED): | ||||
| SUMMIT INVESTORS VI, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. | |||
| Its General Partner | ||||
By:
|
Summit Partners VI (GP), LLC | |||
| Its General Partner | ||||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
| SUMMIT VI ADVISORS FUND, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. | |||
| Its General Partner | ||||
By:
|
Summit Partners VI (GP), LLC | |||
| Its General Partner | ||||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
| SUMMIT VI ENTREPRENEURS FUND, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. | |||
| Its General Partner | ||||
By:
|
Summit Partners VI (GP), LLC | |||
| Its General Partner | ||||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
Signature Page to Investor Rights Agreement
| SERIES A INVESTORS (CONTINUED): | ||||
| SUMMIT VENTURES VI-A, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. | |||
| Its General Partner | ||||
By:
|
Summit Partners VI (GP), LLC | |||
| Its General Partner | ||||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
| SUMMIT VENTURES VI-B, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. | |||
| Its General Partner | ||||
By:
|
Summit Partners VI (GP), LLC | |||
| Its General Partner | ||||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
Signature Page to Investor Rights Agreement
| SERIES Z INVESTORS: | ||||
| XXXXXXXXXXX.XXX, LLC | ||||
By: |
/s/ Xxxxxxx Xxxx | |||
Name:
|
Xxxxxxx Xxxx |
|||
Title: |
President | |||
Signature Page to Investor Rights Agreement
SCHEDULE OF HOLDERS
Series A Investors
Highland Capital Partners VI Limited Partnership
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Highland Capital Partners VI-B Limited Partnership
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Highland Entrepreneurs’ Fund VI Limited Partnership
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Summit Investors VI, L.P.
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Summit VI Advisors Funds, L.P.
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Summit VI Entrepreneurs Funds, L.P.
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Summit Ventures VI-A, L.P.
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Summit Ventures VI-B, L.P.
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Series Z Investors
XxxxXxxxxxx.xxx, LLC
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
AMENDMENT NO. 1 TO
INVESTOR RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO INVESTOR RIGHTS AGREEMENT, dated as of May 14, 2005 (this “First
Amendment”), is made by and among BuyDomains Holdings, Inc., a Delaware corporation, and
certain Investors as defined in the Investor Rights Agreement (as defined below).
WHEREAS, the parties hereto are all parties to that certain Investor Rights Agreement entered
into as of February 22, 2005 (the “Investor Rights Agreement”);
WHEREAS, the parties hereto wish to amend the Investor Rights Agreement as set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. The definition of “Qualified Public Offering” in Section 1 of the Investor Rights Agreement
is hereby deleted in its entirety and is hereby amended and replaced with the following:
“Qualified Public Offering” shall mean the completion of a fully underwritten, firm
commitment public offering pursuant to an effective registration under the Securities Act covering
the offering or sale by the Company of its Common Stock in which (x) the gross proceeds received by
the Company shall be at least $75 million, and (y) the price paid by the public for such shares
shall be at least $6.00 per share (as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, stock dividend, or similar event).
2. The definition of “Reserved Employee Shares” in Section 1 of the Investor Rights Agreement
is hereby deleted in its entirety and is hereby amended and replaced with the following:
“Reserved Employee Shares” shall mean shares of Common Stock not to exceed an
aggregate number of shares equal to 4,575,000 (appropriately adjusted to reflect any stock split,
stock dividend, combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capitalization of the Company) reserved by the Company from time to
time for (i) the sale of shares of Common Stock to employees, consultants or non-employee directors
of the Company or (ii) the issuance and/or exercise of options to purchase Common Stock granted to
employees, consultants or non-employee directors of the Company, in each case pursuant to any stock
plan approved by the Board of Directors. The foregoing number of Reserved Employee Shares may be
increased by vote or written consent of at least seventy percent (70%) of the then outstanding
shares of Series A Preferred Stock.
3. All other terms of the Investor Rights Agreement not expressly amended by this First
Amendment shall continue and remain in full force and effect and the Investor Rights Agreement, as
amended hereby, is hereby ratified and confirmed in all respects.
4. This First Amendment may be executed and delivered (including by facsimile transmission) in
more than one counterpart, each of which shall be deemed to be an original and which, together,
shall constitute one and the same instrument.
5. This First Amendment shall be construed and enforced in accordance with and governed by the
internal laws of the State of Delaware, without regard to its principles of conflicts of laws.
[Signature Pages to Follow]
IN WITNESS WHEREOF, the parties have executed this First Amendment under seal as of the date
first above written.
| BUYDOMAINS HOLDINGS, INC. | ||||
By: |
/s/ Xxxxx X. Xxxx | |||
| Title: CFO | ||||
[Signature Page to First Amendment]
| SERIES A INVESTORS: | ||||
| HIGHLAND CAPITAL PARTNERS VI LIMITED PARTNERSHIP | ||||
| By: | Highland Management Partners VI Limited Partnership | |||
| its General Partner | ||||
| By: | Highland Management Partners VI, Inc. | |||
| its General Partner | ||||
By: |
/s/ Xxxxx Nova | |||
| HIGHLAND CAPITAL PARTNERS VI-B LIMITED PARTNERSHIP | ||||
| By: | Highland Management Partners VI Limited Partnership | |||
| its General Partner | ||||
| By: | Highland Management Partners VI, Inc. | |||
| its General Partner | ||||
By: |
/s/ Xxxxx Nova | |||
| HIGHLAND ENTREPRENEURS’ FUND VI LIMITED PARTNERSHIP | ||||
By:
|
HEF VI Limited Partnership | |||
| its General Partner | ||||
By:
|
Highland Management Partners VI, Inc. | |||
| its General Partner | ||||
By: |
/s/ Xxxxx Nova | |||
[Signature Page to First Amendment]
| SERIES A INVESTORS (CONTINUED): | ||||
| SUMMIT INVESTORS VI, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. | |||
| Its General Partner | ||||
By:
|
Summit Partners VI (GP), LLC | |||
| Its General Partner | ||||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
| SUMMIT VI ADVISORS FUND, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. Its General Partner | |||
By:
|
Summit Partners VI (GP), LLC | |||
| Its General Partner | ||||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
| SUMMIT VI ENTREPRENEURS FUND, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. | |||
| Its General Partner | ||||
By:
|
Summit Partners VI (GP), LLC | |||
| Its General Partner | ||||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
[Signature Page to First Amendment]
| SERIES A INVESTORS (CONTINUED): | ||||
| SUMMIT VENTURES VI-A, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. | |||
| Its General Partner | ||||
By:
|
Summit Partners VI (GP), LLC | |||
| Its General Partner | ||||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
| SUMMIT VENTURES VI-B, L.P. | ||||
By:
|
Summit Partners VI (GP), L.P. Its General Partner | |||
By:
|
Summit Partners VI (GP), LLC Its General Partner |
|||
By: |
/s/ Xxxxxx X. Xxxxxxx | |||
[Signature Page to First Amendment]
AMENDMENT NO. 2 TO
INVESTOR RIGHTS AGREEMENT
THIS AMENDMENT NO. 2 (this “Amendment”), dated as of January 19, 2006
is entered into by and among YesDirect, Inc., a Delaware corporation formerly known as
BuyDomains Holdings, Inc. (the “Company”), and those Investors set forth on the signature
pages hereto (the “Consenting Investors”). When used in this Amendment, terms defined in
the Investor Rights Agreement, dated as of February 22, 2005 (the “Investor Rights
Agreement”), and not otherwise defined herein have the meanings assigned to them in the
Investor Rights Agreement.
WHEREAS, the Company and the Consenting Investors are parties to the Investor Rights
Agreement;
WHEREAS, the Consenting Investors constitute holders of at least seventy percent (70%) in
interest of the outstanding Conversion Shares issued or issuable upon conversion of the Preferred
Stock; and
WHEREAS, the Company wishes to amend the Investor Rights Agreement to provide that Persons
who, from and after the date hereof, acquire shares of Series A Preferred Stock become parties to
the Investor Rights Agreement as “Series A Investors” upon execution of a counterpart signature
page to, and agreement to be bound by all applicable terms and conditions of, the Investor Rights
Agreement;
WHEREAS, the Consenting Investors agree that such amendment is in the best interest of the
Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. By execution of this Amendment, the Company and the Consenting Investors, pursuant to
Section 15(d) of the Investor Rights Agreement, hereby amend the Investor Rights Agreement as
follows:
(a) Section 15 is hereby amended by adding the following paragraph:
“(m) The Company shall take all necessary action to ensure that each Person, who from
and after the date hereof acquires any shares of Series A Preferred Stock, shall become a
party to this Agreement by executing and delivering to the Company an Instrument of
Accession in form of Schedule I hereto, and such Person shall thereafter be added to
Schedule of Holders annexed hereto and be deemed a Series A Investor for all
purposes of this Agreement without the requirement of consent of the other parties
hereto.”
(b) The Investor Rights Agreement is hereby amended to include, as Schedule I thereto,
the Instrument of Accession in form of Exhibit A attached hereto.
2. The Investor Rights Agreement as amended by this Amendment is and shall continue to be in
full force and effect and, except as amended hereby, is hereby ratified and confirmed in all
respects.
3. This Amendment may be executed and delivered (including by facsimile transmission) in more
than one counterpart, each of which shall be deemed to be an original and which, together, shall
constitute one and the same instrument.
4. This Amendment shall be construed and enforced construed in accordance with and governed by
the internal laws of the State of Delaware, without regards to its principles of conflicts of laws.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
- 2 -
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of the date
first written above.
| COMPANY: | ||||||
| YESDIRECT, INC. | ||||||
| By: | /s/ Xxxxx X. Xxxx | |||||
| Name: | ||||||
| Title: | CFO | |||||
| CONSENTING INVESTORS: | ||||||
| HIGHLAND CAPITAL PARTNERS VI LIMITED PARTNERSHIP | ||||||
| By: | Highland Management Partners VI Limited Partnership | |||||
| its General Partner | ||||||
| By: | Highland Management Partners VI, Inc. | |||||
| its General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||
| HIGHLAND CAPITAL PARTNERS VI-B LIMITED PARTNERSHIP | ||||||
| By: | Highland Management Partners VI Limited Partnership | |||||
| its General Partner | ||||||
| By: | Highland Management Partners VI, Inc. | |||||
| its General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||
| HIGHLAND ENTREPRENEURS’ FUND VI LIMITED PARTNERSHIP | ||||||
| By: | HEF VI Limited Partnership | |||||
| its General Partner | ||||||
| By: | Highland Management Partners VI, Inc. | |||||
| its General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||
| SUMMIT INVESTORS VI, L.P. | ||||||
| By: | Summit Partners VI (GP), L.P. | |||||
| Its General Partner | ||||||
| By: | Summit Partners VI (GP), LLC | |||||
| Its General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||||
| SUMMIT VI ADVISORS FUND, L.P. | ||||||
| By: | Summit Partners VI (GP), L.P. | |||||
| Its General Partner | ||||||
| By: | Summit Partners VI (GP), LLC | |||||
| Its General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||||
| SUMMIT VI ENTREPRENEURS FUND, L.P. | ||||||
| By: | Summit Partners VI (GP), L.P. | |||||
| Its General Partner | ||||||
| By: | Summit Partners VI (GP), LLC | |||||
| Its General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||||
| SUMMIT VENTURES VI-A, L.P. | ||||||
| By: | Summit Partners VI (GP), L.P. | |||||
| Its General Partner | ||||||
| By: | Summit Partners VI (GP), LLC | |||||
| Its General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||||
| SUMMIT VENTURES VI-B, L.P. | ||||||
| By: | Summit Partners VI (GP), L.P. | |||||
| Its General Partner | ||||||
| By: | Summit Partners VI (GP), LLC | |||||
| Its General Partner | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||||
EXHIBIT A
Schedule I
YESDIRECT, INC.
INSTRUMENT OF ACCESSION
INSTRUMENT OF ACCESSION
The undersigned, , in order to become the owner or holder
of
shares of Series A Preferred Stock, $0.001 par value per share, of YesDirect, Inc., a Delaware
corporation (the “Company”), hereby agrees to become a party to the Investor Rights
Agreement, dated as of February 22, 2005, by and among the Company and the other parties thereto
(as amended from time to time, the “Agreement”), and to be bound by all provisions thereof.
The undersigned agrees to become a “Series A Investor” and an “Investor” (each as defined in the
Agreement) under the terms of the Agreement. This Instrument of Accession shall take effect and
and shall become an integral part of, and the undersigned shall become a party to and bound by, the
Agreement immediately upon execution by the undersigned hereto and acceptance thereof by the
Company.
EXECUTED as a contract under seal as of the date set forth below:
| Signature: | ||||
| Name: | ||||
| By: | ||||
| Address: | ||||
| Taxpayer ID No./Social Security No.: | ||||
| Date: | ||||
| Accepted: | ||||
| YESDIRECT, INC. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Date: | ||||
YESDIRECT, INC.
INSTRUMENT OF ACCESSION
INSTRUMENT OF ACCESSION
The
undersigned, Xxxxxxx Xxxxx, in order to become the owner or holder
of 10,000 shares of Series A Preferred Stock, $0.001 par value per share, of YesDirect, Inc., a Delaware
corporation (the “Company”), hereby agrees to become a party to the Investor Rights
Agreement, dated as of February 22, 2005, by and among the Company and the other parties thereto
(as amended from time to time, the “Agreement”), and to be bound by all provisions thereof.
The undersigned agrees to become a “Series A Investor” and an “Investor” (each as defined in the
Agreement) under the terms of the Agreement. This Instrument of Accession shall take effect and
and shall become an integral part of, and the undersigned shall become a party to and bound by, the
Agreement immediately upon execution by the undersigned hereto and acceptance thereof by the
Company.
EXECUTED as a contract under seal as of the date set forth below:
| Signature: /s/ Xxxxxxx Xxxxx | ||||
| Name: Xxxxxxx Xxxxx | ||||
| Address: | ||||
| Taxpayer ID No./Social Security No.: | ||||
| Date: | ||||
| Accepted: | ||||
| YESDIRECT, INC. | ||||
| By: /s/ Xxxxx X. Lucy | ||||
| Name: Xxxxx X. Xxxx | ||||
| Title: CFO | ||||
| Date: 1/19/06 | ||||
YESDIRECT, INC.
INSTRUMENT OF ACCESSION
INSTRUMENT OF ACCESSION
The
undersigned, Xxxxx Xxxxxx, in order to become the owner or holder
of 10,000 shares of Series A Preferred Stock, $0.001 par value per share, of YesDirect, Inc., a Delaware
corporation (the “Company”), hereby agrees to become a party to the Investor Rights
Agreement, dated as of February 22, 2005, by and among the Company and the other parties thereto
(as amended from time to time, the “Agreement”), and to be bound by all provisions thereof.
The undersigned agrees to become a “Series A Investor” and an “Investor” (each as defined in the
Agreement) under the terms of the Agreement. This Instrument of Accession shall take effect and shall become an integral part of, and the undersigned shall become a party to and bound by, the
Agreement immediately upon execution by the undersigned hereto and acceptance thereof by the
Company.
EXECUTED as a contract under seal as of the date set forth below:
| Signature: /s/ Xxxxx Xxxxxx | ||||
| Name: Xxxxx Xxxxxx | ||||
| Address: 00 Xxxxxx Xxxxxx | ||||
| Xxxxxxx, XX 00000 | ||||
| Taxpayer ID No./Social Security No.: | ||||
| Date: 1/19/06 | ||||
| Accepted: | ||||
| YESDIRECT, INC. | ||||
| By: /s/ Xxxxx X. Xxxx | ||||
| Name: Xxxxx X. Lucy | ||||
| Title: CFO | ||||
| Date: 1-19-06 | ||||
