Exhibit 4.2
Execution Version
SOUNDBITE COMMUNICATIONS, INC.
INVESTORS' RIGHTS AGREEMENT
THIS AGREEMENT is made as of June 17, 2005, by and among SoundBite
Communications, Inc. (formerly, SoundBite Corporation), a Delaware corporation
(the "Company"), Commonwealth Capital Ventures III L.P. and CCV III Associates
L.P. (collectively, "Commonwealth"), Mosaic Venture Partners II, LP, an Ontario
limited partnership ("Mosaic"), Xxxx XxXxxxxxx ("XxXxxxxxx"), Xxxxx Xxxxxx
("Xxxxxx"), Northbridge Venture Partners IV-A, L.P., a Delaware limited
partnership, Northbridge Venture Partners IV-B, L.P., a Delaware limited
partnership (collectively, "North Bridge") and the Venture Capital Fund of New
England IV, LP ("VCFNE", together with Commonwealth, Mosaic and North Bridge,
the "Investors").
Certain of the parties to this Agreement are parties to a Series D
Preferred Stock Purchase Agreement of even date herewith (the "Purchase
Agreement"), a Series C Preferred Stock Purchase Agreement dated as of March 14,
2003 (the "Original Series C Agreement"), a Series C Preferred Stock Purchase
Agreement dated as of January 20, 2004 (together with the Original Series C
Agreement, the "Series C Purchase Agreement"), a Series B Preferred Stock
Purchase Agreement dated as of November 28, 2001, as amended (the "Series B
Purchase Agreement"), a Series A Preferred Stock Purchase Agreement dated as of
June 6, 2000 (the "Original Series A Agreement"), a Series A Preferred Stock
Purchase Agreement dated as of June 16, 2000 (together with the Original Series
A Agreement, the "Series A Purchase Agreement"), amended and restated founder
stock agreements dated as of June 16, 2000 (the "Founder Stock Agreements"), and
that certain Third Amended and Restated Registration Rights Agreement, dated as
of March 14, 2003, as amended (the "Prior Registration Agreement"). In order to
induce Commonwealth to enter into the Purchase Agreement, the Company and the
other parties hereto have agreed to, among other things, provide the
registration rights set forth in this Agreement, provide for certain covenants
of the Company as set forth herein and to rescind the Prior Registration
Agreement. The execution and delivery of this Agreement is a condition to the
Closing under the Purchase Agreement. Unless otherwise provided in this
Agreement, capitalized terms used herein shall have the meanings set forth in
Article I hereof.
The parties to the Prior Registration Agreement hereby agree to rescind and
terminate the Prior Registration Agreement pursuant to Section 9(d) thereof as
set forth herein, and the parties to the Prior Registration Agreement hereby
consent to this Agreement and expressly waive any objection or consent
requirement they have under the Prior Registration Agreement to this Agreement.
The parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Common Stock" means the common stock of the Company, $.001 par value
per share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission issued under such Act, as they each may, from
time to time, be in effect.
"Founder Registrable Securities" means any shares of Common Stock held
as of the date hereof, or acquired hereafter through the exercise of employee
stock options, by XxXxxxxxx and Xxxxxx.
"Investor Registrable Securities" means (i) any Common Stock issued or
issuable upon the conversion of the Preferred Stock, (ii) twenty-five percent
(25%) of the outstanding Founder Registrable Securities (measured pro rata for
each Founder based on the number of shares of Founder Registrable Securities
held by each Founder), and (iii) any Common Stock issued or issuable with
respect to the securities referred to in clause (i) or (ii) by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Person" means a natural person, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Stock" means (i) the shares of Series A Convertible
Preferred Stock, par value $0,001 per share, of the Company issued pursuant to
the Series A Purchase Agreement, (ii) the shares of Series B Convertible
Preferred Stock, par value $0.001 per share, of the Company issued pursuant to
the Series B Purchase Agreement, (iii) the shares of Series C Convertible
Preferred Stock, par value $0.001 per share (the "Series C Preferred Stock"), of
the Company issued pursuant to the Series C Purchase Agreement, and (iv) the
shares of Series D Convertible Preferred Stock, par value $0.001 per share (the
"Series D Preferred Stock"), of the Company issued pursuant to the Purchase
Agreement.
"Qualified Public Offering" means the closing of the sale of shares of
Common Stock to the public at a price of at least $1.71945 per share (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
similar recapitalizations affecting such shares) in a firm-commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, resulting in at least $30,000,000
of gross proceeds to the Company.
"Registrable Securities" means Investor Registrable Securities and
Founder Registrable Securities. As to any particular Registrable Securities,
such securities shall cease to be Founder or Investor Registrable Securities
when they have been distributed to the public pursuant to an offering registered
under the Securities Act or sold to the public through a broker,
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dealer or market maker in compliance with Rule 144 under the Securities Act (or
any similar rule then in force). Wherever reference is made in this Agreement to
a request or consent of holders of a certain percentage of Registrable
Securities, the determination of such percentage shall include shares of Common
Stock issuable upon conversion of the Preferred Stock even if such conversion
has not been effected.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission issued under such Act, as they each may, from time to time,
be in effect.
"Senior Preferred Stock" means the Series C Preferred Stock and the
Series D Preferred Stock, taken together as a single class.
Unless otherwise stated, other capitalized terms contained herein have
the meanings set forth in the Purchase Agreement.
ARTICLE II
REGISTRATION RIGHTS
2.1 Demand Registrations.
(a) Requests for Registration. At any time after the earlier of (i)
June 17, 2008 or (ii) six (6) months after the date the Company has completed a
public offering of its equity securities under the Securities Act, the holders
of at least seventy percent (70%) of the Investor Registrable Securities issued
or issuable in respect of the Senior Preferred Stock may request registration
under the Securities Act of all or any portion of their Investor Registrable
Securities on Form S-l or any similar long-form registration ("Long Form
Registrations"), and the holders of at least seventy percent (70%) of the
Investor Registrable Securities issued or issuable in respect of the Senior
Preferred Stock may request registration under the Securities Act of all or any
portion of their investor Registrable Securities on Form S-3 or any similar
short-form registration ("Short-Form Registrations") if available for use by the
Company. All registrations requested pursuant to this paragraph 2.1(a) are
referred to herein as "Demand Registrations." Each request for a Demand
Registration shall specify the approximate number of Investor Registrable
Securities requested to be registered by the holders making such request. Within
ten (10) days after receipt of any such request, the Company shall give written
notice of such requested registration to all other holders of Investor
Registrable Securities and, subject to the terms of paragraph 2.1(d) hereof,
shall include in such registration all Investor Registrable Securities with
respect to which the Company has received written requests for inclusion therein
within thirty (30) days after the receipt of the Company's notice.
(b) Long-Form Registrations. The holders of Investor Registrable
Securities shall be entitled to request not more than two (2) Long-Form
Registrations in the aggregate ("Company-Paid Long-Form Registrations"), and the
Company shall pay all Registration Expenses, as defined in paragraph 2.5 below,
associated with such Long-Form Registrations, except as set forth in paragraph
2.5 hereof; provided that, (i) the Investor Registrable Securities requested to
be included in such Long-Form Registration must represent at least twenty
percent
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(20%) of the Investor Registrable Securities owned by such holders requesting
such Long-Form Registration, or (ii) the aggregate offering value of the
Investor Registrable Securities requested to be registered in any Long-Form
Registration must equal at least $5,000,000. A registration shall not count as
one of the permitted Long-Form Registrations until it has become effective
(unless such Long-Form Registration has not become effective due primarily to
the fault of or at the request of the holders requesting such registration).
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to paragraph 2.1(b), the holders of Investor
Registrable Securities shall be entitled to request an unlimited number of
Short-Form Registrations in which the Company shall pay all Registration
Expenses; provided that, the aggregate offering value of the Investor
Registrable Securities requested to be registered in any Short-Form Registration
must equal at least $1,000,000; provided further, that the Company shall not be
required to file more than two (2) Short-Form Registrations pursuant to this
paragraph 2.1(c) in any twelve (12) month period. Demand Registrations shall be
Short-Form Registrations whenever the Company is permitted to use any applicable
short form and if the managing underwriters (if any) agree to the use of a
Short-Form Registration. After the Company has become subject to the reporting
requirements of the Securities Exchange Act, the Company shall use its
reasonable efforts to make Short-Form Registrations available for the sale of
Investor Registrable Securities.
(d) Priority on Demand Registrations. The Company shall not include in
any Demand Registration any securities that are not Investor Registrable
Securities without the prior written consent of the holders of at least seventy
percent (70%) of the Investor Registrable Securities issued or issuable in
respect of the Senior Preferred Stock. If a Demand Registration is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Investor Registrable Securities and,
if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Investor Registrable Securities and other
securities, if any, which can be sold therein without adversely affecting the
marketability of the offering, the Company shall include in such registration
(i) first, the Investor Registrable Securities requested to be included in such
registration, pro rata among the holders of such Investor Registrable Securities
on the basis of the number of shares owned by each such holder and (ii) second,
if permitted hereunder, other securities requested to be included in such
registration.
(e) Restrictions on Demand Registrations. The Company shall not be
obligated to effect any Demand Registration (i) within one hundred eighty (180)
days after the effective date of the Company's initial public offering of its
securities pursuant to a registration statement filed under the Securities Act
and (ii) within ninety (90) days after the effective date of a previous Demand
Registration or a previous registration in which the holders of Registrable
Securities were given piggyback rights pursuant to paragraph 2.2 and in which
there was no reduction in the number of Registrable Securities requested to be
included. The Company may postpone the filing or the effectiveness of a Demand
Registration (i) for up to ninety (90) days in the case of Long-Form
Registration and (ii) for up to sixty (60) days in the case of a Short-Form
Registration if the Company's board of directors determines in its good faith
judgment that such Demand Registration would reasonably be expected to have a
material adverse effect on any proposal or plan by the Company or any of its
Subsidiaries to engage in any acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer,
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reorganization or similar transaction; provided that, in such event, the holders
of Registrable Securities initially requesting such Demand Registration shall be
entitled to withdraw such request and, if such request is withdrawn, such Demand
Registration shall not count as one of the permitted Demand Registrations
hereunder and the Company shall pay all Registration Expenses in connection with
such registration. The Company may delay a Demand Registration hereunder only
twice in any twelve (12) month period.
(f) Selection of Underwriters. The holders of a majority of the
Investor Registrable Securities included in any Demand Registration shall have
the right to select the investment banker(s) and manager(s) to administer the
offering, subject to the Company's approval which shall not be unreasonably
withheld or delayed.
(g) Other Registration Rights. Except as provided in this Agreement,
the Company shall not grant to any Persons the right to request the Company to
register, on terms which are senior to the rights of the holders of Investor
Registrable Securities provided in this Agreement, any equity securities of the
Company, or any securities convertible or exchangeable into or exercisable for
such securities, without the prior written consent of the holders of at least
seventy percent (70%) of the Investor Registrable Securities issued or issuable
in respect of the Senior Preferred Stock.
2.2 Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any
of its securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
shall give prior written notice to all holders of Registrable Securities of its
intention to effect such a registration and, subject to the terms of paragraphs
2.2(c) and 2.2(d) hereof, shall include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within twenty (20) days after the receipt of the Company's
notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company shall include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the Investor
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Investor Registrable Securities on the basis of the
number of shares owned by each such holder, (iii) third, the Founder Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Founder Registrable Securities on the basis of
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the number of shares owned by each such holder, and (iv) fourth, other
securities requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration (i) first, the Investor Registrable Securities requested to
be included in such registration, pro rata among the holders of such Investor
Registrable Securities on the basis of the number of shares owned by each such
holder, (ii) second, the Founder Registrable Securities requested to be included
in such registration, pro rata among the holders of such Founder Registrable
Securities on the basis of the number of shares owned by each such holder, and
(iv) third, other securities requested to be included in such registration.
(e) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 2.1 or pursuant to this paragraph 2.2, and if such previous
registration has not been withdrawn or abandoned, the Company shall not file or
cause to be effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor form),
whether on its own behalf or at the request of any holder or holders of such
securities, until a period of at least sixty (60) days has elapsed from the
effective date of such previous registration.
2.3 Holdback Agreements. Each holder of Registrable Securities shall not
effect any public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven (7) days prior
to and the one hundred eighty (180) day period beginning on the effective date
of any underwritten registration, unless the underwriters managing the
registered public offering otherwise agree; provided that, (i) such restriction
shall only apply for 90 days to secondary offerings and (ii) all stockholders of
the Company then holding at least one percent (1%) of the Company's outstanding
Common Stock (on an as-converted basis) and all officers and directors of the
Company enter into agreements with similar provisions.
2.4 Registration Procedures. Whenever the holders of Registrable Securities
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company shall use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company shall promptly:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed);
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(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange 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 a period of not less
than one hundred eighty (180) days or such lesser period until all Registrable
Securities included in such registration statement are sold and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(e) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
(f) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 1.1(a) of the Securities Act and Rule 158 thereunder;
(g) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material factor omits any fact necessary to make the statements therein not
misleading, and, at the request of any such seller, the Company shall prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus shall not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(h) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be required
to
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(i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(i) provide a transfer agent and registrar and a CUSIP number for all
such Registrable Securities not later than the effective date of such
registration statement; and
(j) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
2.5 Registration Expenses.All expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
fees and disbursements of custodians, and fees and disbursements of counsel for
the Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
as provided in this Agreement, except that the Company shall, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance, the expenses and fees for listing the securities to be registered on
each securities exchange on which similar securities issued by the Company are
then listed or on the NASD automated quotation system, and the cost and expenses
of one special counsel for the holders of Investor Registrable Securities;
provided that, (i) the cost of more than one special counsel for the selling
shareholders and (ii) the cost of any special audit required in connection with
a Demand Registration, to the extent the cost of such audit exceeds $15,000,
shall in each case be borne pro rata by all sellers of securities included in
such registration in proportion to the aggregate selling price of the securities
to be so registered.
(b) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
2.6 Indemnification. The Company agrees to indemnify, to the extent
permitted by law, each holder of Registrable Securities, its officers and
directors and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact
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required to be stated therein or necessary to make the statements therein not
misleading, any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act, any state securities law
in connection with any registration statement or the offering contemplated
thereby, except insofar as the same are caused by or contained in any
information finished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
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(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that, the obligation to indemnify
shall be individual, not joint and several, for each holder and shall be limited
to the net amount of proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. No indemnifying party, in the
defense of any such claim or litigation shall, except with the consent of each
indemnified party, consent to entry of any judgement or enter into any
settlement, and no indemnified party shall consent to entry of any judgement or
settle such claim or litigation without the prior written consent of the
indemnifying party, which consent shall not be unreasonably withheld,
conditioned or delayed. The indemnifying party also shall be responsible for the
expenses of such defense if the indemnifying party is not entitled to, or does
not elect to, assume such defense; provided that, the indemnifying party shall
not be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of-securities.
2.7 Participation in Underwritten Registrations. No Person may participate
in any registration hereunder which is underwritten unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
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ARTICLE III
COVENANTS OF THE CORPORATION
3.1 Financial Statements and Other Information. The Company will deliver to
each Investor holding at least twenty percent (20%) of the Registrable
Securities held by such Investor on the date hereof:
(a) Audited Annual Financial Statements. As soon as practicable after
the end of each fiscal year of the Company, and in any event within ninety (90)
days thereafter, consolidated and consolidating balance sheets of the Company
and any Subsidiaries, as of the end of such year, and consolidated and
consolidating statements of operations and sources and uses of funds of the
Company and any Subsidiaries, for such fiscal year, prepared in accordance with
GAAP and setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and, in the case of the
consolidated statements, certified, without qualification or explanation, by
independent public accountants selected by the Company;
(b) Unaudited Quarterly Financial Statements. As soon as practicable
after the end of each quarter of each fiscal year and in any event within thirty
(30) days thereafter, consolidated and consolidating balance sheets of the
Company and any Subsidiaries as of the end of such period, and consolidated and
consolidating statements of operations of the Company and Subsidiaries for such
period and for the current fiscal year to date, prepared in accordance with
GAAP, together with a comparison of such statements to the Budget (as defined
below), subject to changes resulting from normal year-end audit adjustments, all
in reasonable detail and certified by the principal financial officer of the
Company;
(c) Unaudited Monthly Financial Statements. As soon as practicable
after the end of each month of each fiscal year and in any event within thirty
(30) days thereafter, consolidated and consolidating balance sheets of the
Company and any Subsidiaries as of the end of such period, and consolidated and
consolidating statements of operations of the Company and Subsidiaries for such
period and for the current fiscal year to date, prepared in accordance with
GAAP, together with a comparison of such statements to the Budget (as defined
below), subject to changes resulting from normal year-end audit adjustments, all
in reasonable detail and certified by the principal financial officer of the
Company;
(d) Budget. Not less than thirty (30) days prior to the commencement
of each fiscal year, an annual business plan, including a budget and detailed
financial projections for the Company and any Subsidiaries, for each month
during such period (the "Budget"), all in reasonable detail, together with
underlying assumptions and approved by a majority of the entire Board;
(e) Material Adverse Developments. Promptly upon the occurrence
thereof, notice of any event which has had, or could reasonably be expected to
have, a material adverse impact on the business, affairs, assets, operations,
employee relations or condition, financial or otherwise, of the Company,
including, but not limited to, the institution or threat of any material
litigation or investigation with respect to the Company or any material disputes
with customers;
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(f) Auditors' Reports. Promptly upon receipt thereof, copies of all
other reports, if any, submitted to the Company by independent public
accountants in connection with any annual or interim audit of the books of the
Company and any Subsidiaries made by such accountants; and
(g) Capitalization Table. As soon as practicable after the end of each
quarter of each fiscal year and in any event within thirty (30) days thereafter,
an up-to-date capitalization table, all in reasonable detail and certified by
the principal financial officer of the Company.
3.2 Negative Covenants. So long as at least twenty percent (20%) of the
original issued number of shares of Senior Preferred Stock remain outstanding,
without the prior written consent of the holders of not less than seventy
percent (70%) the then outstanding Senior Preferred Stock, the Company will not
effect any transaction or series of transactions with any officer, director,
employee or Affiliate of the Company or any Affiliate of any officer, director
or employee of the Company, unless such transaction is or series of transactions
are (i) entered into in the ordinary course of business and (ii) approved after
disclosure of such interest by the Board of Directors (including the directors
designated by the holders of Senior Preferred Stock). Accounting. The Company
will maintain and will cause each of its Subsidiaries (if any) to maintain a
system of accounting established and administered in accordance with GAAP and
all financial statements or information delivered under paragraph 3.1 will be
prepared in accordance with GAAP. Preservation of Corporate Existence and
Property; Operations. The Company agrees to preserve, protect, and maintain, and
cause each Subsidiary to preserve, protect, and maintain, (a) its corporate
existence, and (b) all rights, licenses, franchises, accreditations, privileges,
and properties the failure of which to preserve, protect, and maintain could
have a material adverse effect on the business, affairs, assets, operations, or
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole. Confidentiality and Non-Competition Agreements. Except as otherwise
provided by the Board in a particular case, to the extent not already in place,
the Company shall enter into a non-disclosure, noncompetition and
non-solicitation agreement in substantially the form attached hereto as Exhibit
A with each of the Founders and key employees of the Company. Director Expenses.
The Company will promptly reimburse each director designated by the holders of
the Preferred Stock pursuant to the Stockholders Agreement and the managing
directors of each Investor's general partner for all reasonable out-of-pocket
expenses incurred in connection with attending meetings of the Board or any
committee thereof, in accordance with the requirements of the Stockholders
Agreement. Inspection and Audit Rights. Any Investor holding at least twenty
percent (20%) of the shares of Preferred Stock originally purchased by it shall
have full and free access to the Company's personnel, properties, contracts,
books and records, and other documents and data of the Company upon reasonable
notice during regular business hours, and any such Investor may, at its own
expense, make copies of all such contracts, books and records, and other
existing documents and data. The substance of all information regarding the
Company that any such Investor obtains in connection with the exercise of its
rights under this Agreement shall be treated as confidential, and except as
required by law, governmental rule or regulation, each Investor agrees that it
will not disclose any such confidential information to any other person or
entity without the prior written consent of the Board; provided, however, each
Investor may disclose such confidential information to any of its partners,
members or executive officers so long as such partners, members or executive
officers maintain the confidentiality of such
12
information. Legend. The Investors acknowledge that the Company will cause each
certificate representing its securities to be stamped or otherwise imprinted
with a legend to substantially the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THUS MAY NOT BE
TRANSFERRED UNLESS SO REGISTERED OR UNLESS AN EXEMPTION FROM REGISTRATION
IS AVAILABLE."
The Investors further acknowledge that each such certificate will continue
to bear the foregoing legend until (a) the securities represented by such
certificate are effectively registered under the Securities Act or (b) the
holder of such securities delivers to the Company a written opinion of counsel
in form and substance satisfactory to the Board to the effect that such legend
is no longer necessary under the Securities Act.
3.9 Taxes. The Company will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments, and
governmental charges or levies imposed upon the income, profits, property, or
business of the Company or any subsidiary; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto. Insurance. The Company will maintain, with financially sound and
reputable insurers, directors' and officers' liability insurance in the manner
customary for companies in similar businesses similarly situated. Employee Stock
Options. Unless the Board of Directors (including the directors designated by
the holders of Senior Preferred Stock) otherwise authorizes and except as set
forth on Schedule 3.11 hereto, the Company shall not issue any shares of Common
Stock directly or indirectly to its employees (each individually, an "Employee
Holder"), either through equity compensation plans or otherwise, unless such
shares of Common Stock are subject to a vesting schedule, such that twenty-five
percent (25%) of the shares of Common Stock so issued would vest no earlier than
the one-year anniversary of the date of issuance or vesting commencement date,
as applicable, and the balance vesting no sooner than in thirty-six (36) equal
monthly installments thereafter, thereby totaling a four (4) year vesting
schedule; provided that, the Common Stock of employees listed on Schedule 5.4 of
the Disclosure Schedules to the Purchase Agreement, granted or issued prior to
the date hereof, is subject to a vesting schedule as indicated therein. In the
event that the Company undergoes a merger, sale of substantially all of the
Company's assets, a liquidation or similar transaction, up to twenty-five
percent (25%) of the unvested Common Stock held by such Employee Holder may
automatically vest at the time of such transaction. Meeting of the Board of
Directors; Committees. Unless otherwise determined by the vote of a majority of
the directors then in office, the Board of Directors of the Company shall meet
at least quarterly in accordance with an agreed upon schedule. The Company shall
promptly reimburse in full, each director of the Company who is not an employee
of the Company for all of his or her reasonable out-of-pocket expenses incurred
in attending each meeting of the Board of Directors of the Company or any
committee thereof. If not already established, the Board of Directors of the
Company will establish a Compensation Committee and an Audit Committee, each of
which shall consist solely of non-employee directors and one
13
or more of the directors designated by the holders of Senior Preferred Stock.
The Compensation Committee will administer all equity compensation plans and
arrangements and will also approve all executive compensation levels and
arrangements. The Audit Committee will select the Company's auditor and will
approve the scope of the Company's annual audit. By-Laws. At all times, the
Company shall cause its by-laws 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 any outstanding series of
Senior Preferred Stock, 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. Termination. The covenants set forth in this Article III shall
terminate and be of no further force or effect upon (a) the consummation of a
Qualified Public Offering or (b) upon a Deemed Liquidation Event, as such term
is defined in the Company's Certificate of Incorporation.
ARTICLE IV
MISCELLANEOUS
4.1 No Inconsistent Agreements. The Company shall not hereafter enter into
any agreement with respect to its securities that is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement. This Agreement is intended to amend and restate the Prior
Registration Agreement in its entirety. From and after the execution and
delivery of this Agreement by the Company and the holders of at least two-thirds
(2/3) of the Registrable Securities (as defined in the Prior Registration
Agreement), the Prior Registration Agreement shall be deemed to be terminated
and superseded in all respects. Adjustments Affecting Registrable Securities.
The Company shall not take any action, or permit any change to occur, with
respect to its securities which would materially and adversely affect the
ability of the holders of Registrable Securities to include such Registrable
Securities in a registration undertaken pursuant to this Agreement or which
would materially and adversely affect the marketability of such Registrable
Securities in any such registration (including, without limitation, effecting a
stock split or a combination of shares). Remedies. Any party having rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically to recover damages caused by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law or in equity.
The parties hereto agree and acknowledge that money damages would not be an
adequate remedy for any breach of the provisions of this Agreement and that, in
addition to any other rights and remedies existing in its favor, any party shall
be entitled to specific performance and/or other injunctive relief from any
court of law or equity of competent jurisdiction (without posting any bond or
other security) in order to enforce or prevent violation of the provisions of
this Agreement. Amendments and Waivers. This Agreement may be amended or
modified and the observance of any term hereof may be waived (either generally
or in a particular instance and either retroactively or prospectively) only by a
written instrument executed by the holders of at least seventy-five percent
(75%) in voting power of the shares of Common Stock issued or issuable upon
conversion of the Preferred Stock (voting as a single class and on an
as-converted basis). Any amendment or waiver so effected shall be binding upon
the Company, all of the Investors and all of their respective successors and
permitted assigns whether or not such party, assignee or other shareholder
entered into or approved such amendment or waiver. Notwithstanding the
foregoing, this Agreement may not
14
be amended or terminated and the observance of any term hereunder may not be
waived (a) with respect to any Investor without the written consent of such
Investor, unless such amendment, termination or waiver applies to all Investors
in the same fashion and (b) in a manner that would adversely affect the rights
of the holders of Founder Registrable Securities under Article II hereof,
without the prior written approval of the holders of at least a majority in
voting power of the Founder Registrable Securities. The Company shall give
prompt written notice of any amendment or termination hereof or waiver hereunder
to any party hereto that did not consent in writing to such amendment,
termination or waiver. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision. Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities. Notwithstanding
the foregoing, no rights or obligations under this agreement may be transferred
by the holders of Registrable Securities unless the Company is given written
notice thereof and the transfer (i) is in connection with a transfer of all the
Registrable Securities owned by the transferor, (ii) involves a transfer of at
least one hundred thousand (100,000) shares of Common Stock (on an as-converted
basis and as adjusted proportionately for stock splits, stock dividends,
recombinations or other recapitalizations), (iii) is to constituent partners or
shareholders of the transferor, and such partners or shareholders agree to act
through a single representative, or (iv) is an Excluded Transfer or a transfer
to a Permitted Transferee (as such terms are defined in the Fourth Amended and
Restated Stockholders Agreement by and among the Company and the Stockholders
(as defined therein), dated as of the date hereof).Severability. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts, any
one of which need not contain the signatures of more than one party, but all
such counterparts taken together shall constitute one and the same Agreement.
Descriptive Headings. The descriptive headings of this Agreement are inserted
for convenience only and do not constitute a part of this Agreement. Governing
Law. All issues and questions concerting the construction, validity,
interpretation and enforcement of this Agreement and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Delaware; without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given (i) upon delivery, when
delivered personally to the recipient, (ii) one (1) business day after delivery
to the courier, when sent to the recipient by reputable overnight courier
service (charges prepaid), (iii) seven (7) days after mailing, when mailed to
the recipient by certified or registered mail, return receipt requested and
postage prepaid, or (iv) upon confirmed transmittal, when sent via facsimile.
Such notices, demands and other communications shall be sent to each Investor at
the
15
address or facsimile number indicated on the Schedule I to the Purchase
Agreement, to each Founder at the address indicated on the Schedule of Founders
to the Fourth Amended and Restated Stockholders Agreement, and to the Company at
the address indicated below:
SoundBite Communications, Inc.
0 Xxxxxxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: 000-000-0000
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
4.11 Rescission of Certain Agreements.
(a) The provisions of Section 3.2 of this Agreement are intended to
supersede the provisions of Article VII of that certain Series C Convertible
Preferred Stock Purchase Agreement among the Corporation and the investors named
therein, dated as of January 20, 2005 and any amendment thereof or any similar
agreement (the "Original Series C Agreement"). From and after the execution and
delivery of this Agreement by the Company and the Purchasers, who together hold
not less than two-thirds (2/3) of the Underlying Common Stock (as defined in the
Original Series C Agreement), the provisions of Article VII of the Original
Series C Agreement shall be deemed to be terminated and superseded in all
respects.
(b) The provisions of this Agreement are intended to supersede the
provisions of the Prior Registration Agreement. From and after the execution and
delivery of this Agreement by the Company and the Purchasers, who together hold
not less than two-thirds (2/3) of the Underlying Common Stock (as defined in the
Original Series C Agreement), the provisions of Prior Registration Agreement
shall be deemed to be terminated and superseded in all respects
****
16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
SOUNDBITE COMMUNICATIONS, INC.
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Its:
-----------------------------------
/s/ Xxxx XxXxxxxxx
----------------------------------------
XXXX XXXXXXXXX
/s/ Xxxxx Xxxxxx
----------------------------------------
XXXXX XXXXXX
COMMONWEALTH CAPITAL VENTURES III L.P.
By: Commonwealth Venture Partners
III L.P.
Its: General Partner
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: General Partner
CCV III ASSOCIATES L.P.
By: Commonwealth Venture Partners
III L.P.
Its: General Partner
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: General Partner
MOSAIC VENTURE PARTNERS II, L.P.
By: 1369404 Ontario Inc.
Its: General Partner
By: /s/ Xxxxxx Xxxx
------------------------------------
Its: Managing Director
-----------------------------------
[SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT]
NORTH BRIDGE VENTURE PARTNERS IV-A, L.P.
By: North Bridge Venture Management
IV, L.P.
Its: General Partner
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
General Partner
NORTH BRIDGE VENTURE PARTNERS IV-B, L.P.
By: North Bridge Venture Management
IV, L.P.,
Its: General Partner
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
General Partner
VENTURE CAPITAL FUND OF NEW ENGLAND IV,
LP
By: VCFNE IV Partners, LLC
Its: Its General Partner
By: /s/ Xxxx Xxxxxxx
------------------------------------
Managing Director
[SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT]
