EXHIBIT 10.4
INFORMAX, INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is entered into as of the
22nd day of June, 1999, by and among INFORMAX, INC., a Delaware corporation (the
"COMPANY") and the entity(ies) listed on the "Schedule of Investors" attached as
Exhibit A hereto (together, the "INVESTORS" and each individually an
"INVESTOR").
RECITALS
WHEREAS, the Company and the Investors are parties to a certain Series A
Preferred Stock Purchase Agreement (the "PURCHASE AGREEMENT") of even date
herewith, pursuant to which the Company proposes to sell and issue to the
Investors up to Two Million One Hundred Sixty-One Thousand Two Hundred Sixty
Five (2,161,265) shares of the Company's Series A Preferred Stock (the "SERIES A
STOCK");
WHEREAS, in order to induce the Investors to enter into the Purchase
Agreement, the Company has agreed to extend to the Investors registration
rights, information rights and other rights as set forth in this Agreement; and
WHEREAS, unless otherwise defined herein, capitalized terms used herein
shall be given the meanings ascribed to such terms in the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"COMMON STOCK" means the authorized Voting Common Stock and Nonvoting
Common Stock of the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar federal statute.
"FAMILY MEMBER" means a person who is a spouse, child, parent or sibling of
the Holder or one or more trusts established for the exclusive benefit of such
Holder and/or one or more of such persons.
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"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" means any person owning of record Registrable Securities that have
not been sold to the public or pursuant to Rule 144 any assignee of record of
such Registrable Securities to whom rights under Section 2 have been duly
assigned in accordance with Section 2.11 hereof.
"INITIAL OFFERING" means the Company's first firm commitment underwritten
public offering of its Common Stock registered under the Securities Act.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company issued or
issuable upon conversion of the Shares; and (b) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public or sold pursuant to Rule 144 or sold
in a transaction in which the transferor's rights under Section 2 of this
Agreement are not assigned in accordance with this Agreement.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of shares
determined by calculating the total number of shares of the Common Stock that
are Registrable Securities and either (a) are then issued and outstanding or (b)
are issuable pursuant to then exercisable or convertible securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of a single special
counsel for the Holders, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
"RULE 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"SEC" or "COMMISSION" means the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"SHARES" shall mean the Company's Series A Stock issued pursuant to the
Purchase Agreement and held by the Investors listed on Exhibit A hereto and
their permitted assigns.
SECTION 2. RESTRICTIONS ON TRANSFER; REGISTRATION
2.1 RESTRICTIONS ON TRANSFER.
(A) Each Holder agrees not to make any disposition of all or any portion of
the Shares or Registrable Securities:
(I) unless and until there is then in effect a registration statement
under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement;
(II) in the event that any underwriting arrangements described herein
require the Holders to refrain from making any such disposition;
(III) unless and until (A) the transferee of such Shares or
Registrable Securities has agreed with the Company in writing to be bound
by and comply with the terms of this Agreement, (B) such Holder shall have
notified the Company of the proposed disposition and shall have furnished
the Company with a detailed statement of the circumstances surrounding the
proposed disposition, and (C) if reasonably requested by the Company, such
Holder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Securities Act; or
(IV) to any Competitor of the Company. For the purposes of this
Agreement, the term "COMPETITOR" means any person, partnership, limited
liability company, corporation or other entity (other than the Company)
which is engaged as its principal line of business, in the Company's
Business." For the purposes of this Agreement, the term "COMPANY'S
BUSINESS" means the business of [the development and licensing of
pharma-informactic software tools of the type developed by the Company].
(V) Notwithstanding the provisions of paragraphs (i) and (iv) above,
no such registration statement under the Securities Act or opinion of
counsel shall be necessary for a transfer by a Holder which is (A) a
partnership to its partners or former partners in accordance with
partnership interests, (B) a limited liability company to its members or
former members in accordance with their interest in the limited liability
company, or (C) to the Holder's Family Member or trust for the benefit of
an individual Holder; provided that in each case the transferee
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will be subject to the terms of this Agreement to the same extent as if he were
an original Holder hereunder.
(B) Each certificate representing Shares or Registrable Securities shall
(unless otherwise permitted by the provisions of the Agreement) be stamped or
otherwise imprinted with legends substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SHARES SHALL NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED
THE TRANSFER OF SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE RESTRICTIONS SET FORTH IN AN INVESTOR RIGHTS AGREEMENT WHICH
CONTAINS RESTRICTIONS ON TRANSFER OTHER THOSE IMPOSED BY SECURITIES
LAWS. COPIES OF THE INVESTORS RIGHTS AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS.
(C) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(D) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
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2.2 DEMAND REGISTRATION.
(A) Subject to the conditions of this Section 2.2, if the Company shall
receive a written request from the Holders of not less than thirty percent (30%)
of the Registrable Securities then outstanding (the "INITIATING HOLDERS") that
the Company file a registration statement under the Securities Act covering the
registration of Registrable Securities then outstanding, and such offering
provides for an anticipated aggregate offering price, net of underwriting
discounts and commissions, of not less than Twenty Million Dollars ($20,000,000)
(a "QUALIFIED PUBLIC OFFERING"), then the Company shall, within thirty (30) days
of the receipt thereof, give written notice of such request to all Holders and,
subject to the limitations of this Section 2.2 and the registration procedures
set forth in Section 2.7 hereof, use its best efforts to effect, as soon as
practicable, to register under the Securities Act all Registrable Securities
that the Holders request to be registered.
(B) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(C) Notwithstanding the foregoing, the Company shall not be required to
effect a registration pursuant to Section 2.2(a):
(I) prior to the earlier of (A) the third anniversary of the date of
this Agreement or (B) one hundred eighty (180) days following the effective
date of the registration statement pertaining to the Initial Offering;
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(II) after the Company has effected two (2) registrations pursuant to
Section 2.2(a), and such registrations have been declared or ordered
effective;
(III) during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective
date of the registration statement pertaining to the Initial Offering;
provided that the Company makes reasonable good faith efforts to cause such
registration statement to become effective;
(IV) if within thirty (30) days of receipt of a written request from
Initiating Holders pursuant to Section 2.2(a), the Company gives notice to
the Holders of the Company's intention to file its Initial Offering within
ninety (90) days of such Company notice to the Holders;
(V) if the Company shall furnish to Holders requesting a registration
statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be effected
at such time, in which event the Company shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided that such right to delay a
request shall be exercised by the Company not more than once in any twelve
(12) month period; or
(VI) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(A) UNDERWRITING. If the registration statement under which the Company
gives notice under this Section 2.3 is for an underwritten offering, the Company
shall so advise
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the Holders of Registrable Securities. In such event, the right of any such
Holder to be included in a registration pursuant to this Section 2.3 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting pursuant to this Section 2.3
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall reduce the amount of securities of the selling
Holders included in the registration below twenty-five percent (25%) of the
total amount of securities included in such registration, unless such offering
is the Initial Offering and such registration does not include shares of any
other selling shareholders, in which event any or all of the Registrable
Securities of the Holders may be excluded in accordance with the immediately
preceding sentence. In no event will shares of any other selling shareholder be
included in such registration which would reduce the number of shares which may
be included by Holders without the written consent of Holders of not less than
sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities
proposed to be sold in the offering. If any Holder disapproves of the terms of
any such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least ten (10) business
days prior to the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. For any Holder which is a partnership or
corporation, the partners, retired partners and shareholders of such Holder, or
the estates and Family Members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing person shall be deemed to be a
single "HOLDER", and any pro rata reduction with respect to such "HOLDER" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "HOLDER," as defined in this
sentence.
(B) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
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(A) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and
(B) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(I) if Form S-3 (or any successor to Form S-3) is not available for
such offering by the Holders;
(II) if the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than Five Hundred Thousand dollars ($500,000);
(III) if within thirty (30) days of receipt of a written request to
effect such Form S-3 registration, the Company gives notice to the Holders
of the Company's intention to make a public offering within ninety (90)
days of the Company's notice to the Holders;
(IV) if the Company shall furnish to the Holders a certificate signed
by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would
be seriously detrimental to the Company and its shareholders for such Form
S-3 registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of
the request of the Holder or Holders under this Section 2.4; provided, that
such right to delay a request shall be exercised by the Company not more
than once in any twelve (12) month period;
(V) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected one (1) registration on Form S-3
for the Holders pursuant to this Section 2.4; or
(VI) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.
(C) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected
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pursuant to this Section 2.4 shall not be counted as demands for registration or
registrations effected pursuant to Sections 2.2 or 2.3, respectively.
(D) Notwithstanding the foregoing, the Company shall not be required to
effect a registration pursuant to this Section 2.4 after the Company has
effected three (3) registrations on Form S-3 pursuant to this Section 2.4 (or
four (4) registrations on Form S-3 if the Holders have not demanded a
registration pursuant to Section 2.2), and such registrations have been declared
or ordered effective.
2.5 NO REGISTRATION OF SERIES A STOCK. The registration rights of the
Holders set forth in this Agreement apply only to the Common Stock of the
Company and nothing in this Agreement shall obligate the Company to register any
of the Series A Stock.
2.6 EXPENSES OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for the expenses of any registration proceeding begun pursuant to Sections
2.2 or 2.4, the request of which has been subsequently withdrawn by the
Initiating Holders, unless (a) the withdrawal is based upon material adverse
information concerning the Company of which the Company was aware and of which
the Initiating Holders were not aware at the time of such request; or (b) the
Holders of a majority of Registrable Securities agree to forfeit their right to
one requested registration pursuant to Section 2.2 or Section 2.4, as applicable
(in which event such right shall be forfeited by all Holders). If the Holders
are required to pay the Registration Expenses, such expenses shall be borne by
the holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
2.7 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(A) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use all reasonable efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to thirty (30) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
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(B) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in Section 2.7(a) above.
(C) Furnish to the Holders such number of copies of a prospectus, including
a preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(D) Use its reasonable best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(E) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(F) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(G) Use its best efforts to furnish, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters.
2.8 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under Section 2.2 shall terminate and be of no further force and effect five (5)
years after the date of the Company's Initial Offering. In addition, a Holder's
registration rights shall expire if (a) such Holder (together with its
affiliates, partners and former partners) holds less than 1% of the Registrable
Securities, or (b) all Registrable Securities held by and issuable to such
Holder (and its affiliates, partners, former partners, members and former
members) may be sold under Rule 144 during any ninety (90) day period.
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2.9 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(A) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(B) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to Sections 2.2, 2.3 or 2.4 that the selling Holders
shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(C) The Company shall have no obligation with respect to any registration
requested pursuant to Section 2.2 or Section 2.4 if, due to the operation of
Section 2.2(b), the number of shares or the anticipated aggregate offering price
of the Registrable Securities to be included in the registration does not equal
or exceed the anticipated aggregate offering price required to trigger the
Company's obligation to initiate such registration as specified in Section 2.2
or Section 2.4, as applicable.
2.10 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(A) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the partners, officers and directors of each Holder, any
underwriter (as defined in the Securities Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "VIOLATION") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.10(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for
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any such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(B) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company (including, without
limitation, any expenses payable by the Company pursuant to Section 2.6 hereof)
or any such director, officer, controlling person, underwriter or other Holder,
or partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.10(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.10
exceed the net proceeds from the offering received by such Holder.
(C) Promptly after receipt by an indemnified party under this Section 2.10
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 2.10, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its
12
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 2.10, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 2.10.
(D) If the indemnification provided for in this Section 2.10 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the net proceeds from the offering received by such Holder.
(E) The obligations of the Company and Holders under this Section 2.10
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
(F) The foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "FINAL PROSPECTUS"), such indemnity agreement shall not inure to the
benefit of any person if a copy of the Final Prospectus was furnished to the
indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
2.11 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member of a Holder, (b) is a Holder's Family Member or trust for the
benefit of an individual Holder, or (c) acquires at least twenty percent (20%)
of the shares of Registrable Securities (as adjusted for stock splits and
combinations); provided,
13
however, (i) the transferor shall, within ten (10) days after such transfer,
furnish to the Company written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights
are being assigned and (ii) such transferee shall agree in writing with the
Company to be subject to all restrictions set forth in this Agreement.
Notwithstanding the foregoing, the rights to cause the Company to register
Registrable Securities pursuant to this Section 2 may not be assigned by a
Holder to a transferee or assignee who is a Competitor of the Company.
Notwithstanding anything to the contrary, no transfer of shares will require the
Company to effect a registration of shares in excess of the limitations set
forth in Sections 2.2, 2.3 and 2.4 of this Agreement.
2.12 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least sixty six and
two-thirds percent (66 2/3%) of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 2.12 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Section 2, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.
2.13 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of sixty six and two-thirds percent (66 2/3%) of the Registrable
Securities then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company that would grant such holder
registration rights pari passu or senior to those granted to the Holders
hereunder.
2.14 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION. Each
Holder hereby agrees that such Holder shall not sell, pledge, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that (i) such agreement shall apply only to the Company's Initial Offering; and
(ii) the Company shall have used its reasonable best efforts to cause all
Holders of the Company's voting securities to enter into similar agreements; and
(iii) all officers and directors of the Company and holders of at least one
percent (1%) of the Company's voting securities enter into similar agreements.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering
14
of the Company's securities pursuant to a registration statement filed under the
Securities Act. The obligations described in this Section 2.14 shall not apply
to a registration relating solely to employee benefit plans on Form S-1 or Form
S-8 or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said
one-hundred eighty (180) day period.
2.15 RULE 144 REPORTING. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(A) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(B) File with the SEC, in a timely manner, all reports and other documents
required of the Company under the Exchange Act; and
(C) So long as a Holder owns any Registrable Securities, furnish to such
Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(A) The Company will maintain true books and records of account in which
full and correct entries will be made of all its business transactions pursuant
to a system of accounting established and administered in accordance with
generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(B) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company will
furnish each Investor a balance sheet of the Company, as at the end of such
fiscal year, and a statement of income and a statement of cash flows of the
Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements
15
shall be accompanied by a report and opinion thereon by independent public
accountants of national standing selected by the Company's Board of Directors.
(C) The Company will furnish each Investor, as soon as practicable after
the end of each month, and in any event within twenty (20) days thereafter, a
balance sheet of the Company as of the end of each such monthly period, and a
statement of income and a statement of cash flows of the Company for such period
and for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles, with the exception that no notes need be
attached to such statements and year-end audit adjustments may not have been
made.
(D) So long as an Investor (with its affiliates) shall own not less than
one hundred thousand (100,000) shares of Registrable Securities (as adjusted for
stock splits and combinations) (a "MAJOR INVESTOR"), the Company will furnish
each such Major Investor at least sixty (60) days prior to the beginning of each
fiscal year an annual operating plan and budget, prepared on a monthly basis for
the ensuing fiscal year, and on a basis consistent with prior periods
(including, among other items, appropriate reserves, accruals and provisions for
income taxes) and representing the best estimate of the Company based upon
available information. The Company shall also furnish to such Major Investor,
within a reasonable time of its preparation, amendments to the annual budget, if
any. Such budget shall include underlying assumptions and a brief qualitative
description of the Company's plan by the Chief Executive Officer in support of
that budget.
(E) The Company will notify each Investor, as soon as practicable, and in
any event within ten (10) days of discovery, of (i) any event (including pending
or threatened litigation) which could have a material adverse effect upon the
financial condition or results of operations of the Company considered in the
aggregate; (ii) any change in any material fact or circumstance represented or
warranted in this Agreement, (iii) a default or any event or occurrence which
with the lapse of time or notice or both could become a default under the
Purchase Agreement and (iv) a material default or any event or occurrence which
with the lapse of time or notice or both could become a default under any of the
Company's material agreements. Such notice shall contain a reasonably detailed
statement outlining such default or event, and the Company's proposed response.
(F) In the event the Company fails to provide the reports or financial
statements required by this Section 3.1, the Major Investors may give the
Company notice requesting immediate delivery of such reports. If the Company
fails to deliver such reports upon receipt of such notice, then any of the Major
Investors shall have the right and authority, at the Company's sole expense, to
request an audit by a single accounting firm of its or their choice, such that
the reports or financial statements are produced to its or their sole
satisfaction.
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be
16
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 3.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use its
best efforts to insure that its authorized representatives use, the same degree
of care as such Investor uses to protect its own confidential information to
keep confidential any information furnished to it which the Company identifies
as being confidential or proprietary (so long as such information is not in the
public domain), except that such Investor may disclose such proprietary or
confidential information to any partner, subsidiary or parent of such Investor
for the purpose of evaluating its investment in the Company as long as such
partner, subsidiary or parent is advised of, and agrees to comply with, the
confidentiality provisions of this Section 3.3.
3.4 RESERVATION OF SHARES. The Company will at all times reserve and keep
available, solely for issuance and delivery upon conversion of the Preferred
Stock, shares of Common Stock sufficient to effectuate the conversion of all
such shares of the Series A Preferred Stock at the then applicable conversion
rate.
3.5 STOCK VESTING. Unless otherwise approved by the Board of Directors
(including the approval of the director designated by holders of the Shares (the
"Series A Board Designee"), all stock options and other stock equivalents issued
pursuant to agreements executed by the Company, except for agreements executed
prior to, or agreements executed based on offers made prior to, the date of this
Agreement to employees, directors, consultants, and other service providers
shall be subject to vesting as follows: (a) twenty-five percent (25%) of such
stock shall vest at the end of the first year following the earlier of the date
of issuance or such person's services commencement date with the company, and
(b) seventy-five percent (75%) of such stock shall vest over the remaining three
(3) year period subsequent to the end of the one (1) year period described in
subsection (a) above. With respect to any shares of stock purchased by any such
person, the Company's repurchase option shall provide that upon such person's
termination of employment or service with the Company, with or without cause,
the Company or its assignee (to the extent permissible under applicable
securities laws and other laws) shall have the option to purchase at cost any
unvested shares of stock held by such person.
3.6 OPTION POOL. Unless otherwise approved by the Board of Directors
(including the approval of the Series A Board Designee), the Company will not
increase the number of shares reserved under the Company's equity incentive
plan.
3.7 KEY MAN INSURANCE. Subject to the approval of the Board of Directors,
the Company will use its best efforts to obtain and maintain in full force and
effect term life insurance in the amount of Two Million Dollars ($2,000,000) on
the lives of each of Xxxx Xxxxxxxxx and Xxxxx Xxxxxxx; naming the Company as
beneficiary.
3.8 OBSERVATION RIGHTS. In the event FBR Technology Venture Partners, LP
("FBR") (i) does not have a designee elected to the Company's Board of Directors
and (ii) is a
17
Major Investor, the Company shall allow one representative designated by FBR to
attend all meetings of the Company's Board of Directors in a nonvoting capacity,
and in connection therewith, the Company shall give such representative copies
of all notices, minutes, consents and other materials, financial or otherwise,
which the Company provides to its Board of Directors; provided, however, that
the Company reserves the right to exclude such representative from access to any
material or meeting or portion thereof if the company believes upon advice of
counsel that such exclusion is reasonably necessary to preserve the attorney
client privilege, to protect highly confidential proprietary information or for
other similar reasons.
3.9 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in substantially the form attached to the
Purchase Agreement.
3.10 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. In the event the Company elects
not to exercise any right of first refusal or right of first offer the Company
may have on a proposed transfer of any of the Company's outstanding capital
stock pursuant to the Company's charter documents, by contract or otherwise, the
Company shall assign such right of first refusal or right of first offer to the
Major Investors. In the event of such assignment, each Major Investor shall have
a right to purchase its pro rata portion (as defined in Section 4.1) of the
capital stock proposed to be transferred.
3.11 AFFILIATED TRANSACTIONS. The Company shall not without the approval of
a majority of the Board of Directors, with only non-interested Directors voting,
authorize or enter into any transactions, with any director or management
employee, or such director's or employee's immediate family, provided, however,
that with respect to any transaction with a Director who is a member of the
Company's management (other than transactions related to compensation including
salary, stock options, and bonuses), the Company shall not without the approval
of a majority of the outside directors of the Company, authorize or enter into
such transaction.
3.12 DIRECTORS' EXPENSES. Except for the agreement with Xxxxxxxx Xxxx, the
Company shall not pay any compensation to any member of the Company's Board of
Directors in connection with the performance of their duties as a Director;
provided, however, the Company will reimburse reasonable expenses of Board
members incurred in attending Board meetings or any other activities (e.g.,
meetings, trade shows) which are required and/or requested by the Company and
that involve expenses.
3.13 DIRECTORS' LIABILITY AND INDEMNIFICATION. The Company's Certificate of
Incorporation and Bylaws shall provide (a) for elimination of the liability of
director to the maximum extent permitted by law and (b) for indemnification of
directors for acts on behalf of the Company to the maximum extent permitted by
law.
18
3.14 ISSUANCE OF CAPITAL STOCK. The Company shall not, without the prior
approval of a majority of the Board of Directors, issue any capital stock or
securities convertible into capital stock.
3.15 CAPITAL EXPENDITURES. The Company shall not, without the prior
approval of a majority of the Board of Directors (including the Series A Board
Designee), make capital expenditures (including expenditures under capitalized
leases) in excess of $250,000 in the aggregate in any fiscal year or any single
capital expenditure exceeding $100,000.
3.16 INDEBTEDNESS. The Company shall not, without the prior approval of a
majority of the Board of Directors (including the Series A Board Designee),
directly or indirectly create, incur, assume, suffer to exist, or be or remain
liable with respect to, any indebtedness or obligation other than the following:
(A) Current accounts payable and similar current liabilities, incurred in
the ordinary course of business of the Company;
(B) Indebtedness incurred upon the purchase of equipment (which
indebtedness may be secured by a security interest or any other lien or title
retention agreement relating to such equipment), and equipment lease obligations
of any character;
(C) Obligations under present or future leases of real estate used in the
ordinary course of business; or
(D) Any other indebtedness which would not increase the Company's total
indebtedness by more than Two Million Dollars ($2,000,000) in any fiscal year.
Notwithstanding the foregoing, the Company shall not, without the prior
approval of the Holders of at least sixty-six and two-thirds percent (66 2/3%)
of the Registrable Securities, incur any indebtedness or provide any guaranties
in excess of Two Million Dollars ($2,000,000) in any fiscal year.
3.17 BOARD MEETINGS. Until such time as the Board of Directors shall elect
to meet less often, the Company shall cause the Board of Directors to meet at
least once every two months.
3.18 SUBSIDIARIES OR JOINT VENTURES. The Company shall not, without the
prior approval of a majority of the Board of Directors (including the Series A
Board Designee), establish or invest in any subsidiary or joint venture.
3.19 USE OF PROCEEDS. The Company shall use the proceeds of the sale of
shares of the Series A Stock for working capital purposes.
3.20 TERMINATION OF COVENANTS. All covenants of the Company contained in
this Section 3 of the Agreement shall expire and terminate as to each Investor
upon the earlier to
19
occur of (i) the effective date of the registration statement pertaining to the
Initial Offering, which results in the Series A Stock being converted into
Common Stock; (ii) upon (a) the sale, lease or other disposition of all or
substantially all of the assets of the Company or (b) an acquisition of the
Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 3.20 shall not apply to a merger effected exclusively for the purpose of
changing the domicile of the Company (a "CHANGE IN CONTROL"); or (iii) the
termination of this Agreement.
SECTION 4. RIGHTS OF FIRST REFUSAL
4.1 SUBSEQUENT OFFERINGS. Each Investor shall have a right of first refusal
to purchase its pro rata share of all Equity Securities, as defined below, that
the Company may, from time to time, propose to sell and issue after the date of
this Agreement, other than the Equity Securities excluded by Section 4.6 hereof.
The Investor's pro rata share is equal to the ratio of (a) the number of shares
of the Company's Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares) which the Investor is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (b) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares or upon
the exercise of any outstanding warrants or options) immediately prior to the
issuance of the Equity Securities. For the purposes of this Agreement, the term
"EQUITY SECURITIES" shall mean (i) any Common Stock, Series A Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Series A Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Series A Stock or other security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give the Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. The Investor shall have thirty
(30) days from the giving of such notice to agree to purchase its pro rata share
of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to the Investor if it would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If the Investors fail
to exercise in full the rights of first refusal, the Company shall have ninety
(90) days thereafter to sell the Equity Securities in respect of which the
Investor's rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than
20
specified in the Company's notice to the Investors pursuant to Section 4.2
hereof. If the Company has not sold such Equity Securities within ninety (90)
days of the notice provided pursuant to Section 4.2, the Company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Investors in the manner provided above.
4.4 TERMINATION AND WAIVER OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Section 4 shall not apply to, and shall terminate
upon the earlier of (i) effective date of the registration statement pertaining
to the Company's Initial Offering or (ii) a Change in Control. The rights of
first refusal established by this Section 4 may be amended, or any provision
waived with the written consent of the Investor or as permitted by Section 5.6.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of the
Investor under this Section 4 may be transferred to the same parties, subject to
the same restrictions as any transfer of registration rights pursuant to Section
2.11.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(A) up to an aggregate amount of Five Hundred Thousand (500,000) shares of
Common Stock (and/or options, warrants or other Common Stock purchase rights
issued pursuant to such options, warrants or other rights) as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like issued or
to be issued after the Original Issue Date (as defined in the Company's
Certificate of Designation) to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors (or the Equity Incentive Compensation Plan Committee
thereof);
(B) stock issued pursuant to any rights or agreements outstanding as of the
date of this Agreement, options and warrants outstanding as of the date of this
Agreement; and stock issued pursuant to any such rights or agreements granted
after the date of this Agreement; provided that the rights of first refusal
established by this Section 4 applied with respect to the initial sale or grant
by the Company of such rights or agreements;
(C) any Equity Securities issued for consideration other than cash pursuant
to a merger, consolidation, acquisition or similar business combination approved
by the Board of Directors including the representative designated by the holder
of the Shares;
(D) shares of Common Stock issued in connection with any stock split, stock
dividend or recapitalization by the Company;
(E) shares of Common Stock issued upon conversion of the Shares;
(F) any Equity Securities issued pursuant to any equipment leasing or loan
arrangement, or debt financing from a bank or similar financial or lending
institution approved by the Board of Directors, including the Series A Board
Designee;
21
(G) any Equity Securities that are issued by the Company pursuant to a
registration statement filed under the Securities Act; and
(H) shares of the Company's Common Stock or Series A Stock issued in
connection with strategic transactions involving the Company and other entities,
including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors, including the Series A Board
Designee.
SECTION 5. MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware (without
regard to the conflicts of laws principles thereof).
5.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee of such Registrable Securities, the Company may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes, including the payment of dividends
or any redemption price.
5.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
5.5 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
22
5.6 AMENDMENT AND WAIVER.
(A) Except as otherwise expressly provided, this Agreement may be amended
or modified only upon the written consent of the Company and the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities.
(B) Except as otherwise expressly provided, the obligations of the Company
and the rights of the Holders under this Agreement may be waived only with the
written consent of the holders of at least sixty-six and two-thirds percent (66
2/3%) of the Registrable Securities.
(C) Notwithstanding the foregoing, this Agreement may be amended with only
the written consent of the Company to include additional purchasers of Shares as
"INVESTORS," "HOLDERS" and parties hereto.
5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to exercise
any right, power, or remedy accruing to any Holder, upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on any Holder's
part of any breach, default or noncompliance under the Agreement or any waiver
on such Holder's part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Holders, shall be cumulative and not alternative.
5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.9 ATTORNEYS' FEES. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
23
5.11 ADDITIONAL INVESTORS. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of the Series A
Stock pursuant to the Purchase Agreement, any purchaser of such shares of Series
A Stock may become a party to this Agreement by executing and delivering an
additional counterpart signature page to this Agreement and shall be deemed an
"INVESTOR" hereunder.
5.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR RIGHTS
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTOR:
INFORMAX, INC. FBR TECHNOLOGY VENTURE
PARTNERS II, LP
By: FBR VENTURE CAPITAL
MANAGERS, L.P., its General Partner
By: /s/ Xxxxxxxxx Xxxxxxxxx By: /s/ Hooks X. Xxxxxxxx
----------------------------------- ------------------------------
Name: Xxxxxxxxx Xxxxxxxxx Name: Hooks X. Xxxxxxxx
--------------------------------- ----------------------------
Title: CEO and President Title: Managing Director
-------------------------------- ---------------------------
EXHIBIT A
SCHEDULE OF INVESTORS
FBR Technology Venture Partners II, LP
