GRANDE COMMUNICATIONS HOLDINGS, INC. SIXTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
Exhibit
10.9
SIXTH
AMENDED AND RESTATED
This
Sixth Amended and Restated Investor Rights Agreement (the “Agreement”)
by and among (i) Grande Communications Holdings, Inc., a Delaware
corporation (the “Company”),
(ii) each existing holder of Equity Securities of the Company set forth on
Schedule 1
attached hereto (together with any other person or entity that becomes a party
to this Agreement pursuant to Section 8.16 hereof, the
“Investors”),
and certain founding owners set forth on Schedule 2 attached
hereto (the “Founders” and, together with the
Investors, the “Stockholders”),
shall become effective upon the closing of the Transactions, as defined
below.
R
E C I T A L S
A.
The Company and certain of the Stockholders are
parties to that certain Fifth Amended and Restated Investor Rights Agreement,
dated as of December 12, 2005 (the “Original
Agreement”).
B.
The Company has entered into that certain
recapitalization agreement, dated as of August 27, 2009 (the “Recapitalization
Agreement”), by and among ABRY Partners VI, L.P., a Delaware limited
partnership (“ABRY”),
Grande Investment L.P., a Delaware limited partnership and wholly-owned
subsidiary of ABRY (“Ultimate
Parent”), Grande Parent LLC, a Delaware limited liability company and
wholly-owned subsidiary of Ultimate Parent (“Parent”),
the Company, Grande Communications Networks, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company (“Grande
Operating”), and ABRY Partners, LLC, a Delaware limited liability
company.
C.
Pursuant to the Recapitalization
Agreement, among other things, (1) at least two days prior to the closing,
Grande Operating will convert to a Delaware limited liability company that is
disregarded for federal income tax purposes; (2) at least one day prior to
closing of the Transactions, Grande Operating will distribute to the Company a
certain amount of cash for the Company’s future working capital needs; (3) the
Company will contribute certain operating assets to Grande Operating and Grande
Operating will assume certain liabilities arising out of the operation of the
operating assets; (4) ABRY and Grande Manager LLC, a newly formed wholly-owned
subsidiary of ABRY (“Grande
Manager”) will contribute cash to Ultimate Parent (which will be
contributed through Parent to Grande Operating); (5) the Company will contribute
to Ultimate Parent all of the outstanding membership interests of Grande
Operating (which will be contributed to Parent); and (6) ABRY will cause Grande
Operating to enter into a new credit agreement and cause the repurchase and
redemption of all of the Company’s outstanding 14% Senior Secured Notes due 2011
(together with all other transactions contemplated by the Recapitalization
Agreement and any documents ancillary thereto, the “Transactions”).
D.
Upon the closing of the
Transactions, based upon certain assumptions and subject to certain adjustments,
including the amount of the Company’s indebtedness, transaction expenses, cash
and cash equivalents and working capital and prior to dilution by certain
incentive interests, it is expected that (1) an approximately 1.0% common equity
interest of Ultimate Parent will be owned by Grande Manager, that an
approximately 74.3% common equity interest of Ultimate Parent will be owned by
ABRY and that an approximately 24.7% common ownership interest of Ultimate
Parent will be owned indirectly by the Company through a wholly-owned subsidiary
of the Company to be formed prior to closing (“Rio GP”);
(2) the interests of Grande Manager and Rio GP will be general partner
interests, with Grande Manager having 75.3% of the combined voting power of the
general partners of Ultimate Parent and Rio GP having 24.7% of the combined
voting power of the general partners of Ultimate Parent; (3) ABRY will also hold
a preferred equity interest in Ultimate Parent; and (4) ABRY will control Grande
Manager, Ultimate Parent, Parent and Grande Operating.
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E.
After closing of the
Transactions, (1) all of the outstanding Equity Securities of the Company will
remain outstanding; and (2) the Company will not have any operations or material
assets other than the ownership through Rio GP of its general partner interest
of Ultimate Parent.
F.
The amendment and restatement of the
Original Agreement as provided herein is a condition to the obligations of each
party to the Recapitalization Agreement to effect the Transactions.
G.
Effective upon the
Closing (as defined in the Recapitalization Agreement) of the Transactions, the
Company, and those requisite Stockholders having approved this Agreement by
written consent in accordance with Section 8.5 of the Original Agreement (the
“Written
Consent”) , desire to amend and restate the Original Agreement as set
forth herein, and for the Company to take all actions necessary to execute and
deliver this Agreement.
A
G R E E M E N T
NOW, THEREFORE, in
consideration of the foregoing recitals and the mutual promises hereinafter set
forth, the parties hereto agree as follows:
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Section
1.
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General.
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1.1. Definitions. As
used in this Agreement, the following capitalized terms shall have the following
respective meanings:
“Affiliate”
means, with respect to a person or entity, any person or entity that controls,
is controlled by or is under common control with, such person or
entity.
“Board”
means the Board of Directors of the Company.
“Centennial”
shall have the meaning set forth in Section
4.1(b)(ii)(A).
“Common
Stock” means the Company’s Common Stock, $0.001 par value per
share.
“Company”
means Grande Communications Holdings, Inc., a Delaware
corporation, or any successor corporation thereto, whether by merger, conversion
or otherwise.
“Election
Period” shall have the meaning set forth in Section
5.1(b).
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“Equity
Securities” means (i) any shares of Common Stock, Preferred Stock or
other security of the Company, (ii) any security or instrument convertible
into or exercisable or exchangeable for, with or without consideration, any
shares of Common Stock, Preferred Stock or other security of the Company
(including the any option, warrant or right to subscribe for or purchase such a
security or instrument), or (iii) any security or instrument carrying any
option, warrant or right to subscribe for or purchase any shares of Common
Stock, Preferred Stock or other security of the Company.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated by the SEC thereunder.
“February Series A
Purchase Agreement” means the Series A Preferred Stock Purchase Agreement
dated as of February 24, 2000, by and among the Company and the other
parties thereto.
“Founders” means those certain
founding owners of the Company’s Common Stock set forth on Schedule 2
hereto.
“Investors”
means those certain Stockholders set forth on Schedule 1
hereto.
“New
Securities” shall have the meaning set forth in Section
6.1.
“Non-Selling
Stockholder” shall have the meaning set forth in Section
5.4(b).
“Observer”
shall have the meaning set forth in Section
4.2(b).
“Offer
Notice” shall have the meaning set forth in Section 5.4(a).
“Offered
Shares” shall have the meaning set forth in Section
5.4(a).
“Permitted
Transferee” means (i) an Affiliate
of a Stockholder, (ii) a Stockholder’s family members or a trust for the benefit
of an individual Stockholder or his family members, (iii) a Stockholder’s
affiliated or related venture capital funds (if the Stockholder is a venture
capital fund investor), (iv) a Stockholder’s partners or retired partners in
accordance with partnership interests (if the Stockholder is a partnership), (v)
a Stockholder’s members or former members in accordance with their interest in
the limited liability company (if the Stockholder is a limited liability
company), (vi) a Stockholder’s shareholders in accordance with their interest in
the corporation (if the Stockholder is a corporation), (vii) any distribution in
connection with the dissolution, winding-up or liquidation of a Stockholder,
(viii) a transferee of a Stockholder by will or the laws of intestate
succession, and (ix) the Company, for acquisitions from Stockholders of Common
Stock by the Company pursuant to agreements permitting the Company to repurchase
such shares of Common Stock upon termination of services to the Company at such
Stockholders’ cost.
“Preferred
Shares” means (i) shares of Series A Preferred Stock, shares of Series B
Preferred Stock, shares of Series C Preferred Stock, shares of Series D
Preferred Stock, shares of Series E Preferred Stock, shares of Series F
Preferred Stock, shares of Series G Preferred Stock, and shares of Series H
Preferred Stock, and (ii) any other shares of Preferred Stock into which such
shares are converted pursuant to Section IV(3)(e) of the Restated
Certificate.
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“Preferred
Stock” means the Company’s Preferred Stock, $0.001 par value per share,
and any series thereof.
“Prior Existing
Stockholders Agreement” means that certain Stockholders Agreement, dated
as of February 11, 2000, entered into by and among the Company, KNOLOGY, Inc.,
and ClearSource, Inc.
“Prior Management
Agreement” means that certain Amended and Restated Stockholders
Agreement, dated as of February 11, 2000, by and among the Company and members
of the Company’s management, as amended February 22, 2000.
“Purchase
Agreements” means: the February
Series A Purchase Agreement and the Series A Preferred Stock Purchase Agreement
dated as of June 22, 2000, by and between the Company and the other parties
thereto; the Series B Preferred Stock Purchase Agreement dated as of September
19, 2000, by and between the Company and the other parties thereto; the Series C
Preferred Stock Purchase Agreement dated as of October 29, 2001, by and between
the Company and the other parties thereto; the Series F Preferred Stock Purchase
Agreement dated as of November 18, 2002, by and between the Company and the
other parties thereto; the Series G Preferred Stock Purchase Agreement dated as
of October 27, 2003, by and between the Company and the other parties thereto;
and that certain Agreement and Plan of Merger dated April 25, 2002, by and
between the Company and the other parties thereto.
“Qualified
Investor” means an Investor (including any group of affiliated or related
funds, in the case of an Investor that is a venture capital fund investor)
holding at least fifteen million (15,000,000) Preferred Shares (as adjusted for
stock splits, stock dividends, recapitalizations and similar
events).
“Qualified Public
Offering” means a firm commitment underwritten public offering pursuant
to an effective registration statement under the Securities Act covering the
offer and sale of Common Stock for the account of the Company in which the
per-share sales price of such Common Stock to the public is at least $1.30 (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
similar events) and the gross proceeds to the Company (prior to deduction of
underwriting discounts, commissions and fees) are at least
$150,000,000.
“Restated
Certificate” means the Company’s Restated Certificate of Incorporation,
as filed with the Delaware Secretary of State on December 28, 2005 and amended
or restated from time to time.
“Rule 144”
means Rule 144 promulgated under the Exchange Act, as amended.
“Sale
Notice” shall have the meaning set forth in Section
5.3.
“SEC” or
“Commission” means the Securities and
Exchange Commission.
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“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated by the SEC thereunder.
“Series A
Directors” shall have the meaning set forth in Section
4.1(b)(ii);
“Series A
Preferred Stock” means Series A Preferred Stock, $0.001 par value per
share, of the Company.
“Series B
Preferred Stock” means Series B Preferred Stock, $0.001 par value per
share, of the Company.
“Series C
Preferred Stock” means Series C Preferred Stock, $0.001 par value per
share, of the Company.
“Series D
Preferred Stock” means Series D Preferred Stock, $0.001 par value per
share, of the Company.
“Series E
Preferred Stock” means Series E Preferred Stock, $0.001 par value per
share, of the Company.
“Series F
Preferred Stock” means Series F Preferred Stock, $0.001 par value per
share, of the Company.
“Series G
Preferred Stock” means Series G Preferred Stock, $0.001 par value per
share, of the Company.
“Series H
Preferred Stock” means Series H Preferred Stock, $0.001 par value per
share, of the Company.
“Series H
Stockholder”
means any holder of Series H Preferred Stock.
“Shares”
means any shares of (i) Common Stock of the Company held by the Investors,
(ii) Common Stock of the Company issued or issuable upon the conversion,
exercise or exchange of any Equity Securities held by the Investors, and
(iii) Common Stock of the Company issued as (or issuable upon the
conversion, exercise or exchange of any warrant, right or other security which
is issued as) or by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation, or other
reorganization or other distribution with respect to, or in exchange for or in
replacement of, any Equity Securities held by the
Investors. Notwithstanding the foregoing, securities shall cease to
be Shares when such securities are sold to the public either pursuant to a
registration statement or Rule 144.
“Stockholders”
means the Investors and Founders.
“Stockholder Sale
Notice” shall have the meaning set forth in Section
5.4(b).
“Third-Party
Offer” shall have the meaning set forth in Section
5.3.
“Transfer”
shall have the meaning set forth in Section
5.1(a).
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“Transferring
Stockholder” shall have the meaning set forth in Section
5.4(b).
“Whitney &
Co.” shall have the meaning set forth in Section
4.1(b)(ii)(B).
1.2.
Method for
Calculations. Except as otherwise provided in this Agreement,
for purposes of calculating (i) the number of shares of Equity Securities
outstanding as of any date, (ii) the number of shares of Equity Securities held
by a party, and (iii) all related percentages and ratios, all such securities
shall be treated as having been converted into, or exercised or exchanged for,
Common Stock (i.e., all
such calculations shall be made on a fully diluted, converted, exercised and
exchanged basis). Whenever reference is made in this Agreement to a
specific number of shares of Equity Securities, such number shall be
proportionally adjusted in the event of any stock dividends, combinations,
splits, recapitalizations and similar events.
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Section
2.
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[intentionally
omitted]
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Section
3.
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Covenants
of the Company.
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3.1.
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, parent or affiliate of such Investor for
the purpose of evaluating its investment in the Company as long as such partner,
subsidiary, parent or affiliate is advised of the confidentiality provisions of
this Section 3.1.
Notwithstanding the provisions of this Section 3.1, any
party who participates in a transaction contemplated hereunder may disclose to
any and all other parties, without limitation of any kind, the tax treatment and
tax structure of the Company’s transactions and all materials (including tax
opinions) relating to such tax treatment and tax structure. This exception is
intended solely to comply with the presumption set forth in Treasury Regulation
Section 1.6011-4(b)(3)(iii) and is not intended to permit the disclosure of
any information to the extent such disclosure is not required in order to avoid
any Company transaction being treated as a “reportable transaction” within the
meaning of Treasury Regulation Section 1.6011-4(b).
3.2.
Reservation of Common Stock.
The Company will at all times reserve and keep available, solely for issuance
and delivery upon the conversion of the Preferred Stock and the exercise of
Warrants, all Common Stock issuable from time to time upon such conversion or
exercise (including any additional shares issuable as a result of adjustments to
the conversion price of the Preferred Stock or the number of shares issuable
upon exercise of Warrants).
3.3.
Amendment to Certificate of
Incorporation. At any time at which any shares of any series of Preferred
Stock are subject to automatic conversion pursuant to Article IV,
Section 3(e) of the Restated Certificate, each Investor and Founder and
their respective transferees will promptly take such action as is necessary or
desirable, whether in their capacity as officers, directors, or stockholders of
the Company (including, but not limited to, voting or causing to be voted,
attendance at meetings in person or by proxy for purposes of obtaining a quorum
and execution of written consents in lieu of meetings) and the Company shall
promptly take all necessary and desirable actions within its control (including,
without limitation, calling special board and stockholder meetings) to designate
a new series of Preferred Stock of the Company, whether by amending the Restated
Certificate or otherwise, with rights, preferences, privileges and restrictions
identical to those of the affected series of Preferred Stock, except with
respect to anti-dilution rights, as contemplated by such Article IV,
Section 3(e).
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3.4.
Termination of Covenants. All
covenants of the Company contained in Section 3 of
this Agreement shall expire and terminate as to each Investor on the effective
date of the registration statement pertaining to the Company’s first Qualified
Public Offering.
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Section
4.
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Corporate
Governance.
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4.1. Board of
Directors.
Each
Stockholder agrees to vote all securities of the Company over which such
Stockholder has voting control and to take all other necessary or desirable
actions within its control (whether as a stockholder, director or officer of the
Company or otherwise, and including without limitation attendance at meetings in
person or by proxy for purposes of obtaining a quorum and execution of written
consents in lieu of meetings), and the Company shall take all necessary and
desirable actions within its control (including, without limitation, calling
special Board and stockholder meetings), so that:
(a)
the Company shall have a Board of Directors comprised of no more than ten
(10) members;
(b)
the
following persons shall be elected to the Board of Directors:
(i)
One
representative designated by the holders of the outstanding Common Stock, who
shall be designated by Xxxxxx Xxxxxx;
(ii) Five
representatives designated by the holders of the outstanding Series A Preferred
Stock (the “Series A
Directors”) (A) two of whom shall be designated by Centennial Fund VI,
L.P, on behalf of itself, Centennial Entrepreneurs Fund VI, L.P., Centennial
Strategic Partners VI, L.P., Centennial Holdings I, LLC and any of their
affiliated or related funds that are a party to this Agreement or may become a
party to this Agreement after the date hereof (together, “Centennial”),
(B) two of whom shall be designated by X. X. Xxxxxxx XX, L.P. and any of its
affiliates that are a party to this Agreement or may become a party to this
Agreement after the date hereof (“Whitney &
Co.”), and (C) one of whom shall be designated by the holders of a
majority of the shares of Series A Preferred Stock then outstanding; provided that, if Centennial
sells more than sixty percent (60%) of the Preferred Shares that it has
purchased pursuant to the February Series A Purchase Agreement, Centennial shall
relinquish the right to designate one Series A Director as provided above, and
the holders of a majority of the shares of Series A Preferred Stock then
outstanding shall have the right to designate such Series A Director; and provided further that, if
Whitney & Co. sells more than sixty percent (60%) of the Preferred Shares
that it has purchased pursuant to the February Series A Purchase Agreement,
Whitney & Co. shall relinquish the right to designate one Series A Director
as provided above, and the holders of a majority of the shares of Series A
Preferred Stock then outstanding shall have the right to designate such Series A
Director;
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(iii) One independent
director selected by the nominating committee of the Board of Directors and
approved by the Board and the holders of a majority of the outstanding Equity
Securities held by the Investors, such approval not to be unreasonably
withheld;
(iv)
The
person serving as president or Chief Executive Officer of the Company from time
to time;
(v)
One
representative designated by the holders of the outstanding Series D Preferred
Stock and the outstanding Series E Preferred Stock by a majority vote, voting as
a single class on an as-converted basis; and
(vi)
To
the extent the persons or entities entitled to designate one or more directors
pursuant to the provisions of this Section 4.1 cease to
be entitled to do so, such directorship shall be filled in accordance with the
Company’s Restated Certificate and bylaws and applicable law;
(c)
in the event
that any director for any reason ceases to serve as a member of the Board during
his term of office, the resulting vacancy on the Board shall be filled by a
nominee designated in accordance with Section
4.1(b);
(d) any
director designated above may be removed only with the written consent of the
stockholder(s) who or which are entitled to designated such
director;
(e)
if
the Stockholders fail to designate a representative to fill a directorship
pursuant to the terms of this Section 4.1, the
election of such director shall be accomplished at any time a nominee is
designated in accordance with Section 4.1(b) to
fill such vacancy and, in such event, such vacancy shall be filled prior to the
transaction of any other business by the stockholders of or Board of Directors;
and
(f)
to
the extent that any provision of the Restated Certificate or bylaws is
inconsistent with the provisions of this Agreement, the Restated Certificate or
bylaws shall be amended as may be necessary and appropriate to give full effect
to the provisions of this Agreement.
4.2.
Meetings of the Board.
(a)
The
Board of Directors will meet at least six times each year in accordance with an
agreed-upon schedule. The meetings of the Board of Directors may be
held in person or by telephone conference.
(b)
To
the extent that a Qualified Investor does not have a representative on the Board
of Directors, such Qualified Investor shall have the right to designate a
non-voting observer (an “Observer”)
to attend all meetings of the Board, except that the Board shall have the right
to exclude any Observer or any other observer from all or any portion of a
meeting to the extent that it determines in good faith that such exclusion is
required to (i) protect any confidential information of the Company the
disclosure of which could place the Company at a competitive disadvantage or
otherwise could be injurious to the Company’s business, prospects, or financial
condition, or (ii) to preserve and protect the attorney–client
privilege.
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4.3.
Committees. So long
as the Company is subject to the periodic reporting requirements of the Exchange
Act, the Board of Directors will maintain an audit committee and shall delegate
to such committee those duties and powers as are customarily performed by such
committee. The audit committee shall not include any representatives
of the Company’s management.
4.4.
Reimbursement of
Expenses. The reasonable travel expenses of each director who
is not otherwise an officer or employee of the Company (collectively, the “Non-Management
Directors”) and each Observer incurred in attending or observing Board or
committee meetings shall be reimbursed by the Company. If the Company
adopts any plan or arrangement to compensate its “outside” or “independent”
directors generally for service as a director either with cash or with stock
options, then the Company will also extend the same compensation to the
Non-Management Directors and, in the case of stock options, such options shall
be freely transferable by the Non-Management Directors to their respective
firms, subject to the transfer restrictions set forth in Section 5 and the
transfer restrictions contained in the applicable stock option
agreement.
4.5.
Termination of Certain
Rights. The right to designate one Series A Director by each
of Centennial and Whitney & Co. shall terminate on the effective date of the
registration statement pertaining to the Company’s first Qualified Public
Offering; provided,
however, if either of Centennial or Whitney & Co. have already
relinquished the right to designate one Series A Director pursuant to Section 4.1(b)(ii)
above, then the right of a majority of the holders of Series A Preferred Stock
to designate such Series A Director in place of Centennial or Whitney & Co.,
as applicable, shall terminate upon the such date.
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Section
5.
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Transfer
Restrictions.
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5.1.
Prohibition on
Transfer.
(a)
No
Stockholder shall sell, transfer, assign, pledge or otherwise dispose of
(whether with or without consideration and whether voluntarily or involuntarily
or by operation of law) any interest in any Equity Securities (a “Transfer”)
other than in compliance with this Section
5.
(b)
Each
Stockholder agrees not to consummate any Transfer (other than a Transfer to a
Permitted Transferee pursuant to Section 5.5) until
the expiration of a 30-day period (the “Election
Period”) following delivery by such Stockholder to the Company and the
other Stockholders of (i) a Sale Notice pursuant to Section 5.3 or (ii)
the later of an Offer Notice pursuant to Section 5.4(a), or a
Stockholder Sale Notice pursuant to Section 5.4(b), as
applicable.
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5.2.
Securities Law
Restrictions.
(a)
Each Stockholder agrees
not to make any disposition of any Equity Securities unless and until (i) the
transferee has agreed in writing to be bound by the terms of this Agreement,
(ii) such Stockholder has made the deliveries required by Section 5.1 and has
otherwise complied with Section 5, and (iii)
if reasonably requested by the Company, such Stockholder has furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not (A) increase the number of record holders of any
class of Equity Security, (B) require registration of such shares under the
Securities Act, (C) subject the Company to the periodic reporting
requirements of the Exchange Act or (D) subject the Company to the
registration requirements of, or limit the availability of any exemptions from
registration under, the Investment Company Act of 1940, as amended.
(b)
The
Company shall under no circumstances be required to make or keep available
public information as may be required by Rule 144 for reliance by a seller
thereunder, and the Stockholders acknowledge and agree that such information may
not otherwise be made or kept publicly available.
(c)
Each
certificate representing Equity Securities shall (unless otherwise permitted by
the provisions of the Agreement) be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any other legend required
under applicable state securities laws or as provided elsewhere in this
Agreement):
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY
OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED OR QUALIFIED UNDER
THE ACT AND THE SECURITIES LAWS OF ANY OTHER APPLICABLE JURISDICTION OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
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5.3. Right of First Refusal. If at
any time a Founder or Series H Stockholder receives a bona fide offer from any
person to purchase any Equity Securities (a “Third-Party
Offer”) held by such Founder or Series H Stockholder, such Founder or
Series H Stockholder shall cause such Third-Party Offer to be reduced to writing
and shall notify the Company and each Investor of such Founder’s or Series H
Stockholder’s desire to accept the Third-Party Offer (the “Sale
Notice”). The Sale Notice shall contain an irrevocable offer to sell such
Equity Securities to the Company at a purchase price equal to the price
contained in, and on the same terms and conditions of, such Third-Party Offer
and shall be accompanied by a true copy of the Third-Party Offer (which shall
identify the offeror). At any time within 20 days after the date of
receipt by the Company of such Sale Notice, the Company shall have the right,
exercisable by delivery of written notice to the transferring Founder or Series
H Stockholder, to purchase all or any portion of the Equity Securities covered
by such Sale Notice at the same price and on the same terms and conditions as
specified in the Sale Notice. In the event that the Company does not elect to
acquire all of the Equity Securities specified in such Sale Notice, each
Investor shall have the right, exercisable by delivery of written notice to the
transferring Founder or Series H Stockholder prior to the expiration of the
Election Period, to purchase all or any portion of its pro rata share—equal to the
rato 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 Preferred
Shares or upon the exercise of any outstanding warrants or options) of which
such 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 Preferred Shares or upon the exercise of any
outstanding warrants or options) then held by all of the Investors immediately
prior to the issuance of the Equity Securities—of the remaining shares covered
by such Sale Notice. To the extent any Investor does not exercise its
right to purchase its full pro
rata share of the Equity Securities covered by the Sale Notice, the other
Investors shall have the right to purchase such unsubscribed shares, and the
purchase of such shares shall be allocated among the participating Investors
purchasing their full pro
rata share in proportion to the Equity Securities held by such
participating Investors, or in such other proportions as agreed among the
participating Investors. The Company and the Investors may pay cash
to the selling Founder or Series H Stockholder equal in amount to the fair
market value of any non-cash consideration offered in the Third-Party Offer. If
the Company or the Investors have not notified the selling Founder or Series H
Stockholder in writing of their election to purchase all of the Equity
Securities as set forth herein prior to the expiration of the Election Period,
the selling Founder or Series H Stockholder may within 60 days thereafter sell
the balance of such Equity Securities not purchased by the Company or the
Investors on the terms set forth in the original Third-Party Offer. Any Equity
Securities held by the Founder or Series H Stockholder covered by the
Third-Party Offer that is not so transferred during such 60-day period shall
again be subject to this Section
5.3
5.4.
First Offer and Co-Sale
Rights.
(a)
At
least 30 days prior to making any Transfer of any Equity Securities, a
transferring Investor shall deliver a written notice (the “Offer
Notice”) to the Company and the other Investors (other than the Series H
Stockholders), disclosing in reasonable detail the number of Equity Securities
proposed to be transferred (the “Offered
Shares”) and the terms and conditions of such proposed
Transfer. The Company shall have the right, exercisable by delivery
of written notice to the transferring Investor within 20 days after delivery of
the Offer Notice, to purchase all (but not less than all) of the Offered Shares
on the terms and conditions set forth in the Offer Notice. In the event that the
Company declines to exercise its right of first offer, the Offered Shares shall
be offered and reoffered to each Investor on a pro rata basis (and the
Company may, if and to the extent that the Investors consent to the Company’s
participation in such offer, also purchase Offered Shares), until the expiration
of the Election Period. If the Investors and, if and to the extent that the
Investors have consented to the Company’s participation, the Company, have not
elected to purchase all of the Offered Shares prior to the expiration of the
Election Period, the transferring Investor may, within 30 days after the
expiration of the Election Period, Transfer the Offered Shares to one or more
third parties at a price not less than the price per share specified in the
Offer Notice. Any Offered Shares not transferred during such 30-day period shall
again be subject to the provisions of this Section 5.4(a) upon
subsequent Transfer.
11
(b)
At
least 30 days prior to any Transfer of Equity Securities (other than a Transfer
to the Company or the other Investors pursuant to Section 5.3 or Section 5.4(a)), the
Stockholder making such Transfer (the “Transferring
Stockholder”) shall deliver a written notice (the “Stockholder Sale
Notice”) to the Company and the Investors not making such Transfer (the
“Non-Selling
Investors”), specifying in reasonable detail the identity of the
prospective transferee(s), the number of shares to be transferred and the terms
and conditions of the Transfer (which notice may be the same notice and given at
the same time as the Offer Notice under Section 5.3 or Section
5.4(a)). The Non-Selling Investors who have not exercised
their rights pursuant to Section 5.3 or Section 5.4(a) may
elect to participate in the contemplated Transfer at the same price per share
and on the same terms by delivering written notice to the Transferring
Stockholder within fifteen (15) days after delivery of the Stockholder Sale
Notice. If any Non-Selling Investors have elected to participate in
such Transfer, the Transferring Stockholder and such Non-Selling Investors shall
be entitled to sell in the contemplated Transfer, at the same price and on the
same terms, a number of shares of Equity Securities equal to the product, of
(i) the quotient determined by dividing the percentage of Equity Securities
owned by such Transferring Stockholder or Non-Selling Investor, as the case may
be, by the aggregate percentage of Equity Securities owned by the Transferring
Stockholder and all of the Non-Selling Investors participating in such sale and
(ii) the number of shares of Equity Securities to be sold in the contemplated
Transfer.
For example, if the
Stockholder Sale Notice contemplated a sale of 100 shares of Equity Securities
by the Transferring Stockholder, and if the Transferring Stockholder at such
time owns 30% of all Equity Securities and if one Non-Selling Investor elects to
participate and owns 20% of all Equity Securities the Transferring Stockholder
would be entitled to sell 60 shares (30% / 50% x 100 shares) and the Non-Selling
Investor would be entitled to sell 40 shares (20% / 50% x 100
shares).
Each
Transferring Stockholder shall use best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the Non-Selling Investors in
any contemplated Transfer and to the inclusion (in the case of the Investors) of
the Preferred Stock in the contemplated Transfer, and no Transferring
Stockholder shall transfer any of its Equity Securities to any prospective
transferee if such prospective transferee(s) declines to allow the participation
of the Non-Selling Investors or the inclusion of the Preferred Stock held by
such Non-Selling Investors.
5.5.
Exempt
Transactions.
(a)
The
restrictions set forth in Sections 5.3 and
5.4 shall not
apply to Transfers of Equity Securities to a Permitted Transferee of the
transferring Stockholder; provided, however, that such Permitted Transferee
agrees in writing to be bound by such restrictions in connection with subsequent
Transfers.
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(b)
Notwithstanding the
foregoing, no party hereto shall avoid the provisions of this Agreement by
making one or more transfers to one or more Permitted Transferees and then
disposing of all or any portion of such party’s interest in any such Permitted
Transferee.
(c)
Series H Stockholders
shall not have any rights to transfer any securities other than as prescribed in
a Series H Preferred Stock Option Agreement. Notwithstanding the foregoing, if
Series H Stockholders propose to Transfer any Equity Securities, such transfer
shall comply with Section 5.2, and any
transferee must agree in writing to be bound by this Agreement.
5.6.
Termination of
Rights. The transfer restrictions under this Section 5 shall
expire upon, and shall not be applicable subsequent to or upon, any Qualified
Public Offering.
5.7. Transfer of
Rights. Subject to Section 5.2, the
rights of each Investor under this Section 5 may be
transferred by an Investor to a transferee or assignee of Shares in compliance
with this Section
5 that is any of the following: (i) a partner or retired partner of
such Investor (if the Investor is a partnership), (ii) an Affiliate of such
Investor (including, but not limited to, an affiliated or related venture
capital fund of Investors which have venture capital fund investors),
(iii) a member or former member of such Investor (if the Investor is a
limited liability company), (iv) a shareholder of such Investor (if the
Investor is a corporation), (v) a family member of such Investor or a trust
for the benefit of such individual Investor or his or her family members, or
(vi) a party to whom such Investor has transferred or assigned at least one
million (1,000,000) Shares in accordance with any applicable provisions of
this Agreement; provided,
however, that (x) the transferor shall, on or prior to the date of
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 rights
are being assigned, and (y) such transferee shall, on or prior to the date
of such transfer, agree in writing to be subject to the terms of this Agreement
to the same extent as if such transferee were an original Investor
hereunder.
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Section
6.
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Preemptive
Rights.
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6.1.
Subsequent
Offerings. Except for Series H Stockholders, each Investor
shall have a preemptive right to purchase its pro rata share of all Equity
Securities 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 6.6
hereof (“New
Securities”); provided,
however, that in no event shall the Investors as a group have the right
to purchase more than eighty-five percent (85%) of any future offering of New
Securities by the Company. Each Investor’s pro rata share is equal to
the ratio of (a) the product of 0.85 multiplied by the number of shares of
the Company’s 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) of which such Investor is deemed to be a holder immediately
prior to the issuance of such New 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) then held by all of the Investors
immediately prior to the issuance of the New Securities.
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6.2.
Exercise of Rights.
(a)
If
the Company proposes to issue any New Securities, it shall give each Investor
(other than Series H Stockholders) written notice of its intention, describing
the New Securities, the price and the terms and conditions upon which the
Company proposes to issue the same. Each Investor (other than Series
H Stockholders) shall have ten (10) days from the giving of such notice to agree
to purchase its pro
rata share of the New 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 New Securities to be
purchased. Notwithstanding the foregoing, the Company shall not be
required to offer or sell such New Securities to any Investor if such a sale
would (1) increase the number of record holders of any class of Equity
Security, (2) require registration of such shares under the Securities Act,
(3) subject the Company to the periodic reporting requirements of the
Exchange Act or (4) subject the Company to the registration requirements of, or
limit the availability of any exemptions from registration under, the Investment
Company Act of 1940, as amended.
(b)
If
not all of the Investors elect to subscribe for their full pro rata share pursuant to
Section 6.2(a)
above, then the Company shall allocate the Remaining Shares (as defined below)
among the Investors (other than Series H Stockholders) who or which wished to
subscribe for more than their pro rata share on a
continuing, pro rata
basis based on the relative number of shares of Common Stock held by each until
all of such Remaining Shares have been allocated among such Investors or until
the maximum subscription requests of all such Investors have been
fulfilled. The “Remaining
Shares” refer to that number of New Securities determined by subtracting
the aggregate number of New Securities actually subscribed for under Section 6.2(a) above
from the aggregate number of New Securities the Investors were entitled to
subscribe pursuant to Section
6.1.
6.3.
Issuance of New Securities to Other
Persons. If the Investors (other than Series H Stockholders)
fail to exercise in full their preemptive rights under this Section 6, the
Company shall have ninety (90) days thereafter to sell the New Securities in
respect of which the Investors’ (other than Series H Stockholders) rights were
not exercised, at a price and upon general terms and conditions materially no
more favorable to the purchasers thereof than specified in the Company’s notice
to the Investors pursuant to Section 6.2
hereof. If the Company has not sold such New Securities within ninety
(90) days of the notice provided pursuant to Section 6.2, the
Company shall not thereafter issue or sell any New Securities without first
offering such securities to the Investors (other than Series H Stockholders) in
the manner provided above.
6.4.
Termination and Waiver of Preemptive
Rights. The preemptive rights established by this Section 6 shall not
apply to, and shall terminate upon the effective date of the registration
statement pertaining to the Company’s first Qualified Public
Offering.
6.5.
Transfer of Preemptive
Rights. The Preemptive Rights of each Investor under this
Section 6 may
be transferred to a party described in Section 5.7(i)–(v),
subject to the same restrictions as any transfer of rights pursuant to Section 5.7(i)–(v). Such
Preemptive Rights may not be transferred to a party described in Section
5.7(vi).
14
6.6.
Excluded
Securities. The Preemptive Rights established by this Section 6 shall
have no application to the issuance of any of the following Equity
Securities:
(a)
Equity Securities issued
or to be issued by the Company to employees, directors, officers or consultants
of the Company pursuant to the Company’s 2000 Stock Incentive Plan or any other
equity incentive plan of the Company;
(b)
Equity Securities
issuable pursuant to the conversion or exercise of convertible or exercisable
securities that are outstanding as of the date hereof (including shares of
Common Stock issuable upon conversion of the Shares); provided that, except in the
case of the Shares, the rights established by this Section 6 applied
with respect to the initial sale or grant by the Company of such rights or
agreements;
(c)
Equity Securities issued
for consideration other than cash pursuant to any merger, consolidation or
similar business combination or reorganization, any of which must have been
approved by the Board of Directors;
(d)
Equity Securities issued
in connection with any stock split, stock dividend or recapitalization by the
Company;
(e)
Equity Securities issued
for non-cash consideration to non-Affiliates of the Company;
(f)
Equity Securities issued
upon exercise of the warrants to acquire shares of Common Stock;
and
(g)
Equity Securities issued
for the purpose of raising short-term working capital in an amount not to exceed
$1,000,000.
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Section
7.
|
Legend
on Shares.
|
7.1. Legend. Stock
certificates representing Equity Securities shall, in addition to any legend
required by Section
5.2, be imprinted or otherwise have placed on them a restrictive legend
substantially in the form as follows:
THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS
OF AN INVESTOR RIGHTS AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE VOTING
AND TRANSFER OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST
IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH INVESTOR RIGHTS AGREEMENT WILL BE
FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.
15
7.2.
New
Certificates. During the term of this Agreement, the Company
will not remove, and will not permit to be removed (upon registration of
transfer, reissuance or otherwise), the foregoing legend from any such
certificate and will place or cause to be placed the foregoing legend on any new
certificate issued to represent Equity Securities theretofore represented by a
certificate carrying the foregoing legend.
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Section
8.
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Miscellaneous.
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8.1. Effectiveness. Subject
to receipt by the Company of the Written Consent, this Agreement shall become
effective upon the Closing (as defined in the Recapitalization Agreement) of the
Transactions.
8.2.
Waiver of Registration
Rights. Each Stockholder hereby waives the following
(collectively, “Investor
Rights”) with respect to any Equity Securities the Stockholder owns of
record or beneficially on the date hereof or otherwise acquires hereafter: (i)
any and all registration rights previously granted them under the Original
Agreement, the Prior Management Agreement, the Prior Existing Stockholders
Agreement, or under any warrant, option, or other agreement or instrument, with
or from the Company, and (ii) any and all obligations of the Company with
respect to or otherwise related to such registration rights, including any
indemnification obligations or obligations to make or keep public information
available or to provide any reports or written statements to the Stockholder for
the purpose permitting compliance with Rule 144 or Rule 144A under the
Securities Act of 1933, as amended, pursuant to the Securities Exchange Act of
1934, as amended, Rule 15c2-11 promulgated thereunder or
otherwise. Each Stockholder acknowledges that it has no Investor
Rights whatsoever with respect to the Equity Securities and each Stockholder
hereby agrees that any obligations of such Stockholder and the Company under the
Original Agreement, the Prior Management Agreement, the Prior Existing
Stockholders Agreement and any other agreements with respect to registration
rights are hereby terminated.
8.3.
Founder
Options. Unless otherwise approved by the Board of Directors,
all stock, stock options and other stock equivalents issued to or purchased by
the Founders shall be subject to vesting over four (4) years as set forth in the
2000 Stock Incentive Plan (and any Stock Option Agreements thereunder) and as
set forth in the Prior Management Agreement, except for Shares purchased by
certain of the Founders pursuant to the Purchase Agreements. All
stock, stock options and other stock equivalents issued to or purchased by the
Founders shall be subject to a Company repurchase option that shall provide that
upon a Founder’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. Unless
otherwise approved by the Board of Directors, all stock, stock options and other
stock equivalents issued to or purchased by the Founders after the date hereof
shall be issued or purchased at an exercise price equal to the fair market value
of the Common Stock at the time of issue. Any vested stock held by
such terminated Founder shall be subject to the Right of First Refusal as
described in Section
5.3.
8.4.
Governing Law. This
Agreement shall be governed by and construed under the laws of the State of
Delaware (without regard to its conflicts of laws principles) as applied to
agreements among Delaware residents entered into and to be performed entirely
within Delaware.
16
8.5.
Survival. The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by any party hereto 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.
8.6.
Successors and
Assigns. The Company may not assign any of its rights nor
delegate any of its duties under this Agreement that could meaningfully be
exercised by a person or entity other than the Company without the prior written
consent of the holders of fifty-one percent (51%) of the Shares then held by all
Investors. Subject to the foregoing, 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 Shares from time to time; provided, however, that prior
to the receipt by the Company of adequate written notice of the transfer of any
Shares specifying the full name and address of the transferee, 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.
8.7.
Severability. In
case any provision of the Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
8.8.
Amendment and
Waiver. Except as otherwise expressly provided, this Agreement
and any provision hereof may be amended, modified, waived, discharged or
terminated only upon the written consent of the Company and Investors holding at
least sixty-six percent (66%) of the Shares then held by all Investors;
provided, however, that (i) no such amendment, modification, waiver,
discharge or termination which applies specifically to a party’s right to
designate a member of the Company’s Board of Directors as set forth in Section 4.1(b)(i),
(ii), (iii), (v) or (vi) above shall be
binding or effective without a written instrument signed by such party;
(ii) if any amendment, modification, waiver, discharge or termination would
adversely affect the rights or obligations of the Founders, then the written
consent of the holders of at least a majority of the Common Stock then held by
all Founders shall also be required; (iii) if any amendment, modification,
waiver, discharge or termination would adversely affect the rights or
obligations of the holders of any series of Preferred Stock in a manner
different than the holders of any other series of Preferred Stock, then the
written consent of the holders of at least a majority of the Preferred Stock
affected in such different manner then held by all Investors shall also be
required (which Preferred Stock shall include any other shares of Preferred
Stock into which such shares have been converted pursuant to the Section
IV(3)(e) of the Restated Certificate).
17
8.9.
Delays or
Omissions. It is agreed that no delay or omission to exercise
any right, power or remedy accruing to any party hereto 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 Investor’s part of any breach, default or noncompliance under this Agreement
or any waiver on such Investor’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 the Investors, shall be
cumulative and not alternative.
8.10.
Notices. All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified;
(ii) when sent by confirmed receipt telex or confirmed receipt electronic
mail if sent during normal business hours of the recipient, if not, then on the
next business day; (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or (iv) one
(1) day after deposit with a nationally recognized overnight courier, special
next day delivery, with written verification of receipt. All
communications shall be sent to the Company at 000 Xxxxxxx Xxxxxx, Xxx Xxxxxx,
Xxxxx 00000, Attn: President and Chief Executive Officer, and to a Stockholder at
the address reflected in the Company’s stock ledger or at such other address as
the Company or a Stockholder may designate by ten (10) days advance written
notice to the other parties hereto.
8.11.
Attorneys’ Fees. In
the event that any dispute among the parties to this Agreement should result in
litigation, 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, but
not limited to, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
8.12.
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.
8.13.
Complete
Agreement. This Agreement, together with the Schedules
attached hereto and the other documents delivered pursuant hereto, constitutes
the full and entire understanding and agreement among the parties with regard to
the subject matter hereof and supersede any and all other agreements or
understandings relating thereto, written or oral. 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.
8.14.
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.
8.15.
Termination of Prior
Agreements. The Company and each of the parties hereto who and
which are all of the parties to the Prior Management Agreement and the Prior
Existing Stockholders Agreement, hereby agree and acknowledge that (i) Sections
2.1, 2.2, and 2.3 of the Prior Management Agreement were terminated as of
February 24, 2000 and remain terminated, null and void, and are of no force and
effect and (ii) the entirety of the Prior Existing Stockholders Agreement was
terminated as of February 24, 2000 and remains terminated, null and void, and is
of no force and effect. Except as set forth in the preceding
sentence, the Prior Management Agreement remains in full force and effect in
accordance with its terms.
18
8.16.
Addition of Parties. Notwithstanding any
other provisions of this Agreement, with the approval of the Board of Directors
of the Company, the Company may require persons acquiring Equity Securities from
the Company to agree in writing to become party to this Agreement and to be
bound by all of the terms and conditions hereof applicable to a Stockholder
prior to acquiring such Equity Securities. Each such stockholder
shall become a party to this Agreement by executing a joinder to this Agreement
in form and substance reasonably acceptable to the Board of Directors of the
Company, and shall thereafter enjoy the rights and be bound by the obligations
of a Stockholder under this Agreement.
[Signature Pages
Follow]
19
IN
WITNESS WHEREOF, the parties hereto have executed this Amended and Restated
Investor Rights Agreement to be effective as described in the Recitals hereto
and Section
8.1.
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By:
|
/s/
Xxxxxxx X. Xxxxxxx
|
|
|
Name:
|
Xxxxxxx
X. Xxxxxxx
|
|
|
Title:
|
Chief
Financial Officer
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20
