US XXXXXX.XXX INC.
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is entered into as of
September 7, 2000, by and among US XXXXXX.XXX INC., a Delaware corporation (the
"Company"), the investor listed on Exhibit A hereto (the "Pequot Holder") and
the holders listed on Exhibit B hereto (the "KL Holders").
RECITALS
WHEREAS, the Pequot Holder is purchasing shares of the Company's Series A
Convertible Preferred Stock (the "Series A Preferred Stock") pursuant to that
certain Series A Preferred Stock Purchase Agreement (the "Purchase Agreement")
of even date herewith; (the "Financing").
WHEREAS, the KL Holders hold shares of the Company's common stock, par
value $.001 per share (the "Common Stock").
WHEREAS, the obligations in the Purchase Agreement are conditioned upon the
execution and delivery of this Agreement; and
WHEREAS, in connection with the consummation of the Financing, the parties
desire to enter into this Agreement in order to grant registration and other
rights to the Pequot Holder and KL Holders as set forth below.
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree hereto as follows:
SECTION 1. GENERAL.
1.1 Definitions. 1.1 Definitions Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the Purchase
Agreement. As used in this Agreement the following terms shall have the
following respective meanings:
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"First Closing" shall have the meaning set forth in the Purchase Agreement.
"Form S-3" shall mean such form under the Securities Act as in effect on the
date hereof or any successor or similar 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" shall mean the Pequot Holder and the KL Holders owning of record
Registrable Securities or any assignee of record of such Registrable Securities
in accordance with Section 2.10 hereof. A person who holds any security, upon
the exercise of which or conversion of which such person shall be entitled to
receive a Registrable Security shall for all purposes of this Agreement be
deemed to be the Holder of such Registrable Securities.
"Preemptive Rights" shall mean the rights of holders of Series A Preferred Stock
to purchase securities pursuant to Section 8 of the Certificate of Designation
relating to the Series A Preferred Stock.
"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" shall mean (a) shares of Common Stock or any other
security received or receivable upon conversion of the Shares or of the Series A
Preferred Stock issuable upon exercise of the Warrants (as defined in the
Purchase Agreement); (b) all shares of Common Stock, or Common Stock issued as
or issuable upon the conversion or exercise of any warrant, right or any other
convertible security which is purchased from the Company by the Pequot Holder on
or after the First Closing; (c) shares of Common Stock held by the KL Holders;
(d) any securities acquired by the Pequot Holder pursuant to the exercise of
their Preemptive Rights; (e) any security received or receivable as a dividend,
stock split or other distribution with respect to any Shares; (f) any security
received in exchange for or in replacement of any Registrable Securities; (g)
any security issued or issuable with respect to any Registrable Securities as a
result of a change or reclassification of Registrable Securities or any capital
reorganization of the Company; (h) shares of Common Stock held by the Pequot
Holder and (i) any security received or receivable by a holder in respect of
Registrable Securities as a result of a merger or consolidation of the Company.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 or sold in a private transaction in which the transferor's
rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
Shares.
"Registration Expenses" shall mean all expenses incurred 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 Pequot Holder and ten thousand dollars ($10,000) of a single
special counsel for the KL 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).
"SEC" or "Commission" shall mean the Securities and Exchange Commission.
"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.
"Shares" shall mean the Company's Series A Preferred Stock issued pursuant
to the Purchase Agreement and held by the Pequot Holder listed on Exhibit A
hereto and its permitted assigns.
"Special Registration Statement" shall mean a registration statement
relating to any employee benefit plan or with respect to any corporate
reorganization or other transaction under Rule 145 of the Securities Act.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFERSECTION 2.
REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 Restrictions on Transfer2.1 Restrictions on Transfer. Subject to
the provisions set forth in Section 3,
(a) Each Holder agrees not to make any disposition of all or any portion of
the Registrable Securities unless and until:
(i) There is then in effect a registration statement or such Holder sells
such securities in compliance with Rule 144 under the Securities Act covering
such proposed disposition and such disposition is made in accordance with such
registration statement; or
(ii) (A) Such Holder shall have notified the Company in writing of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (B) 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. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii) above, no
such registration statement 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 or to its Affiliates, (B) a
corporation to its shareholders in accordance with their interest in the
corporation, or (C) a limited liability company to its members or former members
in accordance with their interest in the limited liability company, or provided
that in each case the transferee will be subject to the terms of this Agreement
to the same extent as if he were an original Holder hereunder, or by a Holder to
another Holder or other person which is a party to this Agreement.
(b) Each certificate representing Shares or Registrable Securities held by
the Pequot Holder and KL Holders shall (unless otherwise permitted by the
provisions of the Agreement) (a) be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any legend required
under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") AND MAY 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.
and (b) so long as such Shares or Registrable Securities held by the Pequot
Holder and the KL Holders are subject to the terms of this Agreement, bear a
legend reading substantially as follows.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (AND ALL TRANSFERS THEREOF) ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE INVESTORS' RIGHTS
AGREEMENT, DATED AS OF SEPTEMBER 7, 2000, AMONG THE COMPANY AND CERTAIN OF ITS
STOCKHOLDERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
NO TRANSFER OF SUCH SHARES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS
ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT AND BY AN
AGREEMENT OF THE TRANSFEREE TO BE BOUND BY THE RESTRICTIONS SET FORTH THEREIN.
ANY ATTEMPTED TRANSFER OF THESE SHARES IN VIOLATION OF SUCH INVESTOR RIGHTS
AGREEMENT SHALL BE NULL AND VOID AND HAVE NO FORCE OR EFFECT.
(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, or if the securities are to be sold pursuant to a
registration statement or Rule 144 under the Securities Act. The Company shall
be obligated to reissue promptly, in the name of a transferee of securities
referred to in Section 2.1(a)(iii), legended certificates at the request of any
transferor or transferee thereof.
(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.
2.2 Demand Registration2.2 Demand Registration.
(a) (i) At any time, and from time to time, the Holders of more than fifty
percent (50%) of Registrable Securities then outstanding and owned by the Pequot
Holder (the "Pequot Initiating Holder") shall have the right, by written
notice, delivered to the Company to require the Company to register Registrable
Securities having an aggregate offering price (before deducting of underwriting
discounts and commissions) to the public in excess of $5,000,000 (a "Qualified
Public Offering") and (ii) at any time, and from time to time, the Holders of
more than fifty percent (50%) of Registrable Securities then outstanding and
owned by the KL Holders (the "KL Initiating Holders") shall have the right, by
written notice, delivered to the Company to require the Company to register
Registrable Securities in 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,
effect, as expeditiously as reasonably possible, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered.
(b) If the Pequot Initiating Holder or the KL Initiating Holders, as the
case may be, 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 Pequot Initiating Holder or
the KL Initiating Holders, as the case may be (which underwriter or underwriters
shall be reasonably acceptable to the Company) but in no event shall any
indemnity and/or contribution provisions therein provide that the indemnity
and/or contribution of the Holders of the Registrable Securities exceed the net
proceeds of the offering received by such Holders. 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, first to the Holders of Registrable
Securities on a pro rata basis based on the respective numbers of Registrable
Securities which such Holders have requested to be registered, and second, to
any remaining selling stockholders. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
Notwithstanding the above, the KL Holders shall only be included in one such
registration under this Section 2.2 when initiated by the Pequot Holder.
(c) The Company shall not be required to effect a registration pursuant to
this Section 2.2:
(i) with respect to the Pequot Holder, prior to the first anniversary of the
First Closing and with respect to the KL Holders, prior to eighteen (18)
months following the First Closing;
(ii) with respect to the Pequot Holder, after the Company has effected two
(2) registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective with respect to the Registrable Securities
owned by the Pequot Holder;
(iii) with respect to the KL Holders, after the Company has effected one (1)
registration pursuant to this Section 2.2, and such registrations have been
declared or ordered effective with respect to the Registrable Securities owned
by the KL Holders;
(iv) 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
(v) if the Holders propose to dispose of shares of Registrable Securities
that may be registered on Form S-3 pursuant to a request made pursuant to
Section 2.4 below.
2.3 Piggyback Registration2.3 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 Special Registration
Statements) and shall afford each such Holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Holder. The KL Holders shall have only one (1) such piggyback registration
participation right under either Section 2.2 or Section 2.3. 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 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 but in no event shall any
indemnity and/or contribution provisions therein provided that the indemnity
and/or contribution of the Holders of the Registrable Securities exceed the net
proceeds from the offering received by such Holders. 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
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 with respect to the KL Holders, only so long as all selling Holders, other
than the Pequot Holder, are excluded from such registration; and third, to any
shareholder of the Company (other than a Holder) on a pro rata basis. Such
reduction (i) shall not reduce the securities being offered by the Company for
its own account to be included in the registration and underwriting, and (ii)
for all Holders may be reduced to zero, if necessary. 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,
its Affiliates and shareholders of such Holder, as the case may be, 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 for its own account 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 Registration2.4 Form S-3 Registration. In case the Company
shall receive from the Pequot Holder 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 the Pequot Holder,
(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 the Pequot
Holder's 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 is not available to the Company or for such offering by the
Pequot Holder, or
(ii) if the Pequot Holder propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than two
million dollars ($2,000,000), or
(iii) if within thirty (30) days of receipt of a written request from the
Pequot Holder pursuant to this Section 2.4, the Company gives notice to the
Pequot Holder of the Company's intention to make a public offering of Common
Stock within ninety (90) days, other than pursuant to a Special Registration
Statement, or
(iv) if the Company shall furnish to the Pequot Holder 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
Pequot 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, or
(v) if the Company has already effected two (2) registrations on Form S-3
for the Pequot Holder pursuant to this Section 2.4 in any twelve (12) month
period, 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 Pequot Holder. Registrations effected 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.
2.5 Expenses of Registration2.5 Expenses of Registration. Except as
specifically provided in this Section 2.5, 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, except
underwriters' commissions and discounts, 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 expenses of any registration proceeding begun pursuant to Section 2.2
or 2.4, the request of which has been subsequently withdrawn by the Holders
unless (a) the withdrawal is based upon material adverse information concerning
the Company of which the Holders were not aware at the time of such request; (b)
or in the case of a registration pursuant to Section 2.2 hereof, the Holders of
Registrable Securities who initiated the demand for such registration agree to
forfeit their right to one requested registration pursuant to Section 2.2, in
which event such right shall be forfeited by all such Holders), unless (a) or
(c) of this Section 2.5 applies or (c) the Company has requested a delay in
effecting the registration for ninety (90) days and, as a result of such delay,
directly or indirectly, the securities could not be sold in the price range
originally anticipated. 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) or
(c) above, then the Holders shall not forfeit their rights pursuant to Section
2.2 or Section 2.4 to a demand registration.
2.6 Obligations of the Company2.6 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.
(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 paragraph (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 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 but in no event shall
any indemnity and/or contribution provisions therein provide that the indemnity
and/or contribution of the Holders of Registrable Securities exceed the net
proceeds from the offering received by such Holders. 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. The Company will use reasonable efforts to amend or supplement such
prospectus in order to cause such prospectus not to include any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(g) Use its commercially reasonable 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.
2.7 Termination of Registration Rights2.7 Termination of Registration
Rights. All registration rights granted under this Section 2 shall terminate
and be of no further force and effect on the fifth anniversary after the First
Closing. In addition, a Holder's registration rights shall expire if (a) such
Holder holds less than 1% of the Company's outstanding Common Stock (treating
all shares of convertible Preferred Stock on an as converted basis) and (b) all
Registrable Securities held by and issuable to such Holder may be sold under
Rule 144 during any ninety (90) day period without volume limitations.
2.8 Delay of Registration; Furnishing Information2.8 Delay of
Registration; Furnishing Information.
(a) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to Section 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.
(b) 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
subsection 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 number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in Section 2.2 or Section 2.4, whichever is
applicable.
2.9 Indemnification2.9 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 2.9(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 or delayed, nor shall the Company be liable in any
such case for 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 by such Holder under an
instrument duly executed by such Holder and stated to be specifically 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, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer or controlling person 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 or any such director,
officer or controlling person 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 2.9(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 or delayed; provided further, that in no event shall any
indemnity and contribution under this Section 2.9 exceed in the aggregate the
net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 2.9 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 2.9, 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 and to the extent materially prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.9, 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 2.9.
(d) If the indemnification provided for in this Section 2.9 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 indemnification and contribution by a
Holder under this Section 2.9 exceed in the aggregate the net proceeds from the
offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 2.9 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.
2.10 Assignment of Registration Rights2.10 Assignment of Registration
Rights. The rights to cause the Company to register Registrable Securities
pursuant to this Section 2 may be assigned (a "Permitted Transfer") 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 an
Affiliate of a Holder or (b) acquires at least one million (1,000,000) shares of
Registrable Securities (as adjusted for stock splits and combinations);
provided, 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, if not
already a party to this Agreement, agree in writing to be subject to all
restrictions set forth in this Agreement.
2.11 Amendment of Registration Rights2.11 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 holding at least a majority of the Registrable Securities then
held by the Pequot Holder and the Holders holding at least a majority of the
Registrable Securities then held by the KL Holders. Any amendment or waiver
effected in accordance with this Section 2.11 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.
2.12 Limitation on Subsequent Registration Rights2.12 Limitation on
Subsequent Registration Rights. Other than as provided in Section 5.11, after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders holding at least a majority of the Registrable Securities
then held by the Pequot Holder and the Holders holding at least a majority
of the Registrable Securities then held by the KL Holders 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.
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information2.13
Stand-Off Agreement; Agreement to Furnish Information. Each Holder hereby
agrees that such Holder shall not publicly sell, publicly 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 public 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 ninety (90) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that, all officers and directors of the Company and holders of at least one
percent (1%) of the Company's voting securities and all other persons with
registration rights (whether or not pursuant to this Agreement) are bound by and
enter into similar agreements and no such agreement is waived.
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 of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.13 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. Each Holder agrees that
any transferee of any shares of Registrable Securities shall be bound by this
Section 2.13.
2.14 Restrictions on Public Sale by the Company and Others2.14
Restrictions on Public Sale by the Company and Others . The Company agrees not
to make any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for its equity
securities, including a sale under Regulation D under the Securities Act or
under any other exemption of the Securities Act (except as part of the
underwritten registration referred to herein or pursuant to registration on
Forms S-8 or S-4 or any successor form), during the seven (7) days prior to and
the 90 days after the effective date of any underwritten demand registration
pursuant to Section 2.2 or any underwritten piggyback registration pursuant to
Section 2.3 or a Form S-3 Registration pursuant to Section 2.4 unless the
managing underwriter(s) for such demand or piggyback registration agrees
otherwise, and the parties hereto agree that the Company will not be required to
effect any such registration or sale notwithstanding the other provisions
of this Agreement. The Company also agrees to use reasonable efforts to cause
each holder of at least 1% (on a fully-diluted basis) of its equity securities
(other than Registrable Securities) or any securities convertible into or
exchangeable or exerciseable for its equity securities (other than Registrable
Securities), purchased from the Company at any time on or after the date of this
Agreement (other than in a registered public offering), to agree not to make any
public sale or distribution of those securities, including a sale pursuant to
Rule 144 (except as part of the underwritten registration, if permitted), during
the seven (7) days prior to and the one hundred eighty (180) days after the
effective date of the registration unless the managing underwriter(s) agrees
otherwise.
2.15 Rule 144 Reporting2.14 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 reasonable 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.
2.16 S-3 Eligibility. The Company shall use its best efforts to maintain
its eligibility to use Form S-3 under the Securities Act.
SECTION 3. MISCELLANEOUSSECTION 3. MISCELLANEOUS.
3.1 Governing Law3.1 Governing Law. This Agreement shall be governed
by, construed and interpreted in accordance with the laws of the State of New
York, without giving effect to principles of conflicts of law.
3.2 Survival3.2 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.
3.3 Successors and Assigns3.3 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
subject to Section 2.10 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,
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.
3.4 Entire Agreement3.4 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.
3.5 Severability3.5 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.
3.6 Amendment and Waiver3.6 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
holding at least a majority of the Registrable Securities then held by the
Pequot Holder and the Holders holding at least a majority of the Registrable
Securities then held by the KL Holders.
(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 holding at least a majority of the Registrable
Securities then held by the Pequot Holder and the Holders holding at least a
majority of the Registrable Securities then held by the KL Holders.
(c) For the purposes of determining the number of Holders entitled to vote
or exercise any rights hereunder, the Company shall be entitled to rely solely
on the list of record holders of its stock as maintained by or on behalf of the
Company.
3.7 Delays or Omissions3.7 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.
3.8 Notices3.8 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 electronic mail
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.
3.9 Attorneys' Fees3.9 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.
3.10 Titles and Subtitles3.10 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.
3.11 Counterparts3.11 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]
INVESTORS' RIGHTS AGREEMENT
SIGNATURE PAGE
In Witness Whereof, the parties hereto have executed this Investors' Rights
Agreement as of the date set forth in the first paragraph hereof.
PEQUOT HOLDERS:
COMPANY: PEQUOT PRIVATE EQUITY FUND II, L.P.
US XXXXXX.XXX INC. By: Pequot Capital Management, Inc.
Its: Investment Manager
By: /s/ XXXXX X. XXXXX By: /s/ XXXXX X. X'XXXXX
Name: Xxxxx X. Xxxxx Name: Xxxxx X. X'Xxxxx
Title: Chief Executive Officer Title: General Counsel
KL HOLDERS:
THE XXXXXXX-XXXXX COMPANY
By: /s/ XXXXXX XXXXXXX
Name:
Title:
INVESTORS' RIGHTS AGREEMENT
SIGNATURE PAGE
EXHIBIT A
SCHEDULE OF PEQUOT HOLDERS
Aggregate
Name and Address Shares Purchase Price
PEQUOT PRIVATE EQUITY FUND II, L.P.
000 Xxxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxx, Chief Accounting Officer and 100,000 shares @
Xxxxx Xxxxxx, Vice President $100 per
Facsimile: (000) 000-0000 _______ share
Total: $10,000,000
EXHIBIT B
KL HOLDERS
The Xxxxxxx-Xxxxx Company
00000 Xxxxxxxx Xxxx., 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Xxxxxx Xxxxxxx
c/o The Xxxxxxx-Xxxxx Company
00000 Xxxxxxxx Xxxx., 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxx
c/o The Xxxxxxx-Xxxxx Company
00000 Xxxxxxxx Xxxx., 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
