EXHIBIT 10.13
INTERNET EXTRA CORPORATION
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (the "Agreement") is made as of this 30th
day of July, 1999 by and among Internet Extra Corporation, a California
corporation (the "Company"), and the undersigned holders of the Company's
securities (the "Investors").
RECITALS
A. Each of the Investors is a party to the Series C Preferred Stock
Purchase Agreement dated on even date herewith (the "Series C Agreement"),
pursuant to which such Investors are purchasing shares of Series C Preferred
Stock of the Company (the "Series C Preferred").
B. In connection with the purchase and sale of the Series C Preferred,
the Company desires to provide for certain rights of the Investors with respect
to information about the Company and registration of the Common Stock issued
upon conversion of the Series C Preferred according to the terms of this
Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Investors and the Company as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
successor agency.
"Holder" shall mean any holder of outstanding Registrable Securities
which have not been sold to the public, but only if such holder is an Investor
or transferee or assignee of the registration rights as permitted by Section 15
hereof.
"Registrable Securities" shall mean (i) any shares of the Company's
Common Stock issued or issuable upon the conversion of the Series C Preferred;
and (ii) any Common Stock of the Company issued or issuable with respect of any
stock described in clause (i) above; provided, however, that any shares
described in clause (i) or (ii) above which have been resold to the public shall
cease to be Registrable Securities upon such resale.
The terms "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 the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 5, 6 and 9 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 3 hereof (or any similar
legend).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and expenses of counsel for any selling Holders.
2. Restrictions on Transferability. The Restricted Securities shall not
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be transferable except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Each Holder of Restricted Securities will cause any proposed
transferee of the Restricted Securities held by such Holder to agree to take and
hold such Restricted Securities subject to the provisions and upon the
conditions specified in this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Series C
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Preferred, (ii) shares of the Company's Common Stock issued upon conversion of
the Series C Preferred, and (iii) any other securities issued in respect of the
Series C Preferred and Common Stock issued upon conversion of the Series C
Preferred shall (unless otherwise permitted by the provisions of Section 4 below
or upon the sale of such shares pursuant to an effective registration statement)
be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
4. Notice of Proposed Transfers. The Holder of each certificate
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representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the Holder thereof
shall give written notice to the Company of such Holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and shall, if the Company so
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requests, be accompanied (except in transactions in compliance with Rule 144) by
either (i) an unqualified written opinion of legal counsel who shall be
reasonably satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "No Action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the Holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the Holder to the
Company; provided, however, that no opinion or No Action letter need be obtained
with respect to a transfer to (A) a partner, active or retired, of a Holder of
Restricted Securities, (B) the estate of any such partner, (C) an "affiliate" of
a Holder of Restricted Securities as that term is defined in Rule 405
promulgated by the Commission under the Securities Act, (D) to any officer,
director or principal shareholder or member thereof, where such Holder is a
corporation or a limited liability company or (E) the spouse, children,
grandchildren or spouse of such children or grandchildren of any Holder or to
trusts for the benefit of any Holder or such persons, if the transferee agrees
to be subject to the terms hereof. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear the appropriate restrictive
legend set forth in Section 3 above, except that such certificate shall not bear
such restrictive legend if in the opinion of counsel for the Company or in the
written opinion of counsel retained by a Holder at such Holder's expense and
reasonably satisfactory to the Company such legend is not required in order to
establish compliance with any provisions of the Securities Act.
5. Requested Registration.
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(a) Request for Registration. If at any time after the effective date
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of the first registration statement filed by the Company covering the
underwritten offering of any of its securities to the general public, the
Company shall receive from any Holder or group of Holders holding at least 25%
of the Registrable Securities a written request that the Company effect any
registration, qualification or compliance with respect to at least 25% of the
Registrable Securities, or such lesser number of shares of Registrable
Securities provided that the aggregate proceeds of such offering (after
deduction for Selling Expenses) exceed $5,500,000, the Company will:
(x) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(y) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within 20 days after receipt of such written notice from the
Company;
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Provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 5:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(B) After the Company has effected two such registrations pursuant to
this Section 5(a), such registrations have been declared or ordered effective
and the securities offered pursuant to such registration have been sold; or
(C) Within six months following the effective date of any other
registration statement previously filed by the Company.
Subject to the foregoing clauses (A), (B) and (C), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
any Holder or Holders. If, however, the Company shall furnish to the Holder or
Holders requesting a registration statement pursuant to this Section 5 a
certificate signed by the President 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 registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of the
Holder or Holders requesting such registration; provided, however, that the
Company may not utilize this right more than once in any twelve-month period.
(b) Underwriting. If the Holders intend to distribute the Registrable
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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 Section 5(a) and
the Company shall include such information in the written notice referred to in
Section 5(a)(x). The right of any Holder to registration pursuant to Section 5
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Holders
requesting registration pursuant to Section 5(a)) to the extent provided herein.
A Holder may elect to include in such underwriting all or part of the
Registrable Securities held by such Holder.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Holders requesting registration. Notwithstanding any
other provision of this Section 5, if the managing underwriter advises the
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then, subject to the provisions of Section 5(a), the
Company shall so advise all Holders and the number of shares of Registrable
Securities and other securities that may be included in the registration and
underwriting shall be allocated among all Holders requesting inclusion in the
registration in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities and other securities requested
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by such Holders at the time of filing to be included the registration statement;
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities
are first entirely excluded from the underwriting. No Registrable Securities and
other securities excluded from the underwriting by reason of the managing
underwriter's marketing limitation shall be included in such registration. If
less that 75% of Registrable Securities requested to be included in a
registration by all Holders requesting registration are included in such
registration, then each Holder requesting registration shall be entitled to an
additional demand registration right pursuant to the terms of Section 5(a).
If any Holder of Registrable Securities and other securities disapproves of
the terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the other Holders.
The Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration; provided, however, that if by the withdrawal of
such Registrable Securities a greater number of Registrable Securities held by
other Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 5(b). If the
registration does not become effective due to the withdrawal of Registrable
Securities, then either (1) the Holders requesting registration shall reimburse
the Company for expenses incurred in complying with the request or (2) the
aborted registration shall be treated as effected for purposes of Section
5(a)(B); provided that, in the event that such withdrawal is based upon material
adverse information relating to the Company that is different from the
information known or available (upon request from the Company or otherwise) to
the Holders requesting registration at the time of their request for
registration under Section 5, such registration shall not be treated as a
counted registration for purposes of Section 5(a)(B) hereof, even though the
Holders do not bear the Registration Expenses for such aborted registration.
6. Company Registration.
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(a) Notice of Registration. If the Company shall determine to
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register any of its securities, either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights, including the Company's initial public offering but excluding any
registration relating solely to (a) employee benefit plans or shares issued
pursuant thereto, (b) a Rule 145 transaction, or (c) an exchange transaction
involving Rule 144A securities, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 15 days after receipt of such written notice from the
Company, by any Holder or Holders, provided that the Company may limit on a pro
rata basis based on the number of shares proposed to be registered by each
Holder, to the extent so advised by the underwriters, the amount of Registrable
Securities to be included in the registration by the Holders, or may exclude, to
the extent so advised by the underwriters, such Registrable Securities entirely
from such
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registration; and provided, further, that if Registrable Securities are excluded
entirely from the registration, no securities other than the securities being
registered by the Company may be included in the registration.
(b) In all registered public offerings, whether underwritten or not,
the amount of Registrable Securities of Holders which are included in such
registration, in accordance with the limitations set forth in Section 6(a)(ii)
above, shall be allocated to the Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities which would be
held by each of such Holders requesting registration assuming conversion by such
Holders of all outstanding shares of Series C Preferred requested to be included
by them as of the date of the notice given pursuant to this Section 6.
7. Expenses of Registration. All Registration Expenses incurred in
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connection with up to two registrations pursuant to Section 5(a) and any
registration pursuant to Section 6 shall be borne by the Company. Registration
Expenses incurred in connection with any registration pursuant to Section 9
shall be borne by the Company and the Holders of the Registrable Securities
being so registered pro rata. All Selling Expenses relating to securities
registered by the Holders shall be borne by the Holders of such securities pro
rata on the basis of the number of shares so registered.
8. Registration Procedures. In the case of each registration,
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qualification or compliance effected by the Company pursuant to this Agreement
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Keep such registration, qualification or compliance effective for
a period of 120 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs; provided, however, that such 120-day period shall be extended for
a period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company;
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(c) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or automated quotation system
on which similar securities issued by the Company are then listed; and
(d) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
9. Registration on Form S-3. In addition to the rights set forth in
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Section 5 and Section 6, if a Holder or Holders holding at least 25% of the
Registrable Securities requests that the Company file a registration statement
on Form S-3 (or any successor thereto) for a public offering of shares of
Registrable Securities the anticipated aggregate price to the public of which
would exceed $1,000,000,
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and the Company is a registrant entitled to use Form S-3 to register securities
for such an offering, the Company shall use good faith efforts to cause such
shares to be registered for the offering on such form (or any successor
thereto). A Holder or group of Holders is entitled to an unlimited number of
Form S-3 registrations; provided, however, that the Company shall be required to
file no more than one (1) such registration statement during any 12-month
period; provided further, that if the Company shall furnish to the Holder or
Holders requesting a registration statement pursuant to this Section 9 a
certificate signed by the President 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 registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of the
Holder or Holders requesting such registration; provided, however, that the
Company may not utilize this right more than once in any twelve-month period.
10. Termination and Modification of Registration Rights.
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(a) The registration rights granted pursuant to this Agreement shall
terminate (i) as to all Holders on the fifth anniversary of the closing of the
Company's initial public offering and (ii) as to any Holder, at such time after
the Company's initial public offering as the Holder would be able to sell all of
the Registrable Securities held by such Holder under Rule 144 promulgated under
the Securities Act in any three month period.
(b) The Company shall not, without the prior written consent of the
Holders of not less than a majority of the Registrable Securities then held by
Holders, enter into any agreement with any holder or prospective holder of any
securities of the Company that are or were New Securities, as defined below,
which would allow such holder or prospective holder to include such securities
in any registration filed under Sections 5, 6 or 9 hereof other than rights
subordinate to the rights of the Holders hereunder.
11. Lockup Agreement. Each Holder of Registrable Securities and each
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transferee pursuant to Section 15 hereof agrees, in connection with registration
of Registrable Securities or other securities of the Company, upon request of
the Company (if the Company shall be registering shares for its own account) and
the underwriters managing any underwritten offering of the Company's securities
(a) not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company (if the Company shall be registering shares for its own account) and
such underwriters, for such period of time (not to exceed 180 days in the case
of the Company's initial registered public offering or 90 days in the case of
any other such registered offering by the Company) from the effective date of
such registration as the Company and the underwriters may specify and (b) to
enter into a separate written agreement with such underwriters to that effect;
provided, that such obligations shall not apply to any registration of shares of
capital stock for any employee benefit plan on Form S-1 or Form S-8 or any
successor form or to any registration relating to a Commission Rule 145
transaction on Form S-4 or any successor form. Each Holder agrees that the
Company may instruct its transfer agent to place stop transfer notations in its
records to enforce the provisions of this Section 11. Notwithstanding anything
herein to the contrary, the foregoing shall not restrict Xxxxxxx, Xxxxx & Co.
and its affiliates from
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engaging in any brokerage, investment advisory, financial advisory, anti-raid
advisory, merger advisory, financing, asset management, trading, market making,
arbitrage an other similar activities conducted in the ordinary course of its or
its affiliates' business, so long as such activities are not conducted in
respect of the securities of the Company purchased pursuant to the Series C
Agreement.
12. Indemnification.
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(a) The Company will indemnify each Holder, each of its officers,
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners and such Holder's legal
counsel and independent accountants, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action; provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, legal counsel, independent accountants, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with
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investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders hereunder shall be limited to an amount equal to the gross proceeds
before expenses and commissions to each such Holder of Registrable Securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 12
(each an "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense; and provided, further, that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Agreement, except to the extent, but only to the
extent, that the Indemnifying Party's ability to defend against such claim or
litigation is impaired as a result of such failure to give notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the written 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.
(d) If the indemnification provided for in this Section 12 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense 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 statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations.
Notwithstanding the provisions of this Section 12, an Indemnifying Party that is
a selling Holder of Registrable Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Indemnifying Party exceeds the amount of any damages that such Indemnifying
Party has otherwise been required to pay by reason of such untrue or alleged
untrue statement of omission or alleged omission. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined 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. No person adjudged guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not adjudged guilty of
such fraudulent misrepresentation.
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13. Information by Holder. The Holder or Holders of Registrable
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Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in this Agreement.
14. Rule 144 Reporting. With a view to making available the benefits of
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certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) Use its all reasonable commercial efforts to then file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements);
(c) Furnish to Holders of Registrable Securities forthwith upon
request, a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public), and of the Securities Act and
the Securities Exchange Act of 1934 (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 of the Company as a
Holder of Registrable Securities may reasonably request in availing itself of
any rule or regulation of the Commission allowing such Holder to sell any such
securities without registration.
15. Transfer of Registration Rights. The right to cause the Company to
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register securities granted the Investors shall be transferable to (A) a
transferee or assignee who acquires at least 500,000 shares of Series C
Preferred (or Common Stock issuable upon conversion of the Series C Preferred)
(adjusted for stock splits, reverse stock splits or similar events after the
date hereof); provided, that the Company is given written notice of such
assignment prior to such assignment, or (B) the transferee of all of an
Investor's shares of Series C Preferred Stock (or Common Stock issued upon
conversion of the Series C Preferred), if an Investor holds less than 500,000
shares of Series C Preferred (or Common Stock issued on conversion of the Series
C Preferred) (adjusted for stock splits, reverse stock splits or similar events)
provided, that the Company is given written notice of such assignment prior to
such assignment.
16. Company Covenants. The Company hereby covenants and agrees as
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follows:
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16.1 Annual and Quarterly Financial Information. The Company will
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furnish the following reports to each Investor for so long as such Investor is a
holder of any shares of Series C Preferred (or Common Stock issued upon
conversion of the Series C Preferred):
(a) As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of cash flows of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and certified by independent public accountants of
national standing selected by the Company.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in any
event within 45 days thereafter, an unaudited consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and unaudited consolidated statements of income and unaudited
consolidated statements of cash flows of the Company and its subsidiaries for
such period and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the corresponding periods of
the previous fiscal year, all in reasonable detail and signed, subject to
changes resulting from year-end audit adjustments, by the principal financial or
accounting officer of the Company.
16.2 Assignment of Rights to Financial Information. The rights to
---------------------------------------------
receive information pursuant to Section 16.1 shall be transferable to any
transferee of shares of Series C Preferred (or Common Stock issued upon
conversion thereof) acquiring at least 100,000 shares (adjusted for stock
splits, reverse stock splits or similar events after the date hereof); provided,
however, that (i) the Company must receive written notice prior to the time of
said transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such information rights are
being assigned, and (ii) the transferee or assignee of such rights must not be a
person reasonably deemed by the Board of Directors of the Company (in a writing
delivered to the transferor) to be a competitor of the Company.
16.3 Termination of Covenants. Notwithstanding anything to the
------------------------
contrary set forth herein, the covenants set forth in this Section 16 (except
for those set forth in Section 16.3 which shall survive) shall terminate and be
of no further force or effect after the date upon which the first registration
statement filed by the Company under the Securities Act in connection with an
underwritten public offering of its securities first becomes effective.
17. Option to Purchase New Securities. The Company hereby grants to each
---------------------------------
Investor (an "Eligible Purchaser") an option to purchase, pro rata, all (or any
part) of "New Securities" (as defined in this Section 17) that the Company may,
from time to time propose to sell and issue. Such pro rata share, for purposes
of this option, is the ratio of (X) the number of shares of Common Stock then
owned by such Series C Purchaser or issuable upon the conversion of the Series C
Preferred then owned by such Series C Purchaser (including shares issuable upon
exercise of options or warrants held by such Series C
-11-
Purchaser), to (Y) the total number of shares of Common Stock then outstanding,
after giving effect to the conversion of all outstanding convertible securities
(including the Preferred Stock) and the exercise of all outstanding options.
This option shall be subject to the following provisions:
(a) "New Securities" shall mean any Common Stock and Preferred Stock
of the Company whether or not authorized on the date hereof, and rights,
options, or warrants to purchase Common Stock or Preferred Stock and securities
of any type whatsoever that are, or may become, convertible into Common Stock or
Preferred Stock; provided, however, that "New Securities" does not include the
following:
(i) shares of Common Stock, or options to purchase shares of
Common Stock, issued or granted from and after the date hereof to officers,
directors, employees and consultants of the corporation pursuant to employee
incentive plans, or other stock compensation arrangements, the principal purpose
of which is not to raise equity funding, and which (x) have been approved by the
Board of Directors of the corporation and which are not in excess of an
aggregate of 1,000,000 shares or (y) have been approved by the Board of
Directors of the corporation including the vote of the director elected by the
holders of Series C Preferred;
(ii) shares of Series C Preferred being issued or which may
become issuable pursuant to the Series C Agreement;
(iii) shares of Common Stock issuable upon conversion of the
Series C Preferred;
(iv) securities of the Company offered to the public pursuant
to a registration statement filed under the Securities Act subsequent to a
Series C Qualified IPO, as defined in the Company's Articles of Incorporation;
(v) securities of the Company issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets, or other reorganization whereby the Company
owns more than fifty percent (50%) of the voting power of such other
corporation;
(vi) securities of the Company issued to vendors or customers
or in connection with equipment lease financing transactions or bank financing
transactions the principal purpose of which is not to raise equity funding;
(vii) securities of the Company issued to corporate partners,
in connection with other strategic alliances or any other transaction if the
Board of Directors unanimously determines that any such transaction is not
principally for the purpose of raising equity funding; or
(viii) shares of Common Stock or Preferred Stock issued in
connection with any stock split, stock dividend, or recapitalization by the
Company.
-12-
(b) In the event that Company proposes to undertake an issuance of
New Securities, it shall give each Eligible Purchaser written notice of its
intention, describing the type of New Securities, the price to be paid by the
purchaser or purchasers thereof, the valuation of the Company upon which such
price was computed, the identity of the proposed purchasers of such New
Securities, and the general terms upon which the Company proposes to issue the
same. Each Eligible Purchaser shall have ten (10) business days after receipt of
such notice to agree to purchase its pro rata share of such New Securities at
the price and upon the terms specified in the notice by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
If any Eligible Purchaser fails to agree to purchase its full pro rata share
within such ten (10) business day period, the Company will give the Eligible
Purchasers who did so agree (the "Electing Purchasers") notice of the number of
shares which were not subscribed for. Such notice may be by telephone if
followed by written confirmation within two days. The Electing Purchasers shall
have ten (10) business days from the date of such notice to agree to purchase
pro rata all of the New Securities not purchased by such non-purchasing Eligible
Purchasers.
(c) In the event that Eligible Purchasers fail to exercise in full
the option within the period specified above, the Company shall have seventy-
five (75) days thereafter to sell (or enter into an agreement pursuant to which
the sale of New Securities covered thereby shall be closed, if at all, within
forty-five (45) days from the date of said agreement) the New Securities
respecting which the rights of the Eligible Purchasers were not exercised at the
same price, the same valuation, to no purchasers other than those specified in
the Company's notice, and upon the same terms (except for immaterial changes
unrelated to the price, the valuation or the identity of the purchasers) as
specified in the Company's notice. In the event the Company has not sold the New
Securities within such seventy-five (75) day period (or sold and issued New
Securities in accordance with the foregoing within forty-five (45) days from the
date of such agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such New Securities to the Eligible
Purchasers in the manner provided above.
(d) The option granted under this Section 17 shall expire upon the
earlier of (i) five years from the date hereof, or (ii) the closing of a Series
C Qualified IPO, as defined in the Company's Articles of Incorporation.
(e) This option is nonassignable except to any transferee to whom
registration rights may be transferred pursuant to Section 15 of this Agreement.
18. Confidentiality. For a period of three years from the date hereof,
---------------
each Investor shall not disclose to any third party or to the public in general
the terms and conditions of the Series C Preferred Stock Purchase Agreement and
each of the documents entered into in connection therewith, including their
existence, except (a) to the extent the discloser concludes in good faith and
upon advice of counsel that such disclosure is required by applicable law,
regulation or regulatory authority, (b) to the discloser's directors,
shareholders, auditors, accountants, lenders, bankers, underwriters, attorney
and bona fide prospective equity investors and (c) to any potential permitted
transferees in respect of transfers to be made pursuant to Sections 4 or 15 of
this Agreement; provided, that any such potential permitted transferees agree in
writing to be bound by the confidentiality provisions hereof. In the event of
any disclosure authorized by the preceding sentence, the disclosing party shall
use reasonable efforts to obtain confidential treatment of the information and
materials so disclosed.
-13-
19. Additional Parties. The parties hereto agree that additional holders
------------------
of securities of the Company may, with the consent only of the Company, be added
as parties to this Agreement with respect to any or all securities of the
Company held by them, and shall thereupon be deemed for all purposes "Investors"
hereunder. Any such additional party shall execute a counterpart of this
Agreement, and upon execution by such additional party and by the Company, shall
be considered an Investor for purposes of this Agreement. Upon such execution,
all shares of Common Stock of the Company issuable upon conversion of any
securities held by such additional party shall be deemed for all purposes
"Registrable Securities" hereunder. Notwithstanding the foregoing, from and
after the date of this Agreement, the Company shall not without the prior
written consent of each Investor, enter into any other agreement with any holder
or prospective holder of any securities of the Company providing for the grant
to such holder of rights superior to or on parity with those granted herein.
20. Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of California, without giving effect to the conflicts of
laws principals thereof.
21. Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subjects
hereof. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors (including,
without limitation, any successors by reason of a reincorporation of the
Company), assigns, heirs, executors and administrators of the parties hereto.
22. Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five days after deposit with the United States mail, by registered or certified
mail, postage prepaid, addressed (a) if to a Investor, to such Investor address
set forth on the signature page to this Agreement or at such other address as
such Investor shall have furnished to the Company in writing, (b) if to any
other holder of any Registrable Securities, to such address as such holder shall
have furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Registrable Securities who has so furnished an address to the Company, or (c) if
to the Company, to its address set forth on the signature page of this Agreement
to the attention of the Corporate Secretary, or at such other address as the
Company shall have furnished to the Holders.
23. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together constitute one instrument.
24. Amendment. Any provision of this Agreement may be amended, waived or
---------
modified upon the written consent of the (i) Company, and (ii) holders of a
majority of the Registrable Securities; provided, that any such amendment,
waiver or modification applies by its terms to each holder. Any Investor may
waive any of his or its rights or the Company's obligations hereunder without
obtaining the consent of any other person.
-14-
25. Delay or Omissions. No delay or omission to exercise any right, power
------------------
or remedy accruing to any Purchaser, upon any breach or default of the Company
under this Agreement, shall impair any such right, power or remedy of such
holder nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
holder of any breach or default under this Agreement, or any waiver on the part
of any holder 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 or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
26. Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
27. Agreement to Vote for Series C Director. Each Investor hereby agrees
---------------------------------------
to vote its shares of Series C Preferred in favor of the person nominated by
Pequot Private Equity Fund, L.P. to be the member of the Company's Board of
Directors elected by the holders of Series C Preferred pursuant to Section
IV.A.(5) of the Company's Articles of Incorporation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY: INVESTORS
INTERNET EXTRA CORPORATION
BROOKSIDE CAPITAL PARTNERS FUND, L.P.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxx, Chief Executive
Officer By: /s/ X. X. Xxxxxxxx
---------------------------------
Print Name: X. X. Xxxxxxxx
-------------------------
R&E HOLDINGS LLC Title: Managing Director
------------------------------
PEQUOT PRIVATE EQUITY FUND, L.P.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Print Name: Xxxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxx
-------------------------- ---------------------------------
Title: Managing Partner Print Name: Xxxxx X. Xxxxx
------------------------------- -------------------------
Title: CFO
------------------------------
/s/ Xxxxx X. Xxxxx PEQUOT OFFSHORE PRIVATE EQUITY FUND,
--------------------------------------
Xxxxx X. Xxxxx INC.
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Print Name: Xxxxx X. Xxxxx
-------------------------
/s/ Xxxxx X. Xxxxx Title: CFO
-------------------------------------- ------------------------------
Xxxxx X. Xxxxx
-15-
CELERITY PARTNERS
/s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxxx
-------------------------------------- ---------------------------------
Xxxxxxx X. Xxxxxx Print Name: Xxxxx Xxxxxx
-------------------------
Title: ______________________________
THE XXXXXXX XXXXX GROUP, INC.
/s/ Xxxxxxx Xxxxx
-------------------------------------- By: /s/ Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx ---------------------------------
Print Name: Xxxxxx Xxxxxxxxx
-------------------------
Title: Vice President
------------------------------
/s/ Xxxxxx Xxxxxxxx
--------------------------------------
Xxxxxx Xxxxxxxx STONE STREET FUND 1999, L.P.
By: Stone Street 1999 Corp., its
general partner
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------------
/s/ Xxxxx X. Xxxxxxx Print Name: Xxxxxx Xxxxxxxxx
-------------------------------------- -------------------------
Xxxxx X. Xxxxxxx Title: Vice President
------------------------------
/s/ Xxxxx Xxxx
--------------------------------------
Xxxxx Xxxx
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
[FIRST AMENDED AND RESTATED SHAREHOLDER RIGHTS AGREEMENT]
