EXHIBIT 10.5
NORTHPOINT COMMUNICATIONS HOLDINGS, INC.
FIFTH AMENDED AND RESTATED RIGHTS AGREEMENT
DATED AS OF MARCH 22, 1999
FIFTH AMENDED AND RESTATED RIGHTS AGREEMENT
This FIFTH AMENDED AND RESTATED RIGHTS AGREEMENT is entered into as of the
22nd day of March, 1999, by and among NorthPoint Communications Holdings, Inc.,
a Delaware corporation (the "Company"), NorthPoint Communications, Inc., a
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Delaware corporation ("NCI"), persons holding at least 66 2/3% of the
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Registrable Securities under the Fourth Amended and Restated Rights Agreement
dated February 19, 1999 (the "Existing Rights Agreement") (as "Registrable
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Securities" is defined under the Existing Rights Agreement) (the "Prior
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Holders"), Xxxxxx Xxxxxxx Senior Funding, Inc. ("Xxxxxx Xxxxxxx") and the
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purchasers of the Company's Series D-1 Preferred Stock (the "Series D-1
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Purchasers").
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RECITALS
WHEREAS, NCI, the Prior Holders and Xxxxxx Xxxxxxx entered into a Fourth
Amended and Restated Rights Agreement dated as of February 19, 1999;
WHEREAS, NCI has consummated a reorganization (the "Reorganization")
pursuant to which NorthPoint became a wholly owned subsidiary of the Company.
The Reorganization was effected by a merger between NCI and another Delaware
corporation formed solely for this purpose, which was a wholly owned subsidiary
of the Company, with NCI as the surviving corporation of such merger. As a
result of the Reorganization, each of the holders of capital stock of NCI
immediately prior to the consummation of the Reorganization became the only
holders of capital stock of the Company immediately after the consummation of
the Reorganization, each holding the same number of shares of the same class of
capital stock of the Company with the same rights, privileges, terms and
conditions as the shares of capital stock of NCI held by such holders
immediately prior to the consummation of the Reorganization. The Company owns
all of the capital stock of NCI and has no other significant assets. The
Company, NCI, the Prior Holders and Xxxxxx Xxxxxxx each desire amend and restate
the Existing Rights Agreement as set forth herein to reflect the Reorganization;
WHEREAS, the Company is entering into Series D-1 Preferred Stock Purchase
Agreements with each of the Series D-1 Purchasers (the "Series D-1 Purchase
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Agreements") pursuant to which the Company has sold or desires to sell to the
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Series D-1 Purchasers and the Series D-1 Purchasers have purchased or desire to
purchase from the Company shares of the Company's Series D-1 Preferred Stock. A
condition to the Series D-1 Purchasers' obligations under the Series D-1
Purchase Agreements is that the Company, NCI, the Prior Holders, Xxxxxx Xxxxxxx
and the Series D-1 Purchasers enter into this Agreement for the purpose of
granting certain registration and other rights to the Series D-1 Purchasers. The
Company, NCI, the Prior Holders and Xxxxxx Xxxxxxx each desire to facilitate the
arrangements set forth in this Agreement, and the sale and purchase of shares of
Series D-1 Preferred Stock pursuant to the Series D-1 Purchase Agreements by
amending and restating the Existing Rights Agreement as set forth herein; and
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WHEREAS, pursuant to Section 3.7 of the Existing Rights Agreement, the
Existing Rights Agreement may be amended by written consent of the holders of at
least 66 2/3% of the outstanding shares of the Registrable Securities, Xxxxxx
Xxxxxxx and NCI.
NOW, THEREFORE, the parties hereby agree that the Existing Rights Agreement
is amended and restated in its entirety as follows:
SECTION 1
Restrictions on Transferability;
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Registration Rights
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1.1 Certain Definitions. As used in this Agreement, the following terms
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shall have the following respective meanings:
"Carlyle" shall mean TC Group, Inc.
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"Carlyle Option" shall mean the option of Carlyle to purchase
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additional shares of the Company's Series C Preferred Stock pursuant to that
certain side letter agreement between the Company and Carlyle dated as of
February 19, 1999, which agreement has been assigned by NCI to the Company in
connection with the Reorganization.
"Carlyle Warrant" shall mean any warrant issued to Carlyle by the
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Company pursuant to that certain side letter agreement between the Company and
Carlyle dated as of February 19, 1999, which warrant agreement has been assigned
by NCI to the Company in connection with the Reorganization.
"Carlyle Warrant and Option Shares" shall mean the Common Stock or
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other securities issuable or issued upon exercise of the Carlyle Warrants or the
Carlyle Option and any stock issued or issuable with respect thereto upon any
stock split, stock dividend, recapitalization or similar event.
"Class B Common Stock" shall mean the Class B Common Stock, par
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value $0.001 per share, of the Company.
"Class B Common Holder" shall mean any record holder of Class B Common
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Stock and any person holding Class B Common Stock to whom the rights under this
Agreement have been transferred in accordance with Section 1.15 hereof.
"Commission" shall mean the Securities and Exchange Commission or any
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other federal agency at the time administering the Securities Act.
"Commitment Letter" shall mean the letter agreement dated May 20, 1998
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between NCI and Xxxxxx Xxxxxxx Bridge Fund L.L.C. relating to the purchase of
Senior
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Increasing Rate Notes of NCI, which agreement has been assigned by NCI to the
Company in connection with the Reorganization.
"Common Stock" shall mean the Common Stock, par value $0.001 per
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share, of the Company.
"Conversion Shares" means (i) the Common Stock issued or issuable upon
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conversion of the Series B Preferred Stock, the Series C Preferred Stock and the
Series D Preferred Stock, and (ii) the Common Stock issued or issuable upon
conversion of the Class B Common Stock.
"Holders" shall mean the Preferred Holders, the Class B Common Holders
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and the Warrant Holders.
"Initiating Holders" shall mean any Preferred Holders and any Class B
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Common Holders who in the aggregate are Holders of not less than twenty percent
(20%) of the Registrable Securities held by Preferred Holders and Class B Common
Holders.
"Initiating Warrant Holders" shall mean any Warrant Holders who in the
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aggregate are Holders of not less than forty percent (40%) of the aggregate
amount of Registrable Securities held by Warrant Holders.
"Preferred Holder" shall mean any record holder of Preferred Shares
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and any person holding Preferred Shares to whom the rights under this Agreement
have been transferred in accordance with Section 1.15 hereof. "Preferred
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Holder" shall also mean Carlyle for so long as Carlyle is a holder of the
Carlyle Option or any Carlyle Warrant and Vulcan Ventures Incorporated
("Vulcan") for so long as Vulcan is a holder of the Vulcan Option.
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"Preferred Shares" shall mean the Series B Preferred Stock, Series C
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Preferred Stock, Series D Preferred Stock and Series D-1 Preferred Stock of the
Company and any stock issued or issuable with respect thereto upon any stock
split, stock dividend, recapitalization or similar event.
The terms "register," "registered" and "registration" refer to a
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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
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Company in complying with Sections 1.5, 1.6 , 1.7 and 1.8 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, messenger and delivery expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, any travel
and other road show expenses incident to such registration, accounting fees 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).
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"Registrable Securities" means (i) the Conversion Shares; (ii) the
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Warrant Shares; (iii) the Carlyle Warrant and Option Shares; (iv) the Vulcan
Option Shares; (v) any Common Stock issued or issuable in respect of the
Preferred Shares, Conversion Shares, Class B Common Stock, Warrant Shares,
Carlyle Warrant and Option Shares or Vulcan Option Shares or other securities
issued or issuable with respect to the Preferred Shares, Conversion Shares,
Class B Common Stock, Warrant Shares, Carlyle Warrant and Option Shares or
Vulcan Option Shares upon any stock split, stock dividend, recapitalization, or
similar event, or any Common Stock otherwise issued or issuable with respect to
the Conversion Shares, Preferred Shares, Class B Common Stock, Warrant Shares,
Carlyle Warrant and Option Shares or Vulcan Option Shares; provided, however,
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that shares of Common Stock or other securities shall only be treated as
Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale.
"Restricted Securities" shall mean the securities of the Company
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required to bear the legend set forth in Section 1.3 of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
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any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
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commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for the Holders (except as
provided by Section 1.10).
"Senior Increasing Rate Notes" shall mean the Senior Increasing Rate
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Notes issued pursuant to the Note Purchase Agreement dated July 10, 1998,
between Xxxxxx Xxxxxxx and NCI, as amended.
"Shares" shall have the meaning given in Section 2.4 of this
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Agreement.
"Vulcan Option" shall mean the option of Vulcan to purchase additional
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shares of the Company's Series C Preferred Stock pursuant to that certain side
letter agreement between NCI and Vulcan dated as of February 19, 1999, which
agreement has been assigned by NCI to the Company in connection with the
Reorganization.
"Vulcan Option Shares" shall mean the Common Stock or other securities
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issuable or issued upon exercise of the Vulcan Option and any stock issued or
issuable with respect thereto upon any stock split, stock dividend,
recapitalization or similar event.
"Warrant Holder" shall mean any record holder of Warrant Shares and
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any person holding Warrant Shares to whom rights under this Agreement have been
transferred.
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"Warrants" shall mean the warrants to initially purchase 1,235,714 and
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2/7 shares of Common Stock of the Company issued to Xxxxxx Xxxxxxx in connection
with the Commitment Letter and in connection with the Senior Increasing Rate
Notes and any other warrants that are hereafter issued in connection with the
Senior Increasing Rate Notes, which warrants have been assigned by NCI to the
Company in connection with the Reorganization.
"Warrant Shares" shall mean the Common Stock or other securities
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issuable or issued upon exercise of the Warrants and any stock issued or
issuable with respect thereto upon any stock split, stock dividend,
recapitalization or similar event.
1.2 Restrictions. The Preferred Shares, the Class B Common Stock
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and the Conversion Shares shall not be sold, assigned, transferred or pledged
except upon the conditions specified in this Agreement, which conditions are
intended to ensure compliance with the provisions of the Securities Act. The
Preferred Holders and the Class B Common Holders will cause any proposed
purchaser, assignee, transferee or pledgee of the Preferred Shares, the Class B
Common Stock or the Conversion Shares to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Agreement.
1.3 Restrictive Legend. Each certificate representing (i) the
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Preferred Shares, (ii) the Class B Common Stock, (iii) the Conversion Shares and
(iv) any other securities issued in respect of the securities referenced in
clauses (i), (ii) and (iii) upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 1.4 below) be stamped or
otherwise imprinted with legends in the following form (in addition to any
legend required under applicable state securities laws) (other than the Series
D-1 Purchasers, whose certificates of Series D-1 Preferred Stock, Series D
Preferred Stock, Class B Common Stock and Common Stock shall bear the legend set
forth in the Series D-1 Purchase Agreements):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH
MAY BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT
SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
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Each Preferred Holder and Class B Common Holder consents to the Company
making a notation on its records and giving instructions to any transfer agent
of the Restricted Securities in order to implement the restrictions on transfer
established in this Agreement.
1.4 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 Sections 1.3 and 1.4 of this Agreement.
Prior to any proposed sale, assignment, transfer or pledge 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, sale, assignment or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied at such holder's expense by either
(i) a written opinion of legal counsel who shall, and whose legal opinion shall,
be reasonably satisfactory to the Company, addressed to the Company, 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. The Company will not require such a legal opinion or "no action"
letter (a) in any transaction in compliance with Rule 144, (b) in any
transaction in which a Preferred Holder which is a corporation distributes
Restricted Securities after six (6) months following the purchase thereof solely
to its affiliates or majority-owned subsidiaries, or (c) in any transaction in
which a Preferred Holder which is a partnership distributes Restricted
Securities after six (6) months following the purchase thereof solely to
partners thereof for no consideration, provided that each transferee agrees in
writing to be subject to the terms of this Section 1.4. Each certificate
evidencing the Restricted Securities transferred as provided for in the
immediately preceding sentence shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
1.3 above, except that such certificate shall not bear such restrictive legend
if, in the opinion of counsel for such holder and the Company, such legend is
not required in order to establish compliance with any provisions of the
Securities Act.
1.5 Warrant Holder Requested Registration.
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(a) Request for Registration. In case the Company shall receive from
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Initiating Warrant Holders a written request that the Company effect any
registration, qualification or compliance with respect to the Registrable
Securities held by such Warrant Holders, the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Warrant Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation, the
execution of an
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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 Warrant Holder or Warrant
Holders joining in such request as are specified in a written request received
by the Company within thirty (30) days after receipt of such written notice
from the Company; provided, however, that the Company shall not be obligated
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to take any action to effect any such registration, qualification or compliance
pursuant to this Section 1.5:
(1) 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;
(2) Prior to the earlier of (i) June 30, 2001 or (ii) six (6)
months after the effective date of the first registration statement for a public
offering of Common Stock (other than a registration statement relating solely to
the sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan or a Commission Rule 145 transaction);
(3) During the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date six
(6) months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), including, without limitation, a registration pursuant to this Section 1,
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective and that the
Company's estimate of the date of filing such registration statement is made in
good faith; provided, however, that the Company shall not defer a registration
pursuant to this Section 1.5(a)(ii)(3) more than once in any twelve (12) month
period.
(4) After the Company has effected two (2) registrations pursuant
to this subparagraph 1.5(a), such registrations have been declared or ordered
effective and the securities offered pursuant to such registrations have been
sold; or
(5) If the Company shall furnish to such Warrant Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a single period
not to exceed one hundred-twenty (120) days from the date of receipt of written
request from the Warrant Holders; provided, however, that the Company shall not
make such certification more than once in any twelve (12) month period.
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Subject to the foregoing clauses (1) through (5), 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 the Initiating Warrant Holders.
(b) Underwriting. In the event that a registration pursuant to
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Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Warrant Holders as part of the notice given pursuant
to Section 1.5(a)(i). The right of any Warrant Holder to registration pursuant
to Section 1.5 shall be conditioned upon such Warrant Holder's participation in
the underwriting arrangements required by this Section 1.5 and the inclusion of
such Warrant Holder's Registrable Securities in the underwriting, to the extent
requested, to the extent provided in this Agreement.
The Company shall (together with all Warrant 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 Warrant Holders (which
managing underwriter shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 1.5, if the managing
underwriter advises the Warrant Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Warrant Holders of Registrable Securities and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated first among all Warrant Holders
thereof in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Warrant Holders at the time of filing the
registration statement. No Registrable Securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Warrant Holder to the nearest 100 shares.
If any Warrant Holder holding Registrable 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 Warrant Holders
initiating the request under this Section 1.5. The Registrable Securities
and/or other securities so withdrawn shall also be withdrawn from registration,
and such Registrable Securities shall not be transferred in a public
distribution prior to ninety (90) days after the effective date of such
registration.
1.6 Preferred Holder and Class B Common Holder Requested Registration.
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(a) Request for Registration. In case the Company shall receive from
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Initiating Holders a written request that the Company effect any registration,
qualification or compliance with respect to the Registrable Securities held by
Preferred Holders and Class B Common Holders, the anticipated aggregate offering
price, net of underwriting discounts and commissions, of which would exceed
$10,000,000, the Company will:
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(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) 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 thirty (30) days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to take
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any action to effect any such registration, qualification or compliance pursuant
to this Section 1.6:
(1) 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;
(2) Prior to the earlier of (i) June 1, 2001 or (ii) six (6)
months after the effective date of the first registration statement for a public
offering of Common Stock (other than a registration statement relating solely to
the sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan or a Commission Rule 145 transaction);
(3) During the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of and ending (i) on the date
six (6) months immediately following the effective date of any registration
statement pertaining to Common Stock of the Company or (ii) on the effective
date of any registration statement pertaining to securities of the Company (in
each case other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), including, without limitation, a
registration pursuant to this Section 1, provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective and that the Company's estimate of the date of
filing such registration statement is made in good faith; provided, however,
that the Company shall not defer a registration pursuant to this Section
1.6(a)(ii)(3) more than once in any twelve (12) month period.
(4) After the Company has effected three (3) such
registrations pursuant to this subparagraph 1.6(a), such registrations have been
declared or ordered effective and the securities offered pursuant to such
registrations have been sold; or
(5) If the Company shall furnish to the Initiating Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the
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Board of Directors it would be seriously detrimental to the Company or its
stockholders for a registration statement to be filed in the near future, then
the Company's obligation to use its best efforts to register, qualify or comply
under this Section 1.6 shall be deferred for a single period not to exceed one
hundred-twenty (120) days from the date of receipt of written request from the
Initiating Holders; provided, however, that the Company shall not make such
certification more than once in any twelve (12) month period.
Subject to the foregoing clauses (1) through (5), 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 the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
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Section 1.6 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.6(a)(i). The right of any Holder to registration pursuant to Section
1.6 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.6 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.
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 Initiating Holders (which managing underwriter
shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
Holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting with
respect to any Holder shall be an amount equal to (i) to the extent that
proceeds to such Holder from any prior sale of Registrable Securities pursuant
to a registration of Registrable Securities pursuant to this Agreement are less
than such Holder's Aggregate Purchase Price, an amount equal to the total amount
of Registrable Securities the managing underwriter advises may be included in
such underwriting, multiplied by such Holder's Capital Return Ratio, plus (ii)
to the extent that the number of shares of Registrable Securities which may be
included in such underwriting exceeds the amount obtained from the application
of clause (i) above with respect to all Holders requesting to include
Registrable Securities in such underwriting, an amount equal to (A) the total
amount of Registrable Securities the managing underwriter advises may be
included in such underwriting, less the total amount of Registrable Securities
of all Holders to be included in such underwriting pursuant to clause (i) above,
multiplied by (B) such Holder's Sale Ratio. For purposes hereof, as of any date
of determination, a Holder's "Aggregate Purchase Price" is an amount equal to
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the aggregate original purchase price paid to the Company as consideration for
all Registrable Securities held by such Holder; a Holder's "Capital Return
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Ratio" is a fraction, the numerator of which is such Holder's Aggregate Purchase
Price and the denominator of which is the sum of the Aggregate Purchase Prices
for all Holders; and a Holder's "Sale Ratio" is a fraction, the numerator of
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which is the amount of Registrable Securities held by such Holder and the
denominator of which is the aggregate amount of Registrable Securities held by
all Holders. No Registrable Securities excluded from the underwriting by reason
of the
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underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder of Registrable 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 Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to ninety (90) days after the
effective date of such registration.
1.7 Company Registration.
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(a) Notice of Registration. If at any time or from time to time, the
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Company shall determine to register any of its Common Stock, either for its own
account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, 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 in
such registration, all the Registrable Securities specified in a written request
or requests made within thirty (30) days after receipt of such written notice
from the Company by any Holder, but only to the extent that such inclusion will
not diminish the number of securities included by the Company or by holders of
the Company's securities who have demanded such registration, except as set
forth in subsection (b) below.
(b) Underwriting. If the registration of which the Company gives
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notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the written notice given pursuant
to Section 1.7(a)(i). In such event, the right of any Holder to registration
pursuant to Section 1.7 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company (or by the holders who have
demanded such registration). Notwithstanding any other provision of this
Section 1.7, if the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such offering exceeds
the amount of securities sold other than by the Company that the underwriters
determine in their sole discretion is compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not jeopardize the success
of the offering (the securities so included to be apportioned pro rata first
(and to the exclusion of any other selling stockholder) such that each selling
Holder may sell
12
an amount equal to (i) to the extent that proceeds to such Holder from any prior
sale of Registrable Securities pursuant to a registration of Registrable
Securities pursuant to this Agreement are less than such Holder's Aggregate
Purchase Price, an amount equal to the total amount of Registrable Securities
the managing underwriter advises may be included in such underwriting,
multiplied by such Holder's Capital Return Ratio, plus (ii) to the extent that
the number of shares of Registrable Securities which may be included in such
underwriting exceeds the amount obtained from the application of clause (i)
above with respect to all Holders requesting to include Registrable Securities
in such underwriting, an amount equal to (A) the total amount of Registrable
Securities the managing underwriter advises may be included in such
underwriting, less the total amount of Registrable Securities of all Holders to
be included in such underwriting pursuant to clause (i) above, multiplied by (B)
such Holder's Sale Ratio. For purposes hereof, as of any date of determination,
a Holder's "Aggregate Purchase Price" is an amount equal to the aggregate
------------------------
original purchase price paid to the Company as consideration for all Registrable
Securities held by such Holder; a Holder's "Capital Return Ratio" is a fraction,
--------------------
the numerator of which is such Holder's Aggregate Purchase Price and the
denominator of which is the sum of the Aggregate Purchase Prices for all
Holders; and a Holder's "Sale Ratio" is a fraction, the numerator of which is
----------
the amount of Registrable Securities held by such Holder and the denominator of
which is the aggregate amount of Registrable Securities held by all Holders.
Thereafter, the Company shall be required to include in the offering only that
number of securities of such selling stockholder (other than Holders) according
to the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event shall the amount of securities of
the selling Holders included in the offering be reduced below twenty percent
(20%) of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Common Stock in which case the
selling stockholders may be excluded if the underwriters make the determination
described above and no other stockholder's securities are included. If any
Holder or other holder disapproves of the terms of any such underwriting, he or
she may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating thereto.
(c) Right to Terminate Registration. The Company shall have the right
-------------------------------
to terminate or withdraw any registration initiated by it under this Section 1.7
prior to the effectiveness of such registration, whether or not any holder has
elected to include securities in such registration.
1.8 Registration on Form S-3.
------------------------
(a) If any Holder or group of Holders requests that the Company file a
registration statement on Form S-3 (or any successor or substitute form to Form
S-3) for a public offering of shares of the Registrable Securities, the
reasonably anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $1,000,000 (or for all
remaining Warrant Shares), and the Company is a registrant entitled to use Form
S-3 to
13
register the Registrable Securities for such an offering, the Company shall use
its best efforts to cause such Registrable Securities to be registered for
the offering on such form; provided, however, that the Company shall not be
--------- --------
required to effect more than one (1) registration pursuant to this Section 1.8
in any twelve (12) month period. The Company will (i) promptly give written
notice of the proposed registration to all other Holders, and (ii) as soon as
practicable, use its best efforts to effect such registration (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 thirty (30) days after receipt
of such written notice from the Company. The substantive provisions of Section
1.6(b) shall be applicable to each registration initiated under this Section
1.8.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 1.8: (i) 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, (ii) during the period
starting with the date sixty (60) days prior to the filing of, and ending on a
date six (6) months following the effective date of, a registration statement
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities), provided that
the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective, or (iii) if the Company shall
furnish to such Holder a certificate signed by the president of the Company
stating that, in the good faith judgment of the Board of Directors, it would be
seriously detrimental to the Company or its stockholders for registration
statements to be filed in the near future, then the Company's obligation to use
its best efforts to file a registration statement shall be deferred for a single
period not to exceed one hundred twenty (120) days from the receipt of the
request to file such registration by such Holder or Holders; provided, however,
that the Company shall not make such certification more than once in any twelve
(12) month period.
1.9 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities unless such new registration
rights, including standoff obligations, are subordinate to the registration
rights granted Holders under this Agreement.
1.10 Expenses of Registration. All Registration Expenses incurred
------------------------
in connection with any registration pursuant to Sections 1.5, 1.6, 1.7 and the
first three (3) registrations under Section 1.8, and the reasonable fees and
expenses of one special legal counsel to represent all of the Holders together
in any such registration shall be borne by the Company, provided that the
14
Company shall not be required to pay the Registration Expenses of any
registration proceeding begun pursuant to Section 1.5 or 1.6, the request of
which has been subsequently withdrawn by the Initiating Holders or Initiating
Warrant Holders, as the case may be. In such case, the Holders of Registrable
Securities to have been registered shall bear all such Registration Expenses pro
rata on the basis of the number of shares to have been registered.
Notwithstanding the foregoing, however, if at the time of the withdrawal, the
Initiating Holders or the Initiating Warrant Holders, as the case may be, have
learned of a material adverse change in the condition, business or prospects of
the Company from that known to such Holders at the time of their request, then
the Holders shall not be required to pay any of said Registration Expenses.
Unless otherwise stated, all other Selling Expenses relating to securities
registered on behalf of the Holders and all Registration Expenses incurred in
connection with the fourth and any subsequent registration pursuant to Section
1.8 shall be borne by the holders of the registered securities included in such
registration pro rata on the basis of the number of shares so registered.
1.11 Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to Sections 1.6,
1.7 and 1.8, 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) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the registration
statement has been completed; and
(b) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as the selling Holders or such underwriters may
reasonably request in order to facilitate the public offering of such
securities.
1.12 Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, 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 Section 1, 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 or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
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
15
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse each
such Holder, each of its officers and directors, 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, controlling person 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, 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, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with 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 total
amounts payable in indemnity by a Holder under this Section 1.12(b) shall not
exceed the net proceeds received by such Holder in the registered offering in
which the indemnity obligation arose.
(c) Each party entitled to indemnification under this Section 1.12
(the "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 unreasonably be
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 Section 1 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each
16
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 1.12 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. 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; provided, however, that in any such case, the total
amounts payable in contribution by a Holder under this Section 1.12(d) shall not
exceed the net proceeds received by such Holder in the registered offering in
which the contribution obligation arose.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and the Holders under this Section
1.12 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.13 Information by Holders. The Holder or Holders of Registrable
----------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 1.
1.14 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted 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 Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
------------
17
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) So long as a Holder owns any Restricted Securities, to furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
ninety (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 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 of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
1.15 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Preferred Holders and Class B Common Holders under
Sections 1.6, 1.7 and 1.8 may be assigned to a transferee or assignee reasonably
acceptable to the Company; provided, that (a) such transfer may otherwise be
--------
effected in accordance with applicable securities laws, (b) notice of such
assignment is given to the Company, and (c) such transferee or assignee (i) is a
wholly-owned subsidiary or constituent partner (including limited partners) of
such Preferred Holder or Class B Common Holder, as the case may be, or (ii)
acquires from such Preferred Holder or Class B Common Holder the lesser of (a)
500,000 or more shares of Registrable Securities (as appropriately adjusted for
stock splits and the like) or (b) all of the Registrable Securities then owned
by such Preferred Holder or Class B Common Holder. The rights to cause the
Company to register securities granted Xxxxxx Xxxxxxx under Sections 1.5, 1.6,
1.7 and 1.8 may be assigned in connection with any transfer or assignment of
Registrable Securities by Xxxxxx Xxxxxxx (together with any affiliates).
Notwithstanding the rights granted pursuant to Sections 1.6, 1.7 and 1.8 of this
Agreement, the Series D-1 Preferred Stock and the securities issuable upon
conversion thereof shall be subject to restrictions on transfer set forth in the
Series D-1 Purchase Agreements.
1.16 Standoff Agreement. In connection with the initial public offering of
------------------
the Company's securities and upon request of the Company or the underwriters
managing such offering, each Holder agrees 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 or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) from the effective date of
such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be
requested by the underwriters at the time of the initial public offering.
1.17 Termination of Rights. The rights of any particular Holder to cause
---------------------
the Company to register securities under Sections 1.5, 1.6, 1.7 and 1.8 shall
terminate with respect to such Holder five (5) years following a bona fide firm
commitment underwritten public offering of
18
shares of the Company's Common Stock registered under the Securities Act
(provided the per share public offering price is not less than $5.75 (as
adjusted to reflect subsequent stock dividends, stock splits, recapitalizations
or similar transactions) and such offering results in aggregate cash proceeds to
the Company of at least $50,000,000, net of underwriting discounts and
commissions).
SECTION 2
Covenants of the Company
------------------------
The Company hereby covenants and agrees as follows:
2.1 Financial Information. The Company will mail by first class, postage
---------------------
prepaid the following reports to each Preferred Holder and each Class B Common
Holder for so long as such Preferred Holder or Class B Common Holder is a holder
of any Registrable Securities:
(a) As soon as practicable after the end of each fiscal year, and in
any event within ninety (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 and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and audited by independent public accountants of national standing
selected by the Company.
(b) Contemporaneously with delivery to holders of Common Stock, a
copy of each report of the Company delivered to holders of the Common Stock.
(c) For so long as a Preferred Holder or Class B Common Holder is
eligible to receive reports under this Section 2.1, it shall also have the
right, at its expense, to discuss the affairs, finances and accounts of the
Company and its subsidiaries, if any, with the Company's officers, all at such
reasonable times and as often as may be reasonably requested; provided, however,
that the Company shall not be obligated to provide any information that it
reasonably considers to be a trade secret or confidential information.
2.2 Additional Information. As long as a Preferred Holder (together with
----------------------
any affiliate of such Preferred Holder) holds not less than 500,000 Registrable
Securities (except with respect to any Series D-1 Purchaser and their permitted
transferees, who (together with any affiliate of such Holder) holds not less
than 1,000,000 Registrable Securities), as adjusted for recapitalizations, stock
splits, stock dividends and the like, the Company will mail the following
reports to such Preferred Holder:
(a) 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 forty-five (45) days thereafter, a consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of income and consolidated
19
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 (other than for accompanying
notes), all in reasonable detail.
(b) As soon as practicable after the end of each fiscal month, and in
any event within thirty (30) days thereafter, an unaudited consolidated balance
sheet of the Company as at the end of such month, and unaudited consolidated
statements of income and unaudited consolidated statements of cash flows for
such month and for the current fiscal year to date. Such financial statements
shall be prepared in accordance with generally accepted accounting principles
consistently applied (other than accompanying notes), all in reasonable detail.
(c) As soon as practicable, but in any event thirty (30) days prior
to the end of each fiscal year, a budget for the next fiscal year, prepared on a
monthly basis, including balance sheets, income statements and statements of
cash flows for such months and, as soon as prepared, any other budgets or
revised budgets prepared by the Company.
2.3 Transfer of Information Rights. The information rights set forth in
------------------------------
Sections 2.1 and 2.2 may be transferred (a) to any affiliate of a Preferred
Holder or Class B Common Holder, provided that the Company is given notice of
such transfer and (b) in any nonpublic transfer of Registrable Securities,
provided that the Company is given written notice of such transfer, and provided
further that the right to receive the information set forth in Section 2.2 may
only be transferred to a holder of, or affiliated holders who in the aggregate
hold, at least 500,000 Registrable Securities. In the event that the Company
reasonably determines that provision of information pursuant to clause (b) of
the previous sentence to a transferee would materially adversely impact its
proprietary position, such information may be edited in the manner necessary to
avoid such impact.
2.4 Right of First Offer. Subject to the terms and conditions specified
--------------------
in this Section 2.4, the Company hereby grants to each Preferred Holder and
Class B Common Holder a right of first offer with respect to future sales by the
Company of its Shares. A Preferred Holder or Class B Common Holder who chooses
to exercise the right of first offer may designate as purchasers under such
right itself or its partners or affiliates in such proportions as it deems
appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
------
each Preferred Holder and Class B Common Holder in accordance with the following
provisions:
(a) The Company shall deliver a notice by certified mail or by
hand delivery or by messenger ("Notice") to the Holders stating (i) its bona
------
fide intention to offer such Shares, (ii) the number of such Shares to be
offered, and (iii) the price and terms, if any, upon which it proposes to offer
such Shares.
20
(b) Within thirty (30) days after delivery of the Notice, the
Preferred Holder or Class B Common Holder may elect to purchase or obtain, at
the price and on the terms specified in the Notice, up to that portion of such
Shares which equals the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion and exercise of all convertible or
exchangeable securities then held, by such Preferred Holder or Class B Common
Holder bears to the total number of shares of Common Stock then outstanding
(assuming full conversion and exercise of all convertible or exchangeable
securities).
(c) The Company may, during the 45-day period following the expiration
of the period provided in subsection 2.4(b) hereof, offer the remaining
unsubscribed portion of the Shares to any person or persons at a price not less
than, and upon terms no more favorable to the offeree than those specified in
the Notice. If the Company does not enter into a definitive agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within sixty (60) days of the execution thereof, the right provided hereunder
shall be deemed to be revived and such Shares shall not be offered unless first
reoffered to the Preferred Holders and Class B Common Holders in accordance
herewith.
(d) Without limiting any other provision of this Agreement or any
rights a Preferred Holder may have under the Amended and Restated Certificate of
Incorporation of the Company and any amendment or restatement thereof, the right
of first offer in this paragraph 2.4 shall not be applicable (i) to the issuance
or sale of Common Stock (or options therefor) to employees, consultants and
directors, pursuant to plans or agreements approved by the Board of Directors
for the primary purpose of soliciting or retaining their services, or (ii) to or
after consummation of a bona fide, firmly underwritten public offering of shares
of Common Stock, registered under the Act (provided the per share public
offering price is not less than $5.75 (as adjusted to reflect subsequent stock
dividends, stock splits, recapitalizations or similar transactions) and which
results in aggregate cash proceeds to the Company of at least $50,000,000 (net
of underwriting discounts and commissions) or (iii) to the issuance of
securities pursuant to the conversion or exercise of convertible or exercisable
securities, or (iv) to the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise, or (v) to the issuance
of securities to financial institutions or lessors in connection with commercial
credit arrangements, equipment financings, or similar transactions, or (vi) to
the issuance or sale of the Warrants, or (vii) to the issuance of securities
that, with unanimous approval of the Board of Directors of the Company, are not
offered to any existing stockholder of the Company.
(e) Notwithstanding the rights set forth in this Section 2.4, the
Series D-1 Purchasers and their permitted transferees shall at all times be
subject to the standstill provisions set forth in the Series D-1 Purchase
Agreements.
2.5 Termination of Covenants. The covenants set forth in this Section 2
------------------------
shall terminate on and be of no further force or effect upon the earlier of (i)
the consummation of the Company's sale of its Common Stock in an underwritten
public offering pursuant to an effective registration statement filed under the
Securities Act (provided the per share public offering price is not less than
$5.75 (as adjusted to reflect subsequent stock dividends, stock splits,
21
recapitalizations or similar transactions) and which results in aggregate cash
proceeds to the Company of at least $50,000,000, net of underwriting discounts
and commissions), immediately subsequent to which the Company shall be obligated
to file annual and quarterly reports with the Commission pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
------------
or (ii) the registration by the Company of a class of its equity securities
under Section 12(b) or 12(g) of the Exchange Act.
SECTION 3
Miscellaneous
-------------
3.1 Assignment. Except as otherwise provided in this Agreement, the terms
----------
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties to this Agreement,
including, without limitation, subsequent Holders of the Preferred Shares, Class
B Common Stock or the Warrant Shares.
3.2 Voting by Series D-1 Purchasers. Except with respect to votes pursuant
-------------------------------
to Section 6 of Division B of Article IV of the Amended and Restated Certificate
of Incorporation of the Company relating to certain protective provisions, each
Series D-1 Purchaser agrees to vote or cause to be voted all Series D Preferred
Stock owned by it, or over which such Series D-1 Purchaser has voting control,
in accordance with the recommendations of the Board of Directors of the Company.
Each Series D-1 Purchaser shall either attend each meeting of the stockholders
or grant its proxy to the Secretary of the Company, or, in the case of a written
consent of the stockholders, execute and deliver such consent to the Company.
3.3 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns (including, without limitation,
subsequent Holders of the Warrant Shares, the Preferred Shares or Class B Common
Stock), any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
3.4 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California in the United States of America.
3.5 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
3.6 Notices. Except as otherwise specifically provided in this Agreement,
-------
any notice required or permitted by this Agreement shall be in writing and shall
be sent by prepaid registered or certified mail, return receipt requested, or
otherwise delivered by hand or by messenger addressed to the other party at such
party's address as set forth on the books of the Company or at such other
address for which such party gives notice under this Agreement. Such
22
notice shall be deemed to have been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or three (3)
business days after deposit in the mail.
3.7 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.8 Amendment and Waiver. Any provision of this Agreement may be amended
--------------------
or waived with the written consent of all of (i) the Company, (ii) the holders
of at least 66 2/3% of the outstanding shares of the Registrable Securities and
(iii) Xxxxxx Xxxxxxx. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of Registrable Securities and the
Company. In addition, the Company may waive performance of any obligation owing
to it to the extent that any such waiver does not adversely affect the holders
of any other Registrable Securities, as to some or all of the holders of
Registrable Securities, or agree to accept alternatives to such performance,
without obtaining the consent of any holder of Registrable Securities. In the
event that an underwriting agreement is entered into between the Company and any
Holder of Registrable Securities, and such underwriting agreement contains terms
differing from this Agreement, as to any such Holder the terms of such
underwriting agreement shall govern.
3.9 Effect of Amendment or Waiver. The Holders and their successors and
-----------------------------
assigns acknowledge that by the operation of Section 3.8 of this Agreement the
holders of 66 2/3% of the outstanding Registrable Securities and Xxxxxx Xxxxxxx,
acting in conjunction with the Company, will have the right and power to
diminish or eliminate any or all rights or increase any or all obligations
pursuant to this Agreement.
3.10 Rights of Holders. Each Holder of Registrable Securities shall have
-----------------
the absolute right to exercise or refrain from exercising any right or rights
that such Holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
3.11 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party 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 party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made 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.
23
3.12 Provisions Not Applicable to Warrant Holders. Section 1.2, Section
--------------------------------------------
1.3, Section 1.4, Section 1.15 and Section 2 hereof shall not be applicable to
the Warrant Holders.
3.13 Waiver of Right of First Offer. By execution of this Agreement below,
------------------------------
the holders of the Company's Series B Preferred Stock and Series C Preferred
Stock, and each of them, hereby consent to the issuance of the shares of Series
D-1 Preferred Stock to the Series D-1 Purchasers as contemplated by the Series
D-1 Purchase Agreements and waive any rights to notice or to acquire shares of
Series D-1 Preferred Stock to which they may be entitled, including but not
limited to, those provided in Section 2.4 of the Existing Rights Agreement.
3.14 Carlyle Entities One Holder. For purposes of this Agreement,
---------------------------
including, without limitation, Sections 2.2 and 2.3 hereof, all of Carlyle
Partners II, L.P., a Delaware limited partnership, Carlyle Partners III, L.P., a
Delaware limited partnership, State Board of Administration of Florida, Carlyle
Investment Group, L.P., a Delaware limited partnership, Carlyle International
Partners II, L.P., a Cayman Islands limited partnership, Carlyle International
Partners III, L.P., a Cayman Islands limited partnership, C/S International
Partners, a Cayman Islands general partnership, Carlyle-NorthPoint Partners,
L.P., a Delaware limited partnership, Carlyle-NorthPoint International Partners,
L.P., a Cayman Islands limited partnership, Carlyle Venture Partners, LP, a
Cayman Islands limited partnership, Carlyle U.S. Venture Partners, LP, a
Delaware limited partnership, C/S Venture Investors, LP, a Cayman Islands
limited partnership and Carlyle Venture Coinvestment, LLC, a Delaware limited
liability company (collectively, the "Carlyle Entities") shall be considered as
a single Preferred Holder and a single Holder; provided, however, that the
Company shall be protected in relying on the instructions of, and notices
received from, Carlyle-NorthPoint Partners, L.P., a Delaware limited
partnership, in connection with the exercise of any rights or privileges of the
Carlyle Entities hereunder.
3.15 Series D-1 Purchasers. Any Series D-1 Purchaser and any purchaser of
---------------------
the Company's Series D Preferred Stock may become a party hereto by executing a
counterpart signature page to this Agreement. Upon delivery of such signature
page to the Company, the Conversion Shares held by such purchaser shall become
Registrable Securities and such purchaser shall become a Preferred Holder under
this Agreement.
[Signature Pages Follow]
24
IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amended and
Restated Rights Agreement as of the day and year first above written.
COMPANY:
NORTHPOINT COMMUNICATIONS HOLDINGS, INC.,
a Delaware corporation
By:_____________________________
Title:__________________________
Address:
000 Xxxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
PRIOR HOLDERS:
XXXXXXX XXXXX
________________________________________________________
(Signature)
XXXXXX XXXXX
________________________________________________________
(Signature)
XXXXXX XXXXXXX
________________________________________________________
(Signature)
00
XXXXXXX XXXXXX
________________________________________________________
(Signature)
XXXXXXX XXXXXXX
________________________________________________________
(Signature)
VLG INVESTMENTS 1997
_________________________________
(Print Title)
_________________________________
(Signature)
XXXXXXX X. XXXXX
_________________________________
(Signature)
BENCHMARK CAPITAL PARTNERS, L.P.
By: Benchmark Capital Management Co., L.L.C.
Its General Partner
By: __________________________________
Member
26
BENCHMARK FOUNDERS' FUND, L.P.
By: Benchmark Capital Management Co., L.L.C.
Its General Partner
By: __________________________________
Member
ACCEL V L.P.
By: Accel V Associates L.L.C.
Its General Partner
By: __________________________________
Managing Member
ACCEL INTERNET/STRATEGIC TECHNOLOGY FUND L.P.
By: Accel Internet/Strategic Technology Fund Associates L.L.C.
Its General Partner
By: ___________________________________
Managing Member
ACCEL KEIRETSU V L.P.
By: Accel Keiretsu V Associates L.L.C.
Its General Partner
By: ___________________________________
Managing Member
ACCEL INVESTORS `97 L.P.
By: ___________________________________
General Partner
27
XXXXXXX X. XXXXXXXXX PARTNERS
By: ________________________________
General Partner
GREYLOCK IX LIMITED PARTNERSHIP
By: Greylock IX GP Limited Partnership, its General Partner
By: ________________________________
General Partner
STANFORD UNIVERSITY
_____________________________________
(Print Title)
_____________________________________
(Signature)
XXXX X. XXXXXXX AND XXX X. XXXXXXXX,
TRUSTEES OF THE XXXXXXXX-XXXXXXX FAMILY TRUST,
UDT, DATED JULY 28, 1997
By: Xxx X. Xxxxxxxx, Trustee
_____________________________________
(Signature)
AT HOME CORPORATION
_____________________________________
(Print Title)
_____________________________________
(Signature)
28
INTEL CORPORATION
_____________________________________
(Print Title)
_____________________________________
(Signature)
___________________________
Xxxxxxxx X. Xxxxxx
VULCAN VENTURES INCORPORATED
_____________________________________
(Print Title)
_____________________________________
(Signature)
EFTIA
By: ________________________________
________________________________
(Print Name)
________________________________
Title
___________________________
Xxxxxxx Xxxxxx
29
THE XXXX FAMILY TRUST DATED OCTOBER 31, 1989,
AS AMENDED MAY 3, 1990
By: Xxxxxx X. Xxxx as Trustee for the Xxxx Family Trust
___________________________________________________
(Signature)
XXXXXXX XXXX PARTNERS
By: ______________________________________________
______________________________________________
(Print Name)
______________________________________________
Title
LEAD VENTURES
By: _____________________________________________
_____________________________________________
(Print Name)
_____________________________________________
Title
CNATRUST, TTEE FBO VENTURE LAW GROUP 401(K) PLAN XXXXXXX X. XXXX
By:
___________________________________________________
(Signature)
00
XXX XXXXXX XXXXXXXX XXXX. XX.
0000 DEFERRED SAVINGS PLAN FBO XXXXX X. XXXX
By:
___________________________________
(Signature)
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
By: Exeter IV Advisors, Inc.
By: _______________________________
Xxxxx X. Xxx, President
___________________________________
Xxxx Xxxxxx
___________________________________
Xxxx Xxxxxxxx
CARLYLE PARTNERS II, L.P.
By: TC Group, L.L.C.
Its General Partner
By: ______________________________
Title: Managing Director
CARLYLE PARTNERS III, L.P.
By: TC Group, L.L.C.
Its General Partner
By: ______________________________
Title: Managing Director
00
XXXXX XXXXX XX XXXXXXXXXXXXXX XX XXXXXXX
By: Carlyle Investment Management LLC
Its Manager
By: ______________________________
Title: Managing Director
CARLYLE INVESTMENT GROUP, L.P.
By: TC Group, L.L.C.
Its General Partner
By: ______________________________
Title: Managing Director
CARLYLE INTERNATIONAL PARTNERS II, L.P.
By: TC Group, L.L.C.
Its General Partner
By: ______________________________
Title: Managing Director
CARLYLE INTERNATIONAL PARTNERS III, L.P.
By: TC Group, L.L.C.
Its General Partner
By: ______________________________
Title: Managing Director
C/S INTERNATIONAL PARTNERS
By: TC Group, L.L.C.
Its General Partner
By: ______________________________
Title: Managing Director
32
CARLYLE-NORTHPOINT PARTNERS, L.P.
By: TC Group, L.L.C.
Its General Partner
By: ______________________________
Title: Managing Director
CARLYLE-NORTHPOINT INTERNATIONAL PARTNERS, L.P.
By: TC Group, L.L.C.
Its General Partner
By: ______________________________
Title: Managing Director
CARLYLE VENTURE PARTNERS, LP
By: TCG Ventures, Limited
Its General Partner
By: ______________________________
Title: Attorney in Fact
CARLYLE U.S. VENTURE PARTNERS, LP
By: TCG Ventures, LLC
Its General Partner
By: ______________________________
Title: Managing Director
C/S VENTURE INVESTORS, LP
By: TCG Ventures, Limited
Its General Partner
By: ______________________________
Title: Attorney in Fact
33
CARLYLE VENTURE COINVESTMENT, LLC
By: TCG Ventures, LLC
Its Manager
By: ______________________________
Title: Managing Director
XXXXXX XXXXXXX:
XXXXXX XXXXXXX SENIOR FUNDING, INC.
___________________________________
(Print Title)
___________________________________
(Signature)
34
NCI:
NORTHPOINT COMMUNICATIONS, INC.,
a Delaware corporation
By:________________________________
Title:_____________________________
Address:
000 Xxxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
35
SERIES D-1 PURCHASERS:
AT HOME CORPORATION
By:________________________________
________________________________
(Print Name)
________________________________
Title
ALC COMMUNICATIONS CORPORATION
By: _______________________________
_______________________________
(Print Name)
_______________________________
Title
CABLE & WIRELESS USA, INC.
By: _______________________________
_______________________________
(Print Name)
_______________________________
Title
ICG SERVICES, INC.
By: _______________________________
_______________________________
(Print Name)
_______________________________
Title
36
NETOPIA INC.
By: _______________________________
_______________________________
(Print Name)
_______________________________
Title
NETWORK PLUS CORPORATION
By: _______________________________
_______________________________
(Print Name)
_______________________________
Title
VERIO INC.
By: _______________________________
_______________________________
(Print Name)
_______________________________
Title
37
