EXHIBIT 10.4
SYMPHONIX DEVICES, INC.
RESTATED INVESTORS RIGHTS AGREEMENT
This Restated Investors Rights Agreement (the "Agreement") is effective as
of June 11, 1997, by and among Symphonix Devices, Inc., a California corporation
(the "Company") and certain holders of the Company's securities listed on
Exhibit A attached hereto (the "Holders").
The Investors Rights Agreement originally executed on July 27, 1994 and
subsequently amended is hereby restated in its entirety to read as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall
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have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
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federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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"Holder" shall mean any holder of outstanding Securities.
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"Initiating Holders" shall mean any Holder or Holders of not less than
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fifty percent (50%) of the then outstanding Registrable Securities.
"Major Holder" shall mean a Holder of at least one hundred thousand
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(100,000) shares of Preferred Stock (or shares of Common Stock issuable upon
conversion thereof).
"Restricted Securities" shall mean the securities of the Company required
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to bear the legend set forth in Section 2.2 hereof.
"Registrable Securities" means (i) shares of Common Stock issued or
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issuable pursuant to the conversion of the Series A Preferred Stock, the Series
B Preferred Stock, the Series C Preferred Stock and the Series D Preferred
Stock, (ii) shares of Common Stock issued or issuable pursuant to the conversion
of the Series A Preferred Stock and Series B Preferred Stock issued or issuable
upon exercise of Warrants issued to Lighthouse Capital Partners (or any entity
affiliated therewith) in connection with equipment financings, and (iii) shares
of Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange or in replacement of such Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Common Stock, excluding in all cases, however, any
Registrable Securities sold by a holder (y) pursuant to a registration statement
under this Agreement or (z) in a transaction in which his rights under this
Agreement are not transferred, including a transaction pursuant to a
registration statement under this Agreement.
The number of shares of "Registrable Securities then outstanding" shall be
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determined by the number of shares of Common Stock outstanding which are, and
the number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which are, Registrable Securities.
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 by the Commission.
"Registration Expenses" shall mean all expenses incurred by the Company in
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complying with Sections 3.1 and 3.2 hereof and all expenses incurred in
complying with Section 3.9 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of a single special
counsel for the Holders, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company) and Selling Expenses.
"Securities" shall mean the warrants issued to Lighthouse Capital Partners
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and the securities issuable upon exercise thereof, and the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Common Stock issued or issuable upon the conversion of
the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
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similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in affect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
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commissions applicable to the sale of Registrable Securities.
2. Transferability.
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2.1 Restrictions on Transferability. The Securities shall not be
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transferable except upon the conditions specified in this Agreement, which
conditions are intended to insure compliance with the provisions of the
Securities Act, or, in the case of Section 3.8 hereof, to assist in an orderly
distribution. Each Holder will cause any proposed transferee of the Securities
held by such Holder to agree to take and hold such Securities subject to the
provisions and upon the conditions specified in this Agreement.
2.2 Restrictive Legend. Each certificate representing (i) the Securities
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or (ii) any securities issued in respect of the Securities shall (unless
otherwise permitted by the provisions of
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Section 2.3 below) be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT UNDER AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY
NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN EXEMPTION
THEREFROM OR IN CONTRAVENTION OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER.
COPIES OF THE AGREEMENT 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 ITS PRINCIPAL OFFICE.
2.3 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 2.3. 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 be
accompanied (except in the following cases, with respect to which the
requirements set forth in the balance of this sentence need not be complied
with; transactions in compliance with Rule 144 or Rule 144A so long as the
Company is furnished with evidence of compliance with such Rule; transactions
involving the distribution of Restricted Securities by any holder thereof which
is a general or limited partnership to any of its partners, or retired partners,
or to the estate of any of its partners or retired partners; transactions
involving the transfer of Restricted Securities to a parent, subsidiary or
affiliate of the transferring holder; transactions involving the transfer of
Restricted Securities by any holder who is an individual to his family members
or to a trust for the benefit of such shareholder or his family members; or
transfers not involving a change in beneficial ownership) by either (i) a
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, (ii) a "no action" letter from the Commission to the effect that
the distribution of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, or (iii) such other showing that may be reasonably satisfactory to
legal counsel to the Company, 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. Each certificate
evidencing the Restricted Securities transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 2.2 above, except that
such certificate shall not bear such restrictive legend if in the
opinion of counsel for the Company such legend is not required in order to
establish compliance with any provisions of the Securities Act. All Restricted
Securities transferred as above that continue to
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bear the restrictive legend set forth in Section 2.2 shall continue to be
subject to the provisions of this Section 2.3 in the same manner as before such
transfer.
3. Registration Rights.
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3.1 Requested Registration. Prior to such time as the Company has
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effected two (2) registrations pursuant to this Section 3.1 and such
registrations have been declared or ordered effective, if the Company shall
receive from Initiating Holders a written request that the Company effect any
registration (other than a registration on Form S-3 or any related form of
registration statement) with respect to Registrable Securities having an
anticipated aggregate offering price to the public of at least one million
dollars ($1,000,000), the Company will:
(a) promptly give written notice of the proposed registration to all
other Holders; and
(b) as soon as practicable but in any event within one hundred twenty
(120) days, use its diligent 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) 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 given within fifteen (15)
days after receipt of such written notice from the Company; provided that the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 3.1:
(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 com pliance unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act;
(ii) Prior to the earlier of two (2) years after the date of this
Agreement or three (3) months following closing of the first underwritten public
offering of common stock of the Company for its own account pursuant to a
registration statement filed under to the Securities Act; or
(iii) If at the time of the request to register Registrable
Securities the Company in good faith gives notice within thirty (30) days of
such request that it is engaged or has fixed plans to engage within sixty (60)
days of the time of the request in an initial firmly underwritten registered
public offering; provided, however, that such notice may not be given more than
once in any six (6) month period.
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Subject to the foregoing clauses (i) through (iii) and to Section 3.1(d),
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 of the Initiating Holders.
(c) Underwriting. If the Initiating Holders intend to distribute the
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Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 3.1 and the Company shall include such information in the written notice
referred to in Section 3.1(a). The right of any Holder to registration pursuant
to Section 3.1 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent requested (unless otherwise mutually agreed by a
majority in interest of the Holders and such Holder) to the extent provided
herein.
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 underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders with the
approval of the Company, which approval shall not be unreasonably withheld.
Notwithstanding any other provision of this Section 3.1, if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten and so advises the Initiating Holders in writing, then the
Initiating Holders shall so advise all Holders (except those Holders who have
indicated to the Company their decision not to distribute any of their
Registrable Securities through such underwriting) and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all such Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities owned by such
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.
If any Holder disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The Registrable Securities and/or other securities
so withdrawn from such underwriting shall also be withdrawn from such
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 above in determining the
underwriter limitation; and, provided further that in the event that the
withdrawal of a Holder, and the subsequent inclusion of additional Registrable
Securities by other Holders, results in an anticipated aggregate offering price
to the public of less than one million dollars ($1,000,000), the Company shall
no longer be required to effect such registration pursuant to this Section 3.1.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account or the
account of others in such registration if the underwriter so agrees and if the
number of Registrable Securities which would otherwise have been included in
such registration and underwriting will not thereby be limited.
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(d) Delay of Registration. If the Company shall furnish to the
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Initiating Holders 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 on or before the date filing would be
required and it is therefore essential to defer the filing of such registration
statement, then the Company may direct that such request for registration be
delayed for a period not in excess of ninety (90) days, such right to delay a
request to be exercised by the Company not more than once in any one-year
period.
3.2 Company Registration.
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(a) If at any time or from time to time, the Company shall determine
to register any of its Common Stock, for its own account or for the account of
others (other than the Holders), other than a registration relating solely to
employee benefit plans or a registration relating solely to a Commission Rule
145 transaction or a registration on any registration form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities, the
Company will:
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); 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 ten (10) days after receipt of such written notice from
the Company, by any Holder or Holders.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 3.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 3.2, if the
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the underwriter may limit the number of
Registrable Securities and shares of Common Stock to be included in the
registration and underwriting to (i) in the case of the first underwritten
public offering of the securities of the Company, any amount that the
underwriter may determine, or (ii) in the case of any registration subsequent to
the first underwritten public offering of the securities of the Company, to not
less than thirty percent (30%) of the total securities covered by the
registration. The Company shall so advise all Holders (except those Holders who
have indicated to the Company their decision not to distribute any of their
Registrable Securities through such underwriting), and the number of shares of
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Registrable Securities that may be included in the registration and underwriting
shall be allocated among all Holders in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities owned by the 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. If
any Holder disapproves of the terms of any such underwriting, such person may
elect to withdraw therefrom by written notice to the Company and the
underwriter. The securities so withdrawn from such underwriting shall also be
withdrawn from such registration; provided, however, that, if by the withdrawal
of such 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 above
in determining the underwriter limitation.
3.3 Expenses of Registration. All Registration Expenses incurred in
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connection with any registration pursuant to Section 3.1 or Section 3.2 shall be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder and all Registration Expenses incurred in connection
with any registration pursuant to Section 3.9 hereunder, shall be borne by the
Holders of the Registrable Securities so registered pro-rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 3.1,
the request of which has been subsequently withdrawn by the Initiating Holders
(unless the withdrawal is based upon material adverse information concerning the
Company of which the Initiating Holders were not aware at the time of such
request or unless the Holders of a majority of Registrable Securities agree to
forfeit their right to one requested registration pursuant to Section 3.1 in
which event such right shall be forfeited by all Holders), in which case such
expenses shall be borne by the holders of Registrable Securities requesting such
registration in proportion to the number of shares for which registration was
requested.
3.4 Registration Procedures. In the case of each registration,
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qualification or compliance effected by the Company pursuant to this Section 3,
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 one hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs; and
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request.
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3.5 Indemnification.
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(a) The Company will indemnify each Holder, each of its officers,
directors, partners and legal counsel, and each person controlling such Holder
within the meaning of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 3,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other similar document (including any related registration statement,
notification or the like) 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 not misleading in the light of the circumstances under which they were
made, or (ii) any violation by the Company of any federal, state or common law
rule or regulation applicable to the Company in connection with any such
registration, qualification or compliance, and will reimburse each such Holder,
each of its officers, directors, partners and legal counsel, and each person
controlling such Holder, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as incurred, 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 based upon written information furnished to the Company by an
instrument duly executed by such Holder and stated to be specifically for use
therein or furnished by the Holder to the Company in response to a request by
the Company stating specifically that such information will be used by the
Company 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 legal counsel and independent accountant of the Company, each
person who controls the Company within the meaning of the Securities Act, and
each other such Holder, each of its officers, directors, and partners and each
person controlling such Holder within the meaning 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 similar 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 in the light of the
circumstances under which they were made, and will reimburse the Company, such
Holders, such directors, officers, persons, 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, as incurred, 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 con formity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein or furnished by the Holder to the Company in
response to a request by the Company stating specifically that such information
will be used by the Company therein; provided, however, that the obligations of
such Holders hereunder shall be limited to an
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amount equal to the proceeds to each such Holder of Registrable Securities sold
as contemplated herein.
(c) Each party entitled to indemnification under this Section 3.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice 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). The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall bear the expense of such defense of the Indemnified Party if
representation of both parties by the same counsel would be inappropriate due to
actual or potential conflicts of interest. The failure of any Indemnified Party
to give notice within a reasonable period of time as provided herein shall
relieve the Indemnifying Party of its obligations under this Section 3.5 only to
the extent that such failure to give notice shall materially adversely prejudice
the Indemnifying Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that the provisions
on indemnification 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.
(e) The obligations of the Company and Holders under this Section 3.5
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 3, and otherwise.
3.6 Information by Holder. Each Holder including securities of the
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Company in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 3.
3.7 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) Use its best efforts to facilitate the sale of the Restricted
Securities to the public, without registration under the Securities Act,
pursuant to Rule 144 under the Securities Act,
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provided that this shall not require the Company to file reports under the
Securities Act and the Exchange Act at anytime prior to the Company's being
otherwise required to file such reports.
(b) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act at all times after
ninety (90) days 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;
(c) 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);
(d) 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 so filed
by the Company as such 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.
3.8 "Market Stand-off" Agreement. Each Holder agrees not to sell or
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otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by it for a period not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act if so requested by the Company and the underwriter of
Common Stock (or other securities) of the Company, provided that:
(a) such agreement shall apply only to the first underwritten
registered public offering of the Company; and
(b) all officers and directors of the Company enter into similar
agreements. The Company may impose stop-transfer instructions with respect to
the shares (or securities) subject to the foregoing restriction until the end of
such period.
3.9 Form S-3. The Company shall use its best efforts to qualify for
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registration on Form S-3 and to that end the Company shall register (whether or
not required by law to do so) its Common Stock under the Exchange Act within
twelve (12) months following the effective date of the first registration of any
securities of the Company on Form S-1. After the Company has qualified for the
use of Form S-3, in addition to the rights contained in the foregoing provisions
of this Section 3, the Holders of Registrable Securities shall have the right to
request registrations on Form S-3 thereafter under this Section 3.9 (such
requests shall be in a writing signed by Holders holding not less than twenty
percent (20%) of the then outstanding Registrable Securities and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of such
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shares by such Holder or Holders), provided that the Company shall not be
required to effect a registration pursuant to this Section 3.9 unless the Holder
or Holders requesting registration propose to dispose of shares of Registrable
Securities which they reasonably anticipate will have an aggregate disposition
price (before deduction of underwriting discounts and expenses of sale) of at
least five hundred thousand dollars ($500,000), provided further that the
Company shall not be required to effect a registration pursuant to this Section
3.9 if at the time of the request for a registration on Form S-3 the Company in
good faith gives notice within thirty (30) days of such request that it is
engaged or has fixed plans to engage within sixty (60) days of the time of the
request in a firmly underwritten registered public offering (but such notice may
not be given more than once in any six (6) month period), and provided further
that the Company shall not be required to effect more than one registration
pursuant to this Section 3.9 in any twelve (12) month period.
The Company shall give notice to all Holders of Registrable Securities of
the receipt of a request for registration pursuant to this Section 3.9 and shall
provide a reasonable opportunity for other Holders to participate in the
registration. Subject to the foregoing, the Company will use its best efforts
to effect promptly the registration of all shares of Registrable Securities on
Form S-3, as the case may be, to the extent requested by the Holder or Holders
thereof for purposes of disposition.
3.10 Transfer of Registration Rights. Except as otherwise provided
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herein, the rights contained in this Section 3 may be assigned or otherwise
conveyed to a transferee, affiliate or assignee of Registrable Securities, who
shall be considered a "Holder" for purposes of this Section 3, provided that (i)
such transfer is effected in accordance with applicable federal and state
securities laws, (ii) such transferee or assignee becomes a party to this
Agreement or agrees in writing to be subject to the terms hereof to the same
extent as if he were an original purchaser hereunder and (iii) such transferee
or assignee (A) is a parent, wholly owned subsidiary or constituent partner
(including limited partners) or affiliate of the transferring Holder, or (B)
acquires at least ten thousand (10,000) shares of Registrable Securities (as
shares are presently constituted) or (C) acquires all of the Registrable
Securities originally held by the transferring Holder and, provided further,
that the Company is given written notice by such Holder at the time of or within
a reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned. For the purposes of determining the
number of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 3.
3.11 Certain Limitations in Connection with Future Grants of
-------------------------------------------------------
Registration Rights. From and after the date of this Agreement, the Company
-------------------
shall not, without the prior written consent of the Holders of at least a
majority of the outstanding Registrable Securities, enter into any agreement
with any person or persons providing for the granting to such holder of
registration rights superior to those granted to Holders pursuant to this
Section 3, or of registration rights which might cause a reduction
-11-
in the number of shares includable by the Holders in any offering pursuant to
Section 3.1 or in any offering subject to Section 3.2.
3.12 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.
3.13 Termination of Registration Rights. All rights and duties provided for
----------------------------------
in this Section 3 shall terminate on the date five (5) years from the date of a
Qualified IPO (as defined below in Section 4.1(d)).
4. Right of First Refusal on Company Issuances.
-------------------------------------------
4.1 Right of First Refusal. The Company hereby grants to each Major
----------------------
Holder the right of first refusal to purchase, pro rata, all (or any part) of
New Securities (as defined in this Section 4.1) that the Company may, from time
to time propose to sell and issue. Such Major Holder's pro rata share, for
purposes of this right of first refusal, is the ratio of the number of shares of
Common Stock then owned or issuable upon conversion of the Preferred Stock of
the Company then owned by such Major Holder to the total number of shares of
Common Stock outstanding immediately prior to the issuance of the New
Securities, assuming full conversion of all outstanding shares of Preferred
Stock of the Company and exercise of all outstanding rights, options and
warrants to acquire, directly or indirectly, Common Stock of the Company. This
right of first refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any capital stock of the Company,
whether now authorized or not, and rights, options, or warrants to purchase said
capital stock, and securities of any type whatsoever that are, or may become,
convertible into said capital stock; provided, however, that "New Securities"
does not include (1) currently outstanding securities; (ii) securities issuable
upon conversion or exercise of or with respect to outstanding options, warrants
or convertible securities; (iii) securities 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 corporation; (iv) shares of the
Company's Common Stock (or related options) issued to employees, officers,
directors, consultants or advisers of the Company pursuant to any employee stock
offering, plan, or arrangement approved by a majority of the outside Board of
Directors; (v) shares of the Company's Common Stock or Preferred Stock issued in
connection with any stock split, stock dividend, or similar recapitalization by
the Company; (vi) securities issued in connection with equipment or debt
financing or leases (including securities issued in consideration of guarantees
of such financing or leases) which are approved by the Company's Board of
Directors; or (vii) securities issued to vendors, customers or coventurers or to
other persons in similar commercial or corporate partnering situations with the
Company if such issuance is approved by a majority of the outside Board of
Directors.
(b) In the event that the Company proposes to undertake an issuance of
New Securities, it shall give each Major Holder written notice of its intention,
describing the type of New
-12-
Securities, the price, and the general terms upon which the Company proposes to
issue the same. Each Major Holder shall have twenty (20) days from the date of
mailing of any such notice to agree to purchase its pro rata share of such New
Securities, in whole or in part, for the price and upon the general terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. Each Major Holder shall
have a right of overallotment such that if any Major Holder fails to exercise
its right hereunder to purchase its full pro rata portion of New Securities, the
Company shall so notify the other Major Holders who are purchasing their full
pro rata portion, and such fully-exercising Major Holders may purchase that
portion of the New Securities not subscribed for on a pro rata basis, within ten
(10) days from the date of such notice.
(c) In the event that Major Holders fail collectively to exercise in
full the right of first refusal within said twenty (20) day period (plus ten
(10) day period, if applicable) the Company shall have sixty (60) days
thereafter to sell or enter into an agreement providing for the closing of the
sale of the New Securities respecting which the Major Holders' rights were not
exercised within thirty (30) days of such agreement at a price and upon general
terms no more favorable to the purchasers thereon than specified in the
Company's notice. In the event the Company has not sold the New Securities
within such sixty (60) day period, the Company shall not thereafter issue or
sell any New Securities, without first offering such securities to the Major
Holders in the manner provided above.
(d) The right of first refusal granted under this Agreement shall not
apply to and shall expire upon the closing of the first firmly underwritten
public offering of Common Stock of the Company that is pursuant to a
registration statement filed with, and declared effective by, the Commission
under the Securities Act, covering the offer and sale of Common Stock to the
public in which the shares of the Company's Preferred Stock will be converted
into shares of the Company's Common Stock pursuant to the provisions of the
Company's Articles of Incorporation, as now in effect or hereafter amended (a
"Qualified IPO").
(e) This right of first refusal is assignable only to an affiliate of
a Major Holder or in connection with a sale or transfer of Registrable
Securities.
5. Waiver of Right of First Refusal. The Holders hereby waive their rights of
--------------------------------
first refusal set forth in Section 4 of the Agreement with regard to the
proposed sale and issuance of Series D Preferred Stock and the Common Stock into
which such shares are convertible and all prior issuances. This waiver shall be
effective upon execution of this Agreement by the Company and the Holders of
more than 50% of the Securities.
6. Information Rights.
------------------
6.1 Financial Information. The Company will furnish the following
---------------------
information to each Major Holder:
(a) within twenty (20) days after the end of each quarterly accounting
period in each fiscal year,
-13-
(i) unaudited statements of income and of cash flow of the
Company for such quarterly period and for the period from the beginning of such
fiscal year to the end of such quarterly period, and
(ii) balance sheets of the Company as of the end of such
quarterly period, which statements will be prepared in accordance with generally
accepted accounting principles, consistently and uniformly applied.
(b) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations and financial affairs or in conjunction with any annual or
interim audit given to the Company by its independent accountants (and not
otherwise contained in other materials provided pursuant to this Section);
(c) not less than thirty (30) days prior to the end of each fiscal
year, annual consolidated budgets prepared on a monthly basis for the Company
for the succeeding fiscal year, as approved by the Board of Directors
(displaying anticipated statements of income and cash flow and balance sheets
and containing a brief description by the Chief Executive Officer of the
Company's plans for the subsequent year);
(d) within ninety (90) days after the end of each fiscal year,
statements of income and retained earnings and cash flows of the Company for
such fiscal year, and a balance sheet of the Company as of the end of such
fiscal year, which statements shall be prepared in accordance with generally
accepted accounting principles, consistently and uniformly applied, and
accompanied by the unqualified opinion of an accounting firm of recognized
national standing.
6.2 Inspection Rights; Management Rights. The Company shall permit each
------------------------------------
Major Holder, its attorney, or its other representative to visit and inspect the
Company's properties, to examine the Company's books of account and other
records, to make copies or extracts therefrom and to discuss the Company's
affairs, finances and accounts with its officers, management employees and
independent accountants, all at such reasonable times and as often as such Major
Holder may reasonably request.
6.3 Termination of Covenants. The covenants provided in Sections 6.1 and
------------------------
6.2 shall terminate upon a Qualified IPO.
6.4 Assignment of Rights to Information. The rights granted pursuant to
-----------------------------------
Sections 6.1 and 6.2 may not be assigned or otherwise conveyed by any Major
Holder or by any subsequent transferee of any such rights without the written
consent of the Company, which consent shall not be unreasonably withheld;
provided that the Company may refuse such written consent if the proposed
transferee is a competitor of the Company as determined by the Company's Board
of Directors; and provided further, that no such written consent shall be
required if the transfer is made to a party who is not a competitor of the
Company and who is a parent, subsidiary, affiliate, partner or group member of
any Major Holder.
-14-
6.5 Confidentiality. Each Holder agrees that it will keep confidential
---------------
and will not disclose or divulge any confidential, proprietary or secret
information which such Holder may obtain from the Company, and which the Company
has prominently marked "confidential", "proprietary" or "secret" or has
otherwise identified as being such, pursuant to financial statements, reports
and other materials submitted by the Company as required hereunder, or pursuant
to visitation or inspection rights granted hereunder unless such information is
or becomes known to the Holder from a source other than the Company or is or
becomes publicly known, or unless the Company gives its written consent to the
Holder's release of such information, except that no such written consent shall
be required (and Holder shall be free to release such information) if such
information is to be provided to a Holder's counsel or accountant, or to an
officer, director or general or limited partner of a Holder or to employees of,
or consultants to, a Holder on a "need to know" basis, provided that the Holder
shall inform the recipient of the confidential nature of such information, and
shall instruct the recipient to treat the information as confidential.
7. Miscellaneous.
-------------
7.1 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California applicable to contracts
between California residents entered into and to be performed entirely within
the State of California.
7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
7.3 Entire Agreement. This Agreement between the Holders and the Company
----------------
constitutes the full and entire understanding and agreement among the parties
with regard to the subjects hereof.
7.4 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be effective five (5) days
after deposited by first-class mail, postage prepaid, with the United States
mail or delivery by hand or by messenger, if addressed (a) to a Holder, at such
Holder's address set forth on the attached Exhibit A, or at such other address
as such Holder shall have furnished to the Company in writing, or (b) to any
other Holder of Registrable Securities, at 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) to
the Company, at the address set forth below the Company's name on the signature
page to this Agreement or such other address as the Company shall have furnished
to each Holder and each such other holder in writing.
-15-
7.5 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party, upon any breach or default of any other
party under this Agreement, shall impair any such right, power or remedy of such
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 thereunder
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 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.
7.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which may be executed by less than all of the Holders,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
7.7 Severability. In the case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.8 Amendments. The provisions of this Agreement may be amended at any
----------
time and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the holders of not less than a majority of the number of shares
of Securities outstanding as of the date of such amendment or waiver. Each
Holder acknowledges that by the operation of this Section 7.8 the Holders of a
majority of the outstanding Securities may have the right and power to diminish
or eliminate all rights of such Holder under this Agreement.
-16-
The foregoing Restated Investors Rights Agreement is hereby executed as of
the date first above written.
COMPANY:
SYMPHONIX DEVICES, INC.
/s/ Xxxxx X. Xxxxxxx
--------------------
Xxxxx X. Xxxxxxx
Chairman, President and CEO
-17-
HOLDERS:
XXXXXX X. XXXX & XXXXXXX X. XXXX,
TRUSTEES UNDER DECLARATION OF TRUST
DATED JUNE 22, 1988
By: /s/ X.X. Xxxx
---------------------------
Title: ___________________________
/s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxxx Xxxxx
---------------------------------
Xxxxxxxx Xxxxx
/s/ Xxxxx Xxxxxx Xxxx
---------------------------------
Xxxxx Xxxxxx Xxxx
/s/ Xxxxx Xxxx
---------------------------------
Xxxxx Xxxx
THE FIRST NATIONAL BANK OF CHICAGO AS
CUSTODIAN TO THE XXXXXXX VENTURE
CAPITAL FUND III, L.P.
By: __________________________
Title: __________________________
-18-
THE FIRST NATIONAL BANK OF CHICAGO AS
CUSTODIAN TO THEBRINSON TRUST
COMPANY AS TRUSTEE OF THE XXXXXXX MAP
VENTURE CAPITAL FUND III
By: ___________________________
Title: ___________________________
XXXXXX FAMILY PARTNERS, A CALIFORNIA
LIMITED PARTNERSHIP
By: ___________________________
Title: ___________________________
BRENDAN XXXXXX XXXXXX AND XXXXXX X.
XXXXXX, TRUSTEES OF THE XXXXXX FAMILY
TRUST U/D/T DATED JANUARY 31, 1996
By: /s/ X. X. Xxxxxx
---------------------------
Title: ___________________________
XXXXXX X. XXXXX, TTEE CHASE 1991
REVOCABLE TRUST DTD. 4-2-91
By: /s/ Xxxxxx Xxxxx
---------------------------
Title: ___________________________
/s/ Xxxxxx X. Xxxxxxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxxxxx
-19-
/s/ Xxxxx X. Xxxxxxxx
----------------------------------
Xxxxx X. Xxxxxxxx
CORAL PARTNERS IV, LIMITED
PARTNERSHIP
By: Coral Management Partners IV
Limited Partnership, Its: General Partner
/s/ Xxxxx X. XxXxxxxx
----------------------------------
Xxxxx X. XxXxxxxx, General Partner
XXXXXXXX XXXXXX, M.D. AND XXXXXXX X.
XXXXXX AS JOINT TENANTS
/s/ Xxxxxxxx Xxxxxx
----------------------------------
Xxxxxxxx Xxxxxx, M.D.
/s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx
/s/ Xxxxx Xxxxx
----------------------------------
Xxxxx Xxxxx
XXXXXX XXXXXXXXXX, TTEE XXXXXXXXXX
FAMILY TRUST, DTD. 8-16-82
By: /s/ X. Xxxxxxxxx
---------------------------
Title: ___________________________
/s/ Xxxxxx X. Down
----------------------------------
Xxxxxx X. Down
/s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx
-20-
G&H PARTNERS
By: /s/ Illigible
---------------------------
Title: ___________________________
XXXX XXXXXX XXXXXX AND XXXX
XXXXXXX HEARST, CO-TTEES FBO
HEARST REVOCABLE TRUST DTD
3/13/89 c/o XXXX X. XXXXXX
By: /s/ Xxxx X. Xxxxxx
---------------------------
Title: ___________________________
XXXXX XXXXXXXXX, INC.
By: /s/ X. Xxxxxxxxx
---------------------------
Title: ___________________________
/s/ Xxxxxx X. Xxxx
----------------------------------
Xxxxxx X. Xxxx, Xx.
/s/ Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx
/s/ Xxxx X. Xxxx
----------------------------------
Xxxx X. Xxxx
-21-
XXXXXXX & XXXXXXX DEVELOPMENT
CORPORATION
By: /s/ Illigible
---------------------------
Title: ___________________________
/s/ Xxx Xxxxxxxxx
----------------------------------
Xxx Xxxxxxxxx
/s/ Xxxxx Xxxx
----------------------------------
Xxxxx Xxxx
XXXXXXXX X. XXXXXX IRREVOCABLE TRUST
By: /s/ Xxxxxxxx X. Xxxxxx
---------------------------
Title: ___________________________
XXXXXX X. XXXXX, SUCCESSOR TTEE
PROFIT SHARING TRUST DATED 1-1-87
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Title: ___________________________
XXXXXX X. XXXXX, TTEE, XXXXXX X. XXXXX &
XXXXX X. XXXXX TRUST DTD 12/3/84
-22-
By: ____________________________
Title: ___________________________
/s/ Xxxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Xxxxx
XXXXXXX X. XXXXX CANCER FOUNDATION
By: ___________________________
Title: ___________________________
XXXXXXXX VII
A CALIFORNIA LIMITED PARTNERSHIP
BY XXXXXXXX VII MANAGEMENT
A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ Illigible
---------------------------
XXXXXXXX ASSOCIATES FUND II
A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ Illigible
---------------------------
__________________________________
Xxxxxxxx Xxxxxx
-23-
XXXXXX X. & XXXXXX X. XXXXX, TTEE
OSTER FAMILY REVOCABLE TRUST, DTD.
10-5-76, AS AMENDED
By: ___________________________
Title: ___________________________
XXXXXXX X. XXXX IRREVOCABLE TRUST
By: /s/ Xxxxxxx X. Xxxx
---------------------------
Title: ___________________________
XXXX X. XXXX, XX. IRREVOCABLE TRUST
By: /s/ Xxxx X. Xxxx, Xx.
---------------------------
Title: ___________________________
XXXX X. XXXX IRREVOCABLE TRUST
By: /s/ Xxxx X. Xxxx
---------------------------
Title: ___________________________
/s/ Xxxx X. Xxxx
----------------------------------
Xxxx X. Xxxx
-24-
SAND HILL FINANCIAL COMPANY
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Title: ___________________________
XXXXXX X. XXXX, TRUSTEE OF THE XXXXXX
X. XXXX 1990 FAMILY TRUST
By: ___________________________
Title: ___________________________
SIERRA VENTURES IV, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP
BY SV ASSOCIATES IV, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP,
ITS GENERAL PARTNER
By: /s/ Petri Vainio
---------------------------
Petri Vainio, General Partner
SIERRA VENTURES IV INTERNATIONAL,
L.P., A DELAWARE LIMITED PARTNERSHIP
BY SV ASSOCIATES IV, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP,
ITS GENERAL PARTNER
By: ___________________________
Petri Vainio, General Partner
XXXXXX X. XXXXXXXXX, TTEE
XXXXXXXXX FAMILY TRUST DTD. 6-2-88
-25-
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: ___________________________
ST. MARY'S COLLEGE OF CALIFORNIA GAEL
GROWTH FUND
By: /s/ Illigible
---------------------------
Title: ___________________________
ST. XXXXXXX GROWTH FUND
By: /s/ Xxxxx X. Xxxxxx
---------------------------
Title: ___________________________
STANFORD UNIVERSITY
By: /s/ Xxxxx Xxxxxx
---------------------------
Title: ___________________________
/s/ Xxxxxx Xxxxxxx
----------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxxx . Xxxxxxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
/s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx
-26-
VWCSYM INVESTORS
By: /s/ Xxxx X. Xxxxx
---------------------------
Title: ___________________________
WS INVESTMENT CO. 94B
By: /s/ Illigible
---------------------------
Title: ___________________________
/s/ Xxxxxxx X. Xxxxx
----------------------------------
Xxxxxxx X. Xxxxx
/s/ Gwill E. York
----------------------------------
Gwill E. York
-27-
