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JATO COMMUNICATIONS CORP.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
January 20, 2000
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TABLE OF CONTENTS
PAGE
1. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Amendment and Restatement of the Prior Agreement. . . . . . . .1
1.2 Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . .1
2. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . . . . . . .4
2.1 Restrictions on Transfer. . . . . . . . . . . . . . . . . . . .4
2.2 "Market Stand Off" Agreement. . . . . . . . . . . . . . . . . .6
3. REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.1 Demand Registration.. . . . . . . . . . . . . . . . . . . . . .6
3.2 Piggyback Registrations.. . . . . . . . . . . . . . . . . . . .8
3.3 Form S-3 Registration.. . . . . . . . . . . . . . . . . . . . .9
3.4 Registration Expenses.. . . . . . . . . . . . . . . . . . . . 10
3.5 Obligations of the Company. . . . . . . . . . . . . . . . . . 10
3.6 Termination of Registration Rights. . . . . . . . . . . . . . 11
3.7 Furnish Information.. . . . . . . . . . . . . . . . . . . . . 11
3.8 Delay of Registration.. . . . . . . . . . . . . . . . . . . . 11
3.9 Assignment of Registration Rights.. . . . . . . . . . . . . . 11
3.10 Amendment or Waiver of Registration Rights. . . . . . . . . . 12
3.11 Limitation on Subsequent Registration Rights... . . . . . . . 12
3.12 Indemnification.. . . . . . . . . . . . . . . . . . . . . . . 12
3.13 Rule 144 Reporting. . . . . . . . . . . . . . . . . . . . . . 14
4. COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . 15
4.1 Basic Financial Information and Reporting.. . . . . . . . . . 15
4.2 Inspection Rights.. . . . . . . . . . . . . . . . . . . . . . 16
4.3 Confidentiality of Records. . . . . . . . . . . . . . . . . . 16
4.4 Reservation of Common Stock.. . . . . . . . . . . . . . . . . 16
4.5 SEC Compliance. . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Meetings of the Board of Directors. . . . . . . . . . . . . . 16
4.7 Committees. . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.8 Corporate Existence, Licenses and Permits; Maintenance of
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9 Board of Directors Approval . . . . . . . . . . . . . . . . . 17
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TABLE OF CONTENTS
(CONTINUED)
PAGE
4.10 SBIC Regulatory Provisions. . . . . . . . . . . . . . . . . . 18
4.11 Board Observer. . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Qualified Small Business. . . . . . . . . . . . . . . . . . . 19
4.13 Termination of Covenants. . . . . . . . . . . . . . . . . . . 19
5. PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 Subsequent Offerings. . . . . . . . . . . . . . . . . . . . . 19
5.2 Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . 19
5.3 Issuance of Equity Securities to Major Investors. . . . . . . 20
5.4 Termination of Preemptive Rights. . . . . . . . . . . . . . . 20
5.5 Transfer of Preemptive Rights.. . . . . . . . . . . . . . . . 20
5.6 Excluded Securities.. . . . . . . . . . . . . . . . . . . . . 20
6. RIGHT OF FIRST REFUSAL ON FOUNDER TRANSFERS . . . . . . . . . . . . 21
6.1 Right of First Refusal on Founder Transfers.. . . . . . . . . 21
6.2 Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . 21
6.3 Issuance of Equity Securities to the Non-Selling Founders.. . 21
6.4 Issuance of Equity Securities to the Series B Holders . . . . 21
6.5 Issuance of Equity Securities to the Company. . . . . . . . . 22
6.6 No Participation. . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Termination of Right of First Refusal.. . . . . . . . . . . . 22
6.8 Exempt Securities.. . . . . . . . . . . . . . . . . . . . . . 22
7. RIGHT OF FIRST REFUSAL ON TRANSFERS BY SERIES A HOLDERS . . . . . . 23
7.1 Right of First Refusal on Series A Transfers. . . . . . . . . 23
7.2 Right of First Refusal on Transfers by Series A Holders.. . . 23
7.3 Company's Right to Purchase.. . . . . . . . . . . . . . . . . 23
7.4 Series A Holders' Right to Purchase.. . . . . . . . . . . . . 23
7.5 Series B Holders' Right to Purchase . . . . . . . . . . . . . 24
7.6 Sale of Shares. . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Termination of Right of First Refusal.. . . . . . . . . . . . 24
7.8 Exempt Transfers. . . . . . . . . . . . . . . . . . . . . . . 24
8. VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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TABLE OF CONTENTS
(CONTINUED)
PAGE
8.1 Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.2 Election of Directors.. . . . . . . . . . . . . . . . . . . . 25
8.3 Vacancies.. . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. CO-SALE RIGHT.. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1 Sales by Stockholders.. . . . . . . . . . . . . . . . . . . . 25
9.2 Exempt Transfers. . . . . . . . . . . . . . . . . . . . . . . 27
9.3 Termination of Co-Sale Rights.. . . . . . . . . . . . . . . . 27
9.4 Prohibited Transfers. . . . . . . . . . . . . . . . . . . . . 27
10. APPROVED SALE.. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.1 Voting of Shares. . . . . . . . . . . . . . . . . . . . . . . 28
10.2 Drag-Along Provision. . . . . . . . . . . . . . . . . . . . . 28
10.3 Forced Sale.. . . . . . . . . . . . . . . . . . . . . . . . . 28
10.4 No Objections.. . . . . . . . . . . . . . . . . . . . . . . . 29
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.1 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . 29
11.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 29
11.3 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 29
11.4 Subsequent Investors. . . . . . . . . . . . . . . . . . . . . 29
11.5 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . 29
11.6 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 30
11.7 Attorneys' Fees.. . . . . . . . . . . . . . . . . . . . . . . 30
11.8 Injunctive Relief.. . . . . . . . . . . . . . . . . . . . . . 30
11.9 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . 30
11.10 Complete Agreement. . . . . . . . . . . . . . . . . . . . . . 30
11.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 31
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JATO COMMUNICATIONS CORP.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"AGREEMENT") is entered into as of the 20th day of January, 2000, by and
among JATO COMMUNICATIONS CORP., a Delaware corporation (the "COMPANY"),
certain holders of the Company's Common Stock set forth on EXHIBIT A hereto
(each, a "FOUNDER," and, collectively, the "FOUNDERS"), the holders of the
Company's Series A Preferred Stock (the "SERIES A STOCK") set forth on
EXHIBIT A hereto, the holders of the Company's Series B Preferred Stock (the
"SERIES B STOCK") set forth on EXHIBIT A hereto, the holders of the Company's
Series C Preferred Stock (the "SERIES C STOCK") set forth on EXHIBIT A
hereto, and the holders of the Company's Series D Preferred Stock (the
"SERIES D STOCK") set forth on EXHIBIT A hereto. The Founders, the Series A
Holders, the Series B Holders, the Series C Holders and the Series D Holders
shall be referred to hereinafter as the "INVESTORS" and each individually as
an "INVESTOR."
WHEREAS, the Company has granted registration rights, information
rights, preemptive rights and certain other rights pursuant to that certain
Amended and Restated Investors' Rights Agreement, by and among the Company,
the Founders, the Series A Holders, the Series B Holders and the Series C
Holders, dated as of September 16, 1999, as amended by the First Amendment to
the Amended and Restated Investors' Rights Agreement, dated as of December
22, 1999 (the "PRIOR AGREEMENT");
WHEREAS, the Company proposes to sell and issue shares of its Series D
Stock pursuant to those certain Series D Preferred Stock Purchase Agreements
(the "PURCHASE AGREEMENTS"); and
WHEREAS, as a condition of entering into the Purchase Agreements, the
prospective purchasers have requested that the Company extend to them
registration rights, information rights and other rights as set forth below,
and the Company and the parties to the Prior Agreement are willing to amend
the rights given to them pursuant to such agreements by replacing such rights
in their entirety with the rights set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and the Purchase Agreements, the parties mutually agree as follows:
1. GENERAL
1.1 AMENDMENT AND RESTATEMENT OF THE PRIOR AGREEMENT.
(a) The undersigned parties who constitute the parties
necessary to amend the Prior Agreement hereby agree that, effective upon the
date hereof, the Prior Agreement is null and void and superseded by the
rights and obligations set forth in this Agreement.
1.2 DEFINITIONS.
(a) "COMMON STOCK" shall mean the common stock, $.01 par value
per share, of the Company.
(b) "EQUITY SECURITIES" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security
convertible into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
(c) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(d) "FORM S-3" means such form under the Securities Act as
in effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents
filed by the Company with the SEC.
(e) "HOLDER" means any Investor owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 3.9 hereof.
(f) "INITIAL OFFERING" shall mean the Company's first firm
commitment underwritten public offering of its Common Stock registered under
the Securities Act.
(g) "PREFERRED STOCK" shall mean the preferred stock, $.01
par value per share, of the Company.
(h) "QUALIFIED PUBLIC OFFERING" shall mean a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the
account of the Company in which (i) the per share price is at least equal to
the "Target Multiple" (as hereinafter defined) multiplied by the
then-effective Series B Conversion Price (the "SERIES B CONVERSION PRICE"),
determined in accordance with the Company's Restated Certificate of
Incorporation, as filed with the Secretary of State of the State of Delaware
(the "THRESHOLD PRICE"), (ii) the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are at least $30,000,000 and
(iii) the shares of Common Stock are listed on any national securities
exchange or have been registered under Section 12(g) of the Exchange Act. As
used herein, "TARGET MULTIPLE" shall mean (A) an amount equal to the product
of 2.5 prior to the third anniversary of the date hereof and (B) an amount
equal to 3.5 on or after the third anniversary of the date hereof.
(i) The terms "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or
ordering of effectiveness of such registration statement or document.
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(j) The term "REGISTRABLE SECURITIES" shall mean (a) Common
Stock held by the Founders, (b) Common Stock of the Company issued or
issuable upon conversion of the Shares, (c) any Common Stock of the Company
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 for or in replacement of, the Common Stock or
Shares referred to in clause (b) above and (d) any Common Stock of the
Company issued to U.S. Telesource, Inc. pursuant to the Stock Purchase
Agreement, dated as of February 9, 2000 (the "Telesource Purchase Agreement")
by and between the Company and U.S. Telesource, Inc. and any Common Stock of
the Company issued or issuable upon the exercise of that certain warrant
issued to U. S. Telesource, Inc. pursuant to the Telesource Purchase
Agreement as set forth on Exhibit A thereto. Notwithstanding the foregoing,
Registrable Securities shall not include any securities sold by a person to
the public either pursuant to a registration statement or Rule 144 or sold in
a private transaction in which the transferor's rights under Section 3 of
this Agreement with respect to such registration rights are not assigned.
(k) "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the
number of shares determined by calculating the total number of shares of the
Company's Common Stock that are Registrable Securities and either (i) are
then issued and outstanding or (ii) are issuable pursuant to then exercisable
or convertible securities.
(l) "REGISTRATION EXPENSES" shall mean all expenses incident
to the Company's performance of or compliance with its obligations under
Section 3 hereof, including without limitation, all Commission, NASD and
stock exchange or NASDAQ registration and filing fees and expenses, fees and
expenses of compliance with applicable state securities or "blue sky" laws
(including, without limitation, reasonable fees and disbursements of counsel
for the underwriters in connection with "blue sky" qualifications of the
Registrable Securities), printing expenses, messenger and delivery expenses,
the fees and expenses incurred in connection with the listing of the
securities to be registered in an initial public offering on each securities
exchange or national market system on which such securities are to be so
listed and, following such initial public offering, the fees and expenses
incurred in connection with the listing of such securities to be registered
on each securities exchange or national market system on which such
securities are listed, fees and disbursements of counsel for the Company and
all independent certified public accountants (including the expenses of any
annual audit and "cold comfort" letters required by or incident to such
performance and compliance), the fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (including the fees and
expenses of any "qualified independent underwriter" required by the NASD),
the reasonable fees of one counsel retained in connection with each such
registration by the holders of a majority of the Registrable Securities being
registered, not to exceed $20,000, the reasonable fees and expenses of any
special experts retained by the Company in connection with such registration,
and fees and expenses of other Persons retained by the Company (but not
including any underwriting discounts or commission or transfer taxes, if any,
attributable to the sale of Registrable Securities by holders of such
Registrable Securities other than the Company).
(m) "RULE 144" shall mean Rule 144 of the rules and
regulations promulgated under the Securities Act.
(n) "SEC" means the Securities and Exchange Commission.
3
(o) "SECURITIES ACT" shall mean the Securities Act of 1933,
as amended.
(p) "SELLING EXPENSES" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities.
(q) "SERIES A HOLDERS" shall mean the holders of the
Company's Series A Preferred Stock.
(r) "SERIES B HOLDERS" shall mean the holders of the
Company's Series B Stock.
(s) "SERIES C HOLDERS" shall mean the holders of the
Company's Series C Stock.
(t) "SERIES D HOLDERS" shall mean the holders of the
Company's Series D Stock.
(u) "SERIES A SHARES" shall mean all shares of capital stock
of the Company registered in the names of the Series A Holders or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally acquired by the Series A Holders after the
date hereof (including but not limited to all shares of Common Stock issued
upon conversion of, or as dividends or other rights with respect to, the
Series A Stock).
(v) "SERIES B SHARES" shall mean all shares of capital stock
of the Company registered in the names of the Series B Holders or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally acquired by the Series B Holders after the
date hereof (including but not limited to all shares of Common Stock issued
upon conversion of, or as dividends or other rights with respect to, the
Series B Stock).
(w) "SERIES C SHARES" shall mean all shares of capital stock
of the Company registered in the names of the Series C Holders or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally acquired by the Series C Holders after the
date hereof (including but not limited to all shares of Common Stock issued
upon conversion of, or as dividends or other rights with respect to, the
Series C Stock).
(x) "SERIES D SHARES" shall mean all shares of capital stock
of the Company registered in the names of the Series D Holders or
beneficially owned by them as of the date hereof and any and all other
securities of the Company legally acquired by the Series D Holders after the
date hereof (including but not limited to all shares of Common Stock issued
upon conversion of, or as dividends or other rights with respect to, the
Series D Stock).
(y) "STOCKHOLDERS" shall mean the Founders and the Series A
Holders.
(z) "STOCKHOLDER SHARES" shall mean all shares of capital
stock of the Company registered in the names of the Founders and the Series A
Holders or beneficially owned by them as of the date hereof and any and all
other securities of the Company legally acquired by the Founders and Series A
Holders after the date hereof.
4
(aa) "SHARES" shall mean the Company's (i) Common Stock held
by the Founders; (ii) the Series A Stock issued pursuant to the Series A
Preferred Stock Purchase Agreement, dated as of October 23, 1998; (iii) the
Series B Stock issued pursuant to the Series B Stock Purchase Agreement,
dated as of April 16, 1999; (iv) the Series C Stock issued pursuant to the
Series C Stock Purchase Agreement, dated as of September 16, 1999, as
amended; (v) the Series D Stock issued pursuant to the Purchase Agreements;
and (vi) any such shares held by a transferee to the extent such transferee
shall become a party to this Agreement.
2. RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound
by this Section 2.1 unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(ii) (A) Such Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition
and (B) if reasonably requested by the Company, such Holder shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such
shares under the Securities Act or any applicable state securities or Blue
Sky laws. It is agreed that the Company will not require opinions of counsel
for transactions made pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i)
and (ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to any or all
of its partners or former partners, (B) a corporation to its stockholders in
accordance with their interest in the corporation, (C) a limited liability
company to its members or former members in accordance with their membership
interest, (D) by a trust to its beneficiaries in accordance with their
interests in the trust, (E) to the Holder's family member or trust for the
benefit of an individual Holder or (F) to an affiliate of the Holder;
PROVIDED, THAT, the transferee will be subject to the terms of this Agreement
to the same extent as if he were an original Holder hereunder; and PROVIDED,
FURTHER, HOWEVER, that such transfer is pursuant to an exemption under the
Securities Act.
PROVIDED, HOWEVER, that in connection with any such transfer or disposition
other than as described in paragraph (i) above, the transferee shall have
agreed in writing to be bound by the provisions of the Agreement.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the
Agreement) be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under applicable
state securities laws or as provided elsewhere in this Agreement):
5
FIRST LEGEND:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
SECOND LEGEND:
THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECOND AMENDED
AND RESTATED INVESTORS' RIGHTS AGREEMENT, DATED JANUARY 20, 2000,
COPIES OF WHICH ARE ON FILE AT THE OFFICE OF THE ISSUER.
(c) The Company shall reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with
respect to such securities shall be removed upon receipt by the Company of an
order of the appropriate blue sky authority authorizing such removal.
2.2 "MARKET STAND OFF" AGREEMENT. Each Holder hereby agrees that
during the one hundred eighty (180) day period following the effective date
of a registration statement of the Company filed under the Securities Act, it
shall not, to the extent requested by the Company and the managing
underwriter, sell or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any Common Stock of the Company held by it
at any time during such period except Common Stock included in such
registration; PROVIDED, THAT, all officers and directors of the Company enter
into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such one hundred eighty (180) day
period.
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3. REGISTRATION
3.1 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 3.1, if the
Company shall receive a written request from either (i) the holders of more
than forty percent (40%) of the Stockholder Shares or share equivalents then
outstanding (the "SERIES A INITIATING HOLDERS"), or (ii) the holders of at
least fifty-one percent (51%) of the Series B Shares or share equivalents
then outstanding (the "SERIES B INITIATING HOLDERS" and, together with the
Series A Initiating Holders, the "INITIATING HOLDERS") that the Company file
a registration statement under the Securities Act covering the registration
of, Registrable Securities having an aggregate offering price to the public
of at least $10,000,000, then the Company shall, within thirty (30) days of
the receipt thereof, give written notice of such request to all Holders, and
subject to the limitations of this Section 3.1, use its best efforts to
effect, as soon as practicable, the registration under the Securities Act of
all Registrable Securities that the Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 3.1 requesting inclusion in such registration and the Company
shall include such information in the written notice referred to in Section
3.1(a). In such event, the right of any Holder to include its Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed
by a majority in interest of the Initiating Holders and such Holder) to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 3.1, if the underwriter
advises the Company that marketing factors require a limitation of the number
of securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may
be included in the underwriting shall be allocated to the Holders of such
Registrable Securities requesting inclusion in such registration on a pro
rata basis based on the number of Registrable Securities held by all such
Holders (including Initiating Holders); PROVIDED, HOWEVER, that if the
Initiating Holders are the Series B Initiating Holders, any shares proposed
to be included by the Series B Holders shall be included in such registration
before any such allocation takes place. Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a
registration pursuant to this Section 3.1:
(i) prior to the earlier of (A) one hundred eighty
(180) days following the effectiveness of the Company's Initial Offering and
(B) the third anniversary of the date hereof; or
7
(ii) with respect to the Series A Initiating Holders,
after the Company has filed two (2) registration statements pursuant to this
Section 3.1, and: (A) such registration has been declared or ordered
effective; or (B) the request for such registration has been subsequently
withdrawn by the Series A Initiating Holders, unless the withdrawal is based
upon material adverse information concerning the Company of which the Series
A Initiating Holders were not aware at the time of such request; or (C) such
registration includes at least eighty percent (80%) of the Registrable
Securities of which the holders of Common Stock and Series A Holders have
requested registration pursuant to Section 3.1(a); or
(iii) with respect to the Series B Initiating Holders,
after the Company has filed two (2) registration statements pursuant to this
Section 3.1, and: (A) such registration has been declared or ordered
effective; or (B) the request for such registration has been subsequently
withdrawn by the Series B Initiating Holders, unless the withdrawal is based
upon material adverse information concerning the Company of which the Series
B Initiating Holders were not aware at the time of such request; or (C) such
registration includes at least eighty percent (80%) of the Registrable
Securities of which the Series B Holders have requested registration pursuant
to Section 3.1(a); or
(iv) if such registration is the first registration
requested pursuant to this Section 3.1 and the Initiating Holders do not
include holders of a majority of the Series B Shares then outstanding; or
(v) if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 3.1(a), the
Company gives notice to the Holders of the Company's intention to make an
Initial Offering within ninety (90) days and proceeds diligently and in good
faith to see that such Initial Offering be declared effective; PROVIDED,
HOWEVER, that this clause (v) shall not affect any request by Initiating
Holdings in accordance with clause (i)(B) above; or
(vi) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 3.1, a
certificate signed by the Chairman of the Board (or, if there is no Chairman,
a majority of the Board of Directors) 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 stockholders for such registration statement to be
effected at such time, in which event the Company shall have the right to
defer such filing for a period of not more than ninety (90) days after
receipt of the request of the Initiating Holders; PROVIDED, THAT, the right
to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period.
3.2 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders
of Registrable Securities in writing at least thirty (30) days prior to the
filing of any registration statement under the Securities Act for purposes of
a public offering of securities of the Company (including, but not limited
to, registration statements relating to secondary offerings of securities of
the Company and to offerings of securities of the Company initiated by any
party exercising its demand registration rights, but excluding registration
statements relating to employee benefit plans and corporate reorganizations
or other transactions under Rule 145 of the Securities Act) and will afford
each such Holder an opportunity to include in such registration statement all
or
8
part of such Registrable Securities held by such Holder. Each Holder
desiring to include in any such registration statement all or any part of the
Registrable Securities held by it shall, within fifteen (15) days after
receipt of the above-described notice from the Company, so notify the Company
in writing. Such notice shall state the intended method of disposition of
the Registrable Securities by such Holder. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to
have the right to include any Registrable Securities in any subsequent
registration statement or registration statements as may be filed by the
Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
If the registration statement under which the Company gives notice
under this Section 3.2 is for an underwritten offering, the Company shall so
advise the Holders of Registrable Securities. In such event, the right of
any such Holder to be included in a registration pursuant to this Section 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
Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
the inclusion of such shares will materially and adversely affect the
marketing of the offering, the number of shares that may be included in the
underwriting shall be allocated as follows: (i) first, to the Company, (ii)
second, to the Holders on a pro rata basis based on the total number of
Registrable Securities held by the Holders and (iii) third, to any
stockholder of the Company (other than a Holder) on a pro rata basis. No
such reduction shall (i) reduce the securities being offered by the Company
for its own account to be included in the registration and underwriting or
(ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) of the total amount of
securities included in such registration, unless such offering is the Initial
Offering and such registration does not include shares of any other selling
stockholders, in which event any or all of the Registrable Securities of the
Holders may be excluded in accordance with the immediately preceding
sentence. In no event will shares of any other selling stockholder be
included in such registration which would reduce the number of shares which
may be included by the Holders. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 3.2
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 3.4 hereof.
3.3 FORM S-3 REGISTRATION. In case the Company shall receive a
written request from the Holders of more than twenty-five percent (25%) of
the Registrable Securities then outstanding that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such
Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders of Registrable Securities; and
9
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' 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, HOWEVER, that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 3.3:
(i) if the Company has already effected two (2)
registrations on Form S-3 for such Holders pursuant to this Section 3.3 in
any calendar year and such registration includes at least fifty percent (50%)
of the Registrable Securities of which the Holders have requested
registration pursuant to Section 3.3; or
(ii) if such registration is the first registration
requested pursuant to this Section 3.3 and the holders requesting
registration do not include holders of a majority of the Series B Shares,
Series C Shares and Series D Shares, taken together, then outstanding;
(iii) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders; or
(iv) if such Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at
an aggregate price to the public of less than $5,000,000; or
(v) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
(or, if there is no Chairman, a majority of the Board of Directors) 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 stockholders for such
Form S-3 Registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 3.3; PROVIDED, THAT, the
right to delay a request shall be exercised by the Company not more than once
in any twelve (12) month period, or
(vi) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification
or compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders.
3.4 REGISTRATION EXPENSES. The Company shall bear all Registration
Expenses, except that each participating Holder shall bear its proportionate
share of all Selling Expenses. The Company shall not, however, be required
to pay for expenses of any registration proceeding begun pursuant to Sections
3.1 or 3.3, the request of which has been subsequently withdrawn by the
Holders, unless the withdrawal is based upon material adverse information
concerning the
10
Company of which the Holders initiating the registration request were not
aware at the time of such request. If the Holders are required to pay their
Registration Expenses, such expenses shall be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested.
3.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective and keep such registration
statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders, PROVIDED, THAT, the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or incomplete in the light of
the circumstances then existing.
3.6 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 3 shall terminate and be of no further force and
effect five (5) years after the Company has completed its Initial Offering.
In addition, the right of any Holder to request inclusion of Registrable
Securities in any registration pursuant to this Section 3 shall terminate (i)
twelve (12) months following the date on which all Registrable Securities
held by and issuable to such Holder (and its affiliates, partners and former
partners) may be sold under Rule 144 during any ninety (90) day period and
(ii) when the Company has completed its Initial Offering and is subject to
the provisions of the Exchange Act.
11
3.7 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 3 that the selling
Holders shall furnish to the Company such information regarding themselves,
the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 3.1 or 3.3 if, due to the
operation of subsection 3.1(b), the anticipated aggregate offering price of
the Registrable Securities to be included in the registration does not equal
or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in Section 3.1 or 3.3, whichever is applicable.
3.8 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.
3.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or assignee of Registrable Securities
which (a) is a subsidiary, parent, general partner, limited partner, retired
partner, member, retired member, affiliate or trust beneficiary of a Holder,
(b) is a Holder's family member or trust for the benefit of an individual
Holder or (c) acquires at least sixty-six thousand six hundred sixty-six
(66,666) shares of Registrable Securities (as adjusted for stock dividends,
stock splits and combinations); PROVIDED, HOWEVER, (A) the transferor shall,
within ten (10) days after such transfer, furnish to the Company written
notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned
and (B) such transferee shall agree to be subject to all restrictions set
forth in this Agreement.
3.10 AMENDMENT OR WAIVER OF REGISTRATION RIGHTS. Any provision of
this Section 3 may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and (a) the
holders of a majority of the Series B Shares, Series C Shares and Series D
Shares, taken together, or share equivalents then outstanding with respect to
Section 3.3 only, (b) the holders of a majority of the Series B Shares or
share equivalents then outstanding with respect to all other provisions of
this Section 3, and (c) the holders of a majority of the Stockholder Shares
then outstanding. Any amendment or waiver effected in accordance with this
Section 3.10 shall be binding upon each Holder and the Company. By
acceptance of any benefits under this Agreement, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.
3.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date
of this Agreement, the Company shall not, without the prior written consent
of the holders of at least fifty-one percent (51%) of the Series B Shares or
share equivalents then outstanding, enter into any agreement with any holder
or prospective holder of any securities of the Company that
12
would grant such holder registration rights senior (as to time of exercise,
includability in any underwritten offering in connection with an
underwriters' cutback or in any other respect) to those granted to the
Holders hereunder.
3.12 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 3.1, 3.2 or 3.3:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers, directors
and legal counsel of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "VIOLATION") by the Company: (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or (iii)
any violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the Company shall
not be liable in any such case for any such loss, claim, damage, liability or
action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder,
partner, officer, director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as
to which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within
the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holder's partners, directors or officers or any person who controls such
Holder, against any losses, claims, damages or liabilities (joint or several)
to which the Company or any such director, officer, controlling person,
underwriter or other such Holder, or partner, director, officer or
controlling person of such other Holder may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person,
13
underwriter or other Holder, or partner, officer, director or controlling
person of such other Holder in connection with investigating or defending any
such loss, claim, damage, liability or action if it is judicially determined
that there was such a Violation; PROVIDED, HOWEVER, that the indemnity
agreement contained in this Section 3.12(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 3.12(b) exceed the net proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 3.12 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 3.12,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; PROVIDED, HOWEVER,
that an indemnified party shall have the right to retain its own counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or reasonably likely
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party to the extent of
any liability to the indemnified party under this Section 3.12 caused by such
failure, but the omission to so deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 3.12.
(d) If the indemnification provided for in this Section 3.12
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as well
as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a
court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
PROVIDED, THAT, in no event shall any contribution by a Holder hereunder
exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this
Section 3.12 shall survive completion of any offering of Registrable
Securities in a registration statement. 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
14
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.
3.13 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or analogous
rule promulgated under the Securities Act, at all times after the effective
date of the first registration under the Securities Act filed by the Company
for an offering of its securities to the general public.
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Securities Act and the
Exchange Act;
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
of the Securities Act, and of the Exchange Act (at any time after it has
become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Company; and such other reports and
documents as a Holder may reasonably request in availing itself of any rule
or regulation of the SEC allowing it to sell any such securities without
registration.
4. COVENANTS OF THE COMPANY
4.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered
in accordance with generally accepted accounting principles consistently
applied, and will set aside on its books all such proper accruals and
reserves as shall be required under generally accepted accounting principles
consistently applied.
(b) So long as a holder of Series A Shares, Series B Shares,
Series C Shares or Series D Shares (with its affiliates) shall own not less
than sixty-six thousand six hundred sixty-six (66,666) shares of Registrable
Securities (as adjusted for stock dividends, stock splits and combinations)
(a "MAJOR INVESTOR"), as soon as practicable after the end of each fiscal
year of the Company, and in any event within ninety (90) days thereafter, the
Company will furnish each such Major Investor and each Founder an audited
consolidated balance sheet of the Company, as at the end of such fiscal year,
an audited consolidated statement of income and an audited consolidated
statement of cash flows of the Company, for such year, all 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.
(c) The Company will furnish each Major Investor and each
Founder, 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, an unaudited consolidated
balance sheet of the Company as of the end of each such quarterly period, an
15
unaudited consolidated statement of income and an unaudited consolidated
statement of cash flows of the Company for such period and for the current
fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to
such statements and year-end audit adjustments may not have been made.
Additionally, the Company will furnish each Series B Holder, 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 thirty
(30) days thereafter, (i) a letter from the Company's management discussing
the revenues and operations of the Company in each such period and (ii) a
compliance certificate, executed by the President or Chief Executive Officer
of the Company, to the effect that the Company has complied with the
covenants set forth in this Section 4.1 in each such period.
(d) The Company will furnish each Series B Holder, as soon
as practicable after the end of each month, and in any event within thirty
(30) days thereafter, an unaudited consolidated balance sheet of the Company
as of the end of each such month and an unaudited consolidated statement of
income and an unaudited consolidated statement of cash flows of the Company
for such month and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
(e) The Company will furnish each member of the Board of
Directors with (i) the information set forth in Sections 4.1(b)-(d) above at
the time it is distributed to the Major Investors and Founders, (ii) copies
of all filings with the SEC, (iii) information as to any pending material
litigation and any material default under any material agreement of the
Company, (iv) copies of management letters of accountants and, (v) within
thirty (30) days after the beginning of each fiscal year, an annual budget
for such fiscal year.
(f) Each Series B Holder is hereby authorized to deliver a
copy of any financial statement delivered to it pursuant to this Section 4.1
to any regulatory body having jurisdiction over it which requests such
information.
4.2 INSPECTION RIGHTS. Each Major Investor and Founder shall have
the right to visit and inspect any of the properties of the Company or any of
its subsidiaries, and to discuss the affairs, finances and accounts of the
Company or any of its subsidiaries with its officers and to review such
information as is reasonably requested all at such reasonable times and as
often as may be reasonably requested; PROVIDED, HOWEVER, that the Company
shall not be obligated under this Section 4.2 with respect to a competitor of
the Company or with respect to information which the Board of Directors
determines in good faith is confidential and should not, therefore, be
disclosed.
4.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and
to use its best efforts to insure that its authorized representatives uses,
the same degree of care as such Investor uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Investor may
disclose such proprietary or confidential information to any partner,
subsidiary or parent of such Investor for the purpose of
16
evaluating its investment in the Company as long as such partner, subsidiary
or parent is advised of the confidentiality provisions of this Section 4.3.
4.4 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the
conversion of the Series B Stock, Series C Stock and Series D Stock, all
Common Stock issuable from time to time upon such conversion.
4.5 SEC COMPLIANCE. During any time that the Company is subject to
the reporting requirements of the Exchange Act, the Company shall timely file
all required reports pursuant to the Exchange Act. Additionally, the Company
shall make available to Investors the information contemplated by Rule 144A.
At such time that any stock held by an Investor is eligible for transfer
pursuant to Rule 144(k), the Company shall, upon the request of such
Investor, remove any restrictive legend from the applicable stock certificate
at no cost to such Investor.
4.6 MEETINGS OF THE BOARD OF DIRECTORS. The Board of Directors
shall meet as often as is necessary to review the operating results and
developments of the Company, but, in any case, not less than quarterly.
4.7 COMMITTEES. The Company agrees to maintain audit and
compensation committees with such duties and powers as are customarily
performed by such committees. Both committees shall include a representative
of each of Crest Communications Partners LP, CEA Capital Partners USA, L.P.
and Xxxxxxxx X, L.P.
4.8 CORPORATE EXISTENCE, LICENSES AND PERMITS; MAINTENANCE OF
PROPERTIES. So long as any Holder shall hold any Series B Shares, the
Company will at all times use commercially reasonable efforts to do or cause
to be done all things necessary to maintain, preserve and renew its existence
as a corporation organized under the laws of a state of the U.S., preserve
and keep in force and effect, and cause any subsidiary to apply for on a
timely basis, preserve and keep in force and effect, all licenses and permits
necessary and material to the conduct of the business of the Company and any
consolidated subsidiary, taken as a whole, and to maintain and keep, and
cause any subsidiary to maintain and keep, its and their respective
properties in good repair, working order and condition (except for normal
wear and tear), and from time to time to make all needful and proper repairs,
renewals and replacements, including, without limitation, all trade name and
trademark registration renewals, in each case so that any business material
to the Company carried on in connection therewith may be properly and
advantageously conducted.
4.9 BOARD OF DIRECTORS APPROVAL. The Company shall not, without
the approval of a majority of the Board of Directors, including at least two
(2) representatives of the holders of the Series B Stock, take any of the
following actions:
(a) incur, refinance, guarantee or assume any indebtedness
other than (i) in the ordinary course of business, PROVIDED, THAT, any such
indebtedness does not exceed $500,000 in the aggregate at any one time and
(ii) drawdowns under existing credit facilities consistent with the terms of
the budget presented to the Board of Directors pursuant to Section 4.1(e)(v)
above;
17
(b) terminate any member of the Company's existing senior
management team (consisting of Xxxxxxx Xxxxxx, Xxxxx Xxxxx and Xxxxx Xxxx) or
approve or alter the compensation paid to any member of the Company's
existing senior management team except such changes in benefits as may be
consistent with changes made in the Company's standard benefit plans;
(c) enter into any new line of business;
(d) enter or agree to enter into any contract or other
agreement which involves obligations of the Company in excess of $500,000;
(e) acquire or dispose of, in one or a series of
transactions within a twelve (12) months period, assets having a fair market
value in excess of $500,000 or which involve the payment to or by the Company
of consideration in excess of $500,000 (including assumption of
indebtedness), other than capital expenditures consistent with the terms of
the budget presented to the Board of Directors pursuant to Section 4.1(e)(v)
above;
(f) enter into, amend, modify, terminate or waive any
material provision of any agreement involving obligations of the Company in
excess of $500,000;
(g) adopt, amend, modify or terminate any employee benefit
plan or collective bargaining agreement or contract with any union that will,
in the aggregate, materially increase the cost of such plan or arrangement
relative to the Company's existing arrangements;
(h) initiate any litigation, or undertake any course of
defense, in connection with any litigation brought against the Company or any
of its subsidiaries, or settle any claim, litigation or insurance claim in an
amount in excess of $500,000;
(i) enter into any transaction with an affiliate of the
Company unless approved by a majority of the disinterested directors of the
Company's Board of Directors; or
(j) engage or dismiss the existing primary auditors or
existing principal corporate legal counsel of the Company or any of its
subsidiaries.
4.10 SBIC REGULATORY PROVISIONS.
(a) The Company shall notify each Series B Holder, Series C
Holder and Series D Holder who is a Small Business Investment Company (an
"SBIC HOLDER") as soon as practicable prior to taking any action after which
the number of record holders of the Company's voting stock would be increased
from fewer than fifty (50) to fifty (50) or more, and the Company shall
notify each SBIC Holder of any other action or occurrence after which the
number of record holders of the Company's voting stock was increased (or
would increase) from fewer than fifty (50) to fifty (50) or more, as soon as
practicable after the Company becomes aware that such other action or
occurrence has occurred or is proposed to occur.
(b) At the request of any SBIC Holder, the Company shall
provide each such SBIC Holder with a written statement certified by the
Company's president, chief executive officer or chief financial officer
describing in reasonable detail the use of the proceeds from the
18
sale of Series B Stock, Series C Stock or Series D Stock, as applicable. In
addition to any other rights granted hereunder, the Company shall grant such
SBIC Holder and the United States Small Business Administration ("SBA")
access to the Company's records solely for the purpose of verifying the use
of such proceeds.
(c) At the request of any SBIC Holder, after the end of each
fiscal year, the Company shall deliver to each such SBIC Holder a written
assessment of the economic impact of the SBIC Holder's investment in the
Company, specifying the full-time equivalent jobs created or retained in
connection with the investment, the impact of the investment on the
businesses of the Company in terms of expanded revenue and taxes and other
economic benefits resulting from the investment (including, but not limited
to, technology development or commercialization, minority business
development, urban or rural business development and expansion of exports).
4.11 BOARD OBSERVER.
ABN AMRO, Inc. ("ABN AMRO") shall be entitled to have one (1)
observer (the "NON-VOTING OBSERVER") selected by ABN AMRO present at all
meetings of the Company's Board of Directors. Such Non-Voting Observer shall
have the same access to information concerning the business and operations of
the Company and at the same time as the directors of the Company and shall be
entitled to participate in discussions and consult with, and make proposals
and furnish advice to, the Board of Directors, without voting; PROVIDED,
HOWEVER, that the Board of Directors shall be under no obligation to take any
action with respect to any proposals made or advice furnished by such
Non-Voting Observer; and PROVIDED, FURTHER, that the provisions of this
Section 4.11(a) shall terminate at such time that ABN AMRO no longer holds at
least fifty percent (50%) of the shares of Series B Stock it holds on the
date hereof.
4.12 QUALIFIED SMALL BUSINESS. For so long as the Series C Shares
or the shares issuable upon conversion of the Series C Shares ("Conversion
Shares") are held by a Series C Holder (or a transferee in whose hands such
Series C Shares or Conversion Shares are eligible to qualify as "qualified
small business stock") as defined in Section 1202(c) of the Code, the Company
will use reasonable efforts to comply with the reporting and recordkeeping
requirements of Section 1202 of the Code, any regulations promulgated
thereunder and any similar state laws and regulations. The Company covenants
and agrees, on the reasonable request of any Series C Holder, to conduct a
reasonable investigation into the question of whether the Series C Shares or
Conversion Shares are "qualified small business stock" within the meaning of
the Code, and to thereafter deliver to such Series C Holder a duly executed
Certificate of Representations in the form attached hereto as EXHIBIT B (the
"QSBS Certificate"). If the Company is unable to deliver an executed QSBS
Certificate because representation statement 2 in the QSBS Certificate is
inaccurate, the Company covenants and agrees to deliver a statement
explaining the reasons for such inaccuracy.
4.13 TERMINATION OF COVENANTS. All covenants of the Company
contained in Section 4 of this Agreement, other than those contained in
Sections 4.4 and 4.5, shall expire and terminate as to each Investor on the
effective date of the registration statement pertaining to a Qualified
Offering and may be waived by any individual Investor as to such Investor at
any time in its sole discretion.
19
5. PREEMPTIVE RIGHTS
5.1 SUBSEQUENT OFFERINGS. Each Major Investor shall have a
preemptive right to purchase up to eighty percent (80%) of its pro rata share
of all Equity Securities that the Company may, from time to time, propose to
sell and issue after the date of this Agreement, other than the Equity
Securities excluded by Section 5.6 hereof. Each Major Investor's pro rata
share is equal to the ratio of (A) the number of shares of the Company's
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares) of which such Major Investor is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (B) the
total number of shares of the Company's outstanding Common Stock on a
fully-diluted basis (including all shares of Common Stock issued or issuable
upon the conversion of options, warrants or convertible securities or issued
or then issuable upon the exercise of options or warrants) immediately prior
to the issuance of the Equity Securities.
5.2 EXERCISE OF RIGHTS. If the Company proposes to issue any
Equity Securities, it shall give each Major Investor written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Major
Investor shall have fifteen (15) days from the giving of such notice to agree
to purchase its eighty percent (80%) pro rata share of the Equity Securities
for the price and upon the terms and conditions specified in the notice by
giving written notice to the Company and stating therein the quantity of
Equity Securities to be purchased. Notwithstanding the foregoing, the Company
shall not be required to offer or sell such Equity Securities to any Major
Investor who would cause the Company to be in violation of applicable federal
securities laws by virtue of such offer or sale.
5.3 ISSUANCE OF EQUITY SECURITIES TO MAJOR INVESTORS. If not all
of the Major Investors elect to purchase eighty percent (80%) of their pro
rata share of the Equity Securities, then the Company shall promptly notify
in writing the Major Investors who do so elect and shall offer such Major
Investors the right to acquire such unsubscribed shares. The Major Investors
shall have five (5) days after receipt of such notice to notify the Company
of its election to purchase all or a portion thereof of the unsubscribed
shares. If the Major Investors fail to exercise in full their preemptive
rights, the Company shall have ninety (90) days thereafter to sell the Equity
Securities in respect of which the Major Investors' rights were not
exercised, at a price and upon general terms and conditions materially no
more favorable to the purchasers thereof than specified in the Company's
notice to the Major Investors pursuant to Section 5.2 hereof. If the Company
has not sold such Equity Securities within one hundred ten (110) days of the
notice provided pursuant to Section 5.2, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities
to the Major Investors in the manner provided above.
5.4 TERMINATION OF PREEMPTIVE RIGHTS. The preemptive rights
established by this Section 5 shall not apply to, and shall terminate upon,
the effective date of the registration statement pertaining to a Qualified
Public Offering.
5.5 TRANSFER OF PREEMPTIVE RIGHTS. The preemptive rights of each
Major Investor under this Section 5 may be transferred to the same parties,
subject to the same restrictions, as any transfer of registration rights
pursuant to Section 3.9.
20
5.6 EXCLUDED SECURITIES. The preemptive rights established by this
Section 5 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights issued pursuant to such options, warrants
or other rights) (as adjusted for stock splits, recapitalizations and the
like) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights, agreements,
options, warrants and convertible promissory notes outstanding as of the date
of this Agreement and referenced in the schedule of exceptions (Schedule 3.3)
to the Purchase Agreements; and stock issued pursuant to any such rights or
agreements granted after the date of this Agreement, PROVIDED, THAT, the
preemptive rights established by this Section 5 applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or similar
business combination approved by the Board of Directors;
(d) shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and
(g) shares of capital stock, or other securities, or
warrants, rights, options or other convertible securities, issued in any
transaction in which the price per share of Common Stock equivalents is not
less than the then-effective Series C Conversion Price, PROVIDED, THAT, the
value of shares issued do not exceed $500,000 with respect to any one
transaction and $1,500,000 in the aggregate.
6. RIGHT OF FIRST REFUSAL ON FOUNDER TRANSFERS
6.1 RIGHT OF FIRST REFUSAL ON FOUNDER TRANSFERS. No Founder shall
sell, assign, pledge, or in any manner transfer any of the Shares of the
Company held by such Founder or any right or interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, except by a
transfer which meets the requirements hereinafter set forth in this Section 6
and, if applicable, Section 9.
6.2 EXERCISE OF RIGHTS. If a Founder receives from anyone a bona
fide offer acceptable to such Investor to purchase any of his Shares, then
the Founder shall first deliver written notice (the "NOTICE") thereof to the
other Founders and the Series B Holders and the Company. The Notice shall
name the proposed transferee and state the price and quantity of the Equity
Securities to be transferred, as well as all other terms and conditions of
the offer.
21
6.3 ISSUANCE OF EQUITY SECURITIES TO THE NON-SELLING FOUNDERS. For
a period of fifteen (15) days following receipt of such Notice, the
non-selling Founders shall have the option to purchase all or a portion of
the Shares specified in the Notice at the price and upon the terms set forth
in such bona fide offer. In the event the non-selling Founders elect to
acquire any of the Shares of the selling Founder as specified in said selling
Founder's Notice, the purchasing Founders shall so notify the selling Founder
and settlement thereof shall be made in cash within fourteen (14) days
following receipt of said selling Founder's Notice; PROVIDED, THAT, if the
terms of payment set forth in said selling Founder's Notice were other than
cash against delivery, the purchasing Founder shall pay for said Shares on
the same terms and conditions set forth in said selling Founder's Notice.
6.4 ISSUANCE OF EQUITY SECURITIES TO THE SERIES B HOLDERS. In the
event the non-selling Founders do not elect to acquire all of the Shares
specified in the selling Founder's Notice, the selling Founder shall promptly
notify the Series B Holders of the number of Shares available for purchase by
the Series B Holders and the Series B Holders shall have the right,
exercisable upon written notice to the selling Founder within thirty (30)
days following receipt of the notice described in this Section 6.4, to
purchase all or any portion of the Shares (less any purchased by the
non-selling Founders pursuant to Section 6.3 above) on the terms and
conditions specified in the Notice. Settlement for any Shares purchased,
pursuant to this Section 6.4 shall be made in cash within forty-five (45)
days following receipt of the Notice described in this Section 6.4, PROVIDED,
THAT, if the terms of payment set forth in the selling Founder's Notice were
other than cash against delivery the Company shall pay for said Shares on the
same terms and conditions set forth in the Notice.
6.5 ISSUANCE OF EQUITY SECURITIES TO THE COMPANY. In the event
the non-selling Founders and the Series B Holders do not elect to acquire all
of the Shares specified in the selling Founder's Notice, the selling Founder
shall promptly notify the Company of the number of Shares available for
purchase by the Company and the Company shall have the right, exercisable
upon written notice to the selling Founder within forty-five (45) days
following receipt of the original Notice described in Section 6.2 above, to
purchase all or any portion of the Shares (less any purchased by the
non-selling Founders pursuant to Section 6.3 above and the Series B Holders
pursuant to Section 6.4 above) on the terms and conditions specified in the
Notice. Settlement for any Shares purchased, pursuant to this Section 6.5
shall be made in cash within sixty (60) days following receipt of the
original Notice described in Section 6.2 above, PROVIDED, THAT, if the terms
of payment set forth in the selling Founder's Notice were other than cash
against delivery the Company shall pay for said Shares on the same terms and
conditions set forth in the Notice.
6.6 NO PARTICIPATION. Subject to the provisions of Section 10
below, in the event that neither the non-selling Founders nor the Series B
Holders nor the Company elect to acquire all of the Shares specified in the
selling Founder's Notice, said selling Founder may, within the sixty (60) day
period following the expiration of the option rights granted to the Company,
sell elsewhere the Shares specified in said selling Founder's Notice which
were not acquired, in accordance with the provisions of this Section 6,
PROVIDED, THAT, said sale shall not be on terms and conditions more favorable
to the purchaser than those contained in the bona fide offer set forth in
said selling Founder's Notice; PROVIDED FURTHER, that said sale shall not be
to a competitor of the Company as determined in good faith by the Board of
Directors; and, PROVIDED FURTHER,
22
HOWEVER, that the transferee of such Shares shall become a party to this
Agreement as if an Investor hereunder.
6.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first
refusal established by this Section 6 shall not apply to, and shall terminate
upon, the Company's consummation of an Initial Offering.
6.8 EXEMPT SECURITIES. The right of first refusal established by
this Section 6 shall not apply to (a) any transfer or transfers by any
Stockholder which, in the aggregate, over the term of this Agreement, amount
to no more than one hundred thousand (100,000) Shares (as adjusted for stock
splits, stock dividends and the like) held by such stockholder, (b) any
pledge of Shares made pursuant to a bona fide loan transaction with a
financial institution that creates a mere security interest or to the
foreclosure of such pledge, (c) any transfer to the ancestors, descendants or
spouse or to trusts, limited partnerships or limited liabilities companies
established for the benefit of such persons or the selling stockholder, or
(d) any bona fide gift (those items set forth in (a), (b), (c) and (d) above,
the "EXEMPT SECURITIES"); PROVIDED, THAT, in the event of any pledge or
transfer of Exempt Securities, the pledgee, transferee or donee shall furnish
the Company with a written agreement to be bound by and comply with all
provisions of this Agreement.
7. RIGHT OF FIRST REFUSAL ON TRANSFERS BY SERIES A HOLDERS
7.1 RIGHT OF FIRST REFUSAL ON SERIES A TRANSFERS. No Series A
Holder shall sell, assign, pledge, or in any manner transfer any of the
Shares of the Company held by such Series A Holder or any right or interest
therein, whether voluntarily or by operation of law, or by gift or otherwise,
except by a transfer which meets the requirements hereinafter set forth in
this Section 7 and, if applicable, Section 9.
7.2 RIGHT OF FIRST REFUSAL ON TRANSFERS BY SERIES A HOLDERS. If
any Series A Holder proposes to sell or transfer any Shares, then such Series
A Holder shall promptly give written notice (the "SERIES A NOTICE")
simultaneously to the Company, to each of the non-selling Series A Holders
and the Series B Holders. The Series A Notice shall describe in reasonable
detail the proposed sale or transfer including, without limitation, the
number of Shares to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee.
7.3 COMPANY'S RIGHT TO PURCHASE. For a period of fifteen (15) days
following receipt of any Series A Notice described in Section 7.2, the
Company shall have the right to purchase all or a portion of the Shares
subject to such Series A Notice on the same terms and conditions as set forth
therein. The Company's purchase right shall be exercised by written notice
signed by an officer of the Company and delivered to the selling Series A
Holder with a check for payment for the Shares being purchased.
7.4 SERIES A HOLDERS' RIGHT TO PURCHASE. If the Company does not
purchase all of the Shares available pursuant to its rights under Section 7.3
within the period set forth therein, each non-selling Series A Holder shall
then have the right, exercisable upon written notice to the selling Series A
Holder within thirty (30) days of the date of the original Series A Notice
23
described in Section 7.1, to purchase its pro rata share of the Shares
subject to the Notice (less shares purchased by the Company pursuant to
Section 7.3) on the same terms and conditions.
(a) Each non-selling Series A Holder may buy all or any part
of that number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Shares covered by the Series A Notice (less
shares purchased by the Company pursuant to Section 7.3) by (y) a fraction
the numerator of which is the number of shares of Common Stock owned by the
non-selling Series A Holder (on an as-if-converted basis) at the time of the
sale or transfer and the denominator of which is the total number of shares
of Common Stock owned by all of the non-selling Series A Holders (on an
as-if-converted basis) at the time of the sale or transfer.
(b) If not all of the non-selling Series A Holders elect to
purchase their pro rata share of the Shares covered by the Series A Notice as
provided in Section 7.4(a) above, then the selling Series A Holder shall
promptly notify the non-selling Series A Holders who do so elect and shall
offer such non-selling Series A Holders the right to acquire such
unsubscribed shares. The non-selling Series A Holders who elect to
participate shall have five (5) days after receipt of such notice to notify
the selling Series A Holder of its election to purchase all or a portion
thereof of the unsubscribed shares.
7.5 SERIES B HOLDERS' RIGHT TO PURCHASE. If the Series A Holders
do not purchase all of the Shares available pursuant to its rights under
Section 7.4 within the period set forth therein, each Series B Holder shall
then have the right, exercisable upon written notice to the selling Series A
Holder within forty-five (45) days of the date of the original Series A
Notice described in Section 7.2, to purchase its pro rata share of the Shares
subject to the Notice (less shares purchased by the Company pursuant to
Section 7.3 and the Series A Holders pursuant to Section 7.4) on the same
terms and conditions.
(a) Each Series B Holder may buy all or any part of that
number of shares equal to the product obtained by multiplying (x) the
aggregate number of shares of Shares covered by the Series A Notice (less
shares purchased by the Company pursuant to Section 7.3 and Series A Holders
pursuant to Section 7.4) by (y) a fraction the numerator of which is the
number of shares of Common Stock owned by the Series B Holder (on an
as-if-converted basis) at the time of the sale or transfer and the
denominator of which is the total number of shares of Common Stock owned by
all of the Series B Holders (on an as-if-converted basis) at the time of the
sale or transfer.
(b) If not all of the Series B Holders elect to purchase
their pro rata share of the Shares covered by the Series A Notice as provided
in Section 7.5(a) above, then the selling Series A Holder shall promptly
notify the Series B Holders who do so elect and shall offer such Series B
Holders the right to acquire such unsubscribed shares. The Series B Holders
who elect to participate shall have five (5) days after receipt of such
notice to notify the selling Series A Holders of its election to purchase all
or a portion thereof of the unsubscribed shares.
7.6 SALE OF SHARES. Subject to the provisions of Section 10 below,
should any Shares remain for sale to a third-party following the exercise or
expiration of the rights of purchase described in Sections 7.3, 7.4 and 7.5,
then the selling Series A Holder may, not later than ninety
24
(90) days following delivery to the Company of the Series A Notice, enter
into an agreement providing for the closing of the transfer of the Shares
covered by the Series A Notice (less shares purchased pursuant to Sections
7.3, 7.4 and 7.5) within thirty (30) days of such agreement on terms and
conditions not more favorable to the transferor than those described in the
Series A Notice. Any proposed transfer on terms and conditions more
favorable than those described in the Series A Notice, as well as any
subsequent proposed transfer of any of the Shares by the selling Investor,
shall again be subject to the purchase rights of the Company and the Series A
Holders and shall require compliance by the selling Series A Holder with the
procedures described in this Section 7.
7.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first
refusal established by this Section 7 shall not apply to, and shall terminate
upon, the Company's consummation of an Initial Offering.
7.8 EXEMPT TRANSFERS. The right of first refusal established by
this Section 7 shall not apply to the Exempt Securities; PROVIDED, THAT, in
the event of any pledge or transfer of Exempt Securities, the pledgee,
transferee or donee shall furnish the Company with a written agreement to be
bound by and comply with all provisions of this Agreement.
8. VOTING
8.1 VOTING. The Investors agree to hold all Shares subject to, and
to vote their Shares in accordance with, the provisions of this Agreement.
8.2 ELECTION OF DIRECTORS.
(a) At each election of directors in which the Series B
Holders, voting together as a separate class on an as-converted basis, are
entitled to elect directors of the Company pursuant to Article IV(E)(2)(d) of
the Company's Restated Certificate of Incorporation, the Series B Holders
shall vote their respective Shares so as to elect (i) one (1) person
designated by Crest Communications Partners LP and (ii) one (1) person
designated by CEA Capital Partners USA, L.P.
(b) At each election of directors in which the holders of
Common Stock, Series A Holders, Series B Holders, Series C Holders and Series
D Holders, voting together as a separate class on an as-converted basis, are
entitled to elect directors of the Company pursuant to Article IV(E)(2)(d) of
the Company's Restated Certificate of Incorporation, the holders of Common
Stock, Series A Holders, Series B Holders, Series C Holders and Series D
Holders shall vote their respective Shares so as to elect the following
persons as directors: (i) the person serving as Chief Executive Officer of
the Company; (ii) one (1) person designated by the person serving as Chief
Executive Officer of the Company; (iii) one (1) person designated by Xxxxxxxx
X, L.P.; and (iv) one other independent person as are nominated by the
Company who is mutually acceptable to the existing members of the Board of
Directors.
8.3 VACANCIES. If any director is unable to serve, or once having
commenced to serve, is removed or withdrawn from the Board of Directors of
the Company, the party or parties who designated such directors will be
entitled to designate a person to fill the vacancy on the Board of Directors
of the Company so created and the holders of Common Stock, Series A
25
Holders, Series B Holders, Series C Holders and Series D Holders shall vote
their respective Shares to fill the vacancy so created with the person so
designated.
8.4 EXPENSES. The Company hereby agrees that the Company will pay
(a) all reasonable travel and other out-of-pocket expenses of the directors
designated by the Series B Holders, of any independent, non-employee
directors and any Non-Voting Observer and (b) such fees as are paid to
directors, severally, that are not employees of the Company or any of its
affiliates.
9. CO-SALE RIGHT.
9.1 SALES BY STOCKHOLDERS.
(a) If a Stockholder proposes to sell or transfer fifty
percent (50%) or more of the Stockholder Shares held by such Stockholder, as
calculated prior to the exercise by the Company, Series A Holders and Series
B Holders of their rights under Sections 6 and 7, as applicable, and the
Company, Stockholders and Series B Holders should fail to exercise their
respective rights to purchase all the Stockholder Shares described in the
Notice or Series A Notice, as applicable, following the exercise or
expiration of the applicable rights of purchase described in Sections 6.3,
6.4, 6.5, 7.2, 7.3, 7.4 and 7.5, then each Series B Holder and Series D
Holder shall have the right, exercisable upon written notice to the selling
Stockholder within sixty (60) days after the date of the original Notice or
Series A Notice (described in Sections 6.2 and 7.1, respectively), as
applicable, to participate in such sale of Stockholder Shares on the same
terms and conditions. Such notice shall indicate the number of Series B
Shares or Series D Shares, as applicable, such Series B Holder or Series D
Holder wishes to sell under his or her right to participate. Subject to the
provisions of subsection (c) below, to the extent one or more of the Series B
Holders or Series D Holders exercise such right of participation in
accordance with the terms and conditions set forth below, the number of
Stockholder Shares that the selling Stockholder may sell in the transaction
shall be correspondingly reduced.
(b) Each electing Series B Holder and Series D Holder (a
"PARTICIPANT") may sell all or any part of that number of Common Stock shares
equal to the product obtained by multiplying the aggregate number of Common
Stock or Stockholder Share equivalents covered by the Notice by a fraction
the numerator of which is the number of shares of Common Stock (on an
as-converted basis) owned by such Participant at the time of the sale or
transfer and the denominator of which is the total number of shares of Common
Stock equivalents (on an as-converted basis) owned by the selling Stockholder.
(c) Each Participant shall effect its participation in the
sale by promptly delivering to the selling Stockholder for transfer to the
prospective purchaser one or more certificates, properly endorsed for
transfer, which represent the type and number of shares of Common Stock or
Preferred Stock which such Participant elects to sell; PROVIDED, HOWEVER,
that if the prospective purchaser objects to the delivery of Preferred Stock
in lieu of Common Stock, such Participant shall convert such Preferred Stock
into Common Stock and deliver Common Stock. The Company agrees to make any
such conversion concurrent with the actual transfer of such shares to the
purchaser.
26
(d) The stock certificate or certificates that the
Participant delivers to the selling Stockholder pursuant to Section 10.1(c)
shall be transferred to the prospective purchaser in consummation of the sale
of the Common Stock or Preferred Stock pursuant to the terms and conditions
specified in the Notice or Series A Notice, as applicable, and the purchaser
or transferee shall concurrently therewith remit to such Participant that
portion of the sale proceeds to which such Participant is entitled by reason
of its participation in such sale. To the extent that any prospective
purchaser or purchasers prohibits such assignment or otherwise refuses to
purchase shares or other securities from a Participant exercising its rights
of co-sale hereunder, the selling Stockholder shall not sell to such
prospective purchaser or purchasers any Stockholder Shares unless and until,
simultaneously with such sale, the selling Stockholder shall purchase such
shares or other securities from such Participant on the same terms and
conditions specified in the Notice.
(e) In the event that the prospective purchaser(s)
purchase(s) fewer shares than set forth in the Notice, the shares sold by the
selling Stockholder and the Participants shall be reduced pro rata calculated
pursuant to Section 9.1(b), based on the number of shares they would have
been entitled to sell had the purchaser(s) purchased all the shares set forth
in the Notice.
(f) The exercise or non-exercise of the rights of the
Participants hereunder to participate in one or more sales of Stockholder
Shares made by the Stockholder shall not adversely affect their rights to
participate in subsequent sales of Stockholder Shares subject to the terms of
this Agreement.
(g) Subject to the provisions of Section 9.1(a), should any
Stockholder Shares remain for sale to a third party following the exercise or
expiration of the rights of first refusal described in Sections 6.3, 6.4,
6.5, 7.3, 7.4 and 7.5, the selling Stockholder may, not later than ninety
(90) days following delivery of the Notice or Series A Notice, as applicable,
enter into an agreement providing for the closing of the transfer of the
Stockholder Shares covered by the Notice or Series A Notice, as applicable
(less shares purchased pursuant to Sections 6.3, 6.4, 6.5, 7.3, 7.4 and 7.5)
within thirty (30) days of such agreement on terms and conditions not more
favorable to the transferor than those described in the Notice or Series A
Notice, as applicable. Any proposed transfer on terms and conditions more
favorable than those specified in the Notice or Series A Notice, as
applicable, shall again be subject to the rights of first refusal and co-sale
rights described herein.
9.2 EXEMPT TRANSFERS. The co-sale rights established by this
Section 9 shall not apply to any transfer or transfers that comply with
Section 6.8 above.
9.3 TERMINATION OF CO-SALE RIGHTS. The co-sale rights established
by this Section 10 shall not apply to, and shall terminate upon, the
Company's consummation of an Initial Offering.
9.4 PROHIBITED TRANSFERS.
(a) In the event that any Stockholder should sell any
Stockholder Shares in contravention of the co-sale rights of each Series B
Holder and Series D Holder under this
27
Agreement (a "PROHIBITED TRANSFER"), each Series B Holder and Series D
Holder, in addition to such other remedies as may be available at law, in
equity or hereunder, shall have the put option provided below, and the
selling Stockholder shall be bound by the applicable provisions of such
option.
(b) In the event of a Prohibited Transfer, each Series B
Holder and Series D Holder shall have the right to sell to the selling
Stockholder the type and number of shares of Common Stock or Preferred Stock
equal to the number of shares each Series B Holder and Series D Holder would
have been entitled to transfer to the purchaser under Section 9.1(b) hereof
had the Prohibited Transfer been effected pursuant to and in compliance with
the terms hereof. Such sale shall be made on the following terms and
conditions:
(i) The price per share at which the shares are to be
sold by the selling Series B Holder and Series D Holder shall be equal to the
price per share paid by the purchaser to the selling Stockholder in such
Prohibited Transfer. The selling Stockholder shall also reimburse each
Series B Holder and Series D Holder for any and all fees and expenses,
including legal fees and expenses, incurred pursuant to the exercise or the
attempted exercise of the Series B Holder's and Series D Holder's rights
under Section 9.1 and this Section 9.4.
(ii) Within one hundred twenty (120) business days
after the date on which a Series B Holder and Series D Holder received notice
of the Prohibited Transfer or otherwise became aware of the Prohibited
Transfer, such Series B Holder and Series D Holder shall, if exercising the
option created hereby, deliver to the selling Stockholder the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(iii) The selling Stockholder shall, upon receipt of
the certificate or certificates for the shares to be sold by a Series B
Holder or Series D Holder, pursuant to this Section 9.4(b), pay the aggregate
purchase price therefor and the amount of reimbursable fees and expenses, as
specified in Section 9.4(b)(i), in cash or by other means acceptable to the
Investor.
(iv) Notwithstanding the foregoing, any attempt by the
selling Stockholder to transfer Stockholder Shares in violation of Section
9.1 hereof shall be voidable at the option (which option must be exercised
within fifteen (15) business days after the date on which a Series B Holder
or Series D Holder received notice of a Prohibited Transfer) of any Series B
Holder or Series D Holder if such Series B Holder or Series D Holder does not
elect to exercise the put option set forth in this Section 9.4, and the
Company agrees it will not effect such a transfer nor will it treat any
alleged transferee as the holder of such shares without the written consent
of a majority in interest of the Series B Holders and Series D Holders.
10. APPROVED SALE.
10.1 VOTING OF SHARES. The Investors each agree to vote their
respective Shares in accordance with the provisions of this Section 10.
10.2 DRAG-ALONG PROVISION. At any time following the first
anniversary of the date of this Agreement, (a) the holders of more than
seventy-five percent (75%) of the Series B Shares then outstanding and (b)
the holders of a majority of the outstanding capital stock of the
28
Company then outstanding (the "REQUISITE HOLDERS") shall have the option to
compel a sale of the Company or of all or substantially all of the Company's
assets at any time (a "DRAG-ALONG SALE"); PROVIDED, THAT, in the event that
the holders of Series B Shares constitute at least a majority of the
outstanding capital stock of the Company (on an as-converted basis) the
provisions of Section 10.2(b) shall not apply. The Drag-Along Right
established by this Section 10.2 shall not apply to, and shall terminate
upon, the Company's consummation of an Initial Offering.
10.3 FORCED SALE. The Company hereby covenants and agrees that, if
the Company has not effected a Qualified Public Offering or obtained the
Minimum Trading Requirement (as defined below) prior to the fourth
anniversary of the date of this Agreement, the Company shall use commercially
reasonable efforts, including retaining an appropriate investment bank
reasonably satisfactory to a majority in interest of the Series B Holders, to
identify a suitable purchaser of the Company to be effected by means of a
merger, consolidation or sale of stock or assets, auction or otherwise at
such time (a "FORCED SALE," and, together with a Drag-Along Sale, an
"APPROVED SALE"). As used herein, the "MINIMUM TRADING REQUIREMENT" shall be
obtained following an Initial Offering on the business day following the end
of a one hundred eighty (180) consecutive day period during which the average
closing price of the Company's Common Stock on each such day exceeded the
Threshold Price.
10.4 NO OBJECTIONS. Each Investor agrees that in the event of an
Approved Sale, it shall consent to and raise no objections against the
Approved Sale, and if the Approved Sale is structured as (a) a merger or
consolidation of the Company, or a sale of all or substantially all of the
Company's assets, each such Holder shall waive any dissenters' rights,
appraisal rights or similar rights in connection with such merger,
consolidation or asset sale or (b) a sale of the stock of the Company, then
each such Investor shall agree to sell its respective Shares on the terms and
conditions approved by the Requisite Holders, PROVIDED, THAT, such terms do
not provide that the Series A Holders, Series B Holders, Series C Holders or
Series D Holders would receive less than the amount that would be distributed
to such Holders in the event of a liquidation of the Company in accordance
with the Company's Restated Certification of Incorporation. The Investors
shall each take all necessary and desirable actions approved by the Requisite
Holders, in connection with the consummation of the Approved Sale, including
the execution of such agreements and such instruments and other actions
reasonably necessary to (a) provide the representations, warranties,
indemnities, covenants, conditions, non-compete agreements, escrow agreements
and other provisions and agreements relating to such Approved Sale and (b)
effectuate the allocation and distribution of the aggregate consideration
upon the Approved Sale.
11. MISCELLANEOUS
11.1 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Colorado without regard to its
conflict-of-laws rules; PROVIDED, THAT, the provisions of Section 8 shall be
governed by the laws of the State of Delaware.
11.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs,
29
executors, and administrators of the parties hereto and shall inure to the
benefit of and be enforceable by each person who shall be a holder of Shares
from time to time.
11.3 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
11.4 SUBSEQUENT INVESTORS. No person or persons ("SUBSEQUENT
INVESTORS") shall acquire, either by purchase or otherwise any shares of
Series A Stock, Series B Stock, Series C Stock or Series D Stock of the
Company subsequent to the date hereof, unless such Subsequent Investors shall
become a party to this Agreement and agree to be bound by the provisions
hereof. Such Subsequent Investors shall be considered "Investors" for all
purposes hereof and all shares of capital stock of the Company held by such
Investors shall be deemed to be "Shares" for all purposes hereof. After the
date of this Agreement, the Company may, without the prior consent of the
Investors, make such Subsequent Investors a party to this Agreement by
executing an "Additional Party Signature Page" in the form set forth as
EXHIBIT C; provided that the inclusion of such additional party is approved
by the Company's board of directors. Thereafter, the shares of Series A
Stock, Series B Stock, Series C Stock or Series D Stock held by such
Subsequent Investor shall be deemed Registrable Securities and such holder
shall be a "Holder" for purposes hereof and both of such definitions shall be
deemed duly and properly amended.
11.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement
may be amended or modified only upon the written consent of the Company and
(i) the holders of a majority of the Series B Shares, Series C Shares and
Series D Shares or share equivalents then outstanding and (ii) the holders of
a majority of the Stockholder Shares then outstanding. Notwithstanding the
foregoing, the right of a party to designate a member of the Board of
Directors pursuant to the provisions of Section 8.2 may not be amended
without such party's consent and the provisions of Sections 10.2 and 10.3 may
not be amended without the consent of the holders of a majority of the Series
B Shares.
(b) Except as otherwise expressly provided, the obligations
of the Company and the rights of the Holders under this Agreement may be
waived only with the written consent of (i) the holders of a majority of the
Series B Shares, Series C Shares and Series D Shares or share equivalents
then outstanding and (ii) the holders of a majority of the Stockholder Shares
then outstanding. Notwithstanding the foregoing, the right of any party to
designate a member of the Board of Directors pursuant to the provisions of
Section 8.2 may not be waived without such party's consent.
11.6 NOTICES, ETC. All notices required or permitted hereunder
shall be deemed effectively given: (i) upon personal delivery to the party
to be notified, (ii) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient; if not, then on the next business
day, (iii) upon receipt after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (iv) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address set forth on the
30
signature pages hereto or EXHIBIT A hereto or at such other address as such
party may designate by ten (10) days advance written notice to the other
parties hereto.
11.7 ATTORNEYS' FEES. If legal action is brought to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any rights of
such prevailing party under or with respect to this Agreement, including
without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
11.8 INJUNCTIVE RELIEF. It is acknowledged that it will be
impossible to measure in money the damages that would be suffered if the
parties fail to comply with certain of the obligations imposed on them by
this Agreement and that, in the event of any such failure, an aggrieved
person will be irreparably damaged and will not have an adequate remedy at
law. Any such person shall, therefore, be entitled to injunctive relief
and/or specific performance to enforce such obligations, and if any action
should be brought in equity to enforce any of such provisions of this
Agreement, none of the parties hereto shall raise the defense that there is
an adequate remedy at law.
11.9 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
11.10 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, between the parties hereto with regard
to the subject matter hereof.
11.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP. MICROSOFT CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxx
------------------------------- ----------------------------------
Name: Xxxxxx X. Xxxxxxxx Title: SVP-CFO
----------------------------- -------------------------------
Title: President
----------------------------
INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP. XXXXXXXX ASSOCIATES FUND IV
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxx
------------------------------- ----------------------------------
Name: Xxxxxx X. Xxxxxxxx Title: General Partner
----------------------------- -------------------------------
Title: President
----------------------------
2
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP. XXXXXXXX PRINCIPALS FUND LLC
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxx
------------------------------- ----------------------------------
Name: Xxxxxx X. Xxxxxxxx Title: General Partner
----------------------------- -------------------------------
Title: President
----------------------------
3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP. XXXXXXXX X
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
------------------------------- ----------------------------------
Name: Xxxxxx X. Xxxxxxxx Title: General Partner
----------------------------- -------------------------------
Title: President
----------------------------
4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP. ABN AMRO, INC.
I EAGLE TRUST
ABN AMRO CAPITAL (USA), INC.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
------------------------------- ----------------------------------
Name: Xxxxxx X. Xxxxxxxx Title: Managing Director
----------------------------- -------------------------------
Title: President
----------------------------
5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP. CREST COMMUNICATIONS PARTNERS LP
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxxxxx
------------------------------- ----------------------------------
Name: Xxxxxx X. Xxxxxxxx Title: Managing Director
----------------------------- -------------------------------
Title: President
----------------------------
6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP. CEA CAPITAL PARTNERS USA LP
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxx
------------------------------- ----------------------------------
Name: Xxxxxx X. Xxxxxxxx Title: Executive Vice President
----------------------------- -------------------------------
Title: President
----------------------------
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP. CEA CAPITAL PARTNERS USA CI, L.P.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxx
------------------------------- ----------------------------------
Name: Xxxxxx X. Xxxxxxxx Title: Executive Vice President
----------------------------- -------------------------------
Title: President
----------------------------
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP.
By: /s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxx X. Xxxxx, Xx.
------------------------------- -------------------------------------
Name: Xxxxxx X. Xxxxxxxx Title:
----------------------------- -------------------------------
Title: President
----------------------------
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP.
By: /s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxxxx Xxxxxx
------------------------------- -------------------------------------
Name: Xxxxxx X. Xxxxxxxx Title:
----------------------------- -------------------------------
Title: President
----------------------------
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
JATO COMMUNICATIONS CORP.
By: /s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxx X. Xxxx
------------------------------- -------------------------------------
Name: Xxxxxx X. Xxxxxxxx Title:
----------------------------- -------------------------------
Title: President
----------------------------
11
EXHIBIT A
JATO COMMUNICATIONS CORP.
INVESTORS' RIGHTS AGREEMENT
FOUNDERS
NAME AND ADDRESS:
Xxxxxxx Xxxxxx
0000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Xxxxx X. Xxxxx
0000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Xxxxx X. Xxxx
0000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
SERIES A HOLDERS
Xxxxxxx Xxxxxx, as Custodian for Xxxxxxxxx X. Xxxxxx
0000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Xxx X. Xxxxxx and Xxxxx X. Xxxxxx
0000 Xxxx 00xx Xxxxx
Xxxxx, XX 00000
Xxxx Xxxxxxx
X.X. Xxx 00000
Xxxxxxxx Xxxxxxx, XX 00000
Xxxxxx Xxxxxxxxxx
00 Xxxxxxx Xxxxxxx
Xxxxxx 0
Xxxxxx, Xxxxxxx xx0xxx
Xxxx Xxxxxxxx
0000 Xxxx Xxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
12
Xxxxxx Xxxxxx
c/o BT Alex. Xxxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000
Xxxxxxx Xxxxxxxx
0000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
First Trust Corporation FBO TTEE, Xxxxxxx X. Xxxxxx, acct. #x204622-0001
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxx
0 Xxxxxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
Xxxxx X. Xxxxx
0000 X. Xxxxxxx Xxxxxx #00
Xxxxxx, XX 00000
Xxxxxxx Xxxxx
0000 X. Xxxxxxx Xxxxxx #00
Xxxxxx, XX 00000
Xxxxx X. Xxxx
000 Xxxxxxxxx Xxx
Xxxx Xxxxxxx, XX 00000
Xxxxxxx X. Xxxx
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Xxxxxxx & Xxxxx Xxxx
0000 Xxxxxxxxx Xxxx
Xxxx Xxxxxxxxxx, XX 00000
Xxxxxxx Xxxxxxx
0000 Xxxxxxxxxx Xx.
Xxxxxxxxxx, XX 00000
Xxxxxxx Family Trust
0000 Xxxxxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
13
Trustee F.B.O. FWD Corporation Savings & Profit Sharing Trust,
Xxxxx X. Xxxxx, Segregated Account
c/o - Xxxxx X. Xxxxxx, President
Pension Inc., Trustee
000 X. Xxxxx Xxxxxx
Xxxxx Xxx, XX 00000
COPY OF ANY CORRESPONDENCE TO :
Xxxxx X. Xxxxx, Segregated Account
X0000 Xxxxxxxxxx Xxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Xxx X. and Xxxxx X. Xxxxxxx
0000 X. Xxxxxx Xxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxx
Xxxxx, XX 00000
Xxxxx and Xxxxxx Xxxxxx
00000 X. Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxx
0000 Xxxxx Xxxx
Xxxxxxxx, XX 00000
Trustee F.B.O. FWD Corporation Savings & Profit Sharing Trust,
Xxxxxx X. Xxxxxxxx, Segregated Account
c/o - Xxxxx X. Xxxxxx, President
Pension Inc., Trustee
000 X. Xxxxx Xxxxxx
Xxxxx Xxx, XX 00000
COPY OF ANY CORRESPONDENCE TO:
Xxxxxx X. Xxxxxxxx, Segregated Account
X0000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxx
0000 X. Xxxxxxxx Xxxxx
Xxxxxxxxx Xxxxxxx, XX 00000
14
Xxxxxx X. XxXxxxxxx and Xxxxx XxXxxxxxx
0000 Xxxx 00xx Xxxxx
Xxxxx, XX 00000
Xxxxx Xxxxxx
000 Xxxx Xxx Xxxxxxx Xxxxxxx Xxxxx #0000
Xxxxxxx, XX 00000
Xxxxxx Xxxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxxx X'Xxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Xxxx X. and Xxxxx X. X'Xxxxx
0000 Xxxx 000xx Xxxx
Xxxxxxxx Xxxx, XX 00000
Xxxx Xxxxx
000 X. Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxx
000 Xxxxxxxxxx Xxxxx
Xxxxxx Xxxx, XX 00000
Xxxxxxx Xxxxxxx
Retirement Accounts & Co.
FBO Xxxxxxx X. Xxxxxxx
X.X. Xxx 000000
Xxxxxx, XX 00000-0000
Xxxxx X. Xxxxx
0000 00xx Xxxxx
Xxxxx, XX 00000
Xxxxx X. Xxxxx and Xxxxxxxx X. Xxxxx
0000 Xxxx 00xx Xxxxx
Xxxxx, XX 00000
Xxxxxx X. Xxxxxxx
0 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
15
Somes Ventures, LLC
X.X. Xxx 0000
Xxxx, XX 00000
Xxxx X. Street
P.O. Box 62028
Xxxxxxxx Xxxxxxx, XX 00000
Xxxxxxxxxxxxx & Villiotti PC Profit Sharing Plan and Trust
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, XX 00000
Xxxxxxxx Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxx X. Xxxx
000 X. Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
SERIES B HOLDERS
Crest Communications Partners L.P.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxxxxx
CEA Capital Partners USA, L.P.
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx XxXxxx
CEA Capital Partners USA
CI, L.P.
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx XxXxxx
16
ABN AMRO Capital (USA), Inc.
000 X. XxXxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
I Eagle Trust
000 X. XxXxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
ABN AMRO Incorporated
000 X. XxXxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Access Technology Partners, X.X.
Xxxxxxxxx & Xxxxx
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
Access Technology Partners
Brokers Fund, X.X.
Xxxxxxxxx & Xxxxx
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
Xxxxxxxxx & Xxxxx California
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
Xxxxxxxxx & Xxxxx Employee Venture Fund, X.X. XX
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
17
H&Q Jato Communications
Investors, X.X.
Xxxxxxxxx & Xxxxx
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Xxxx X. Xxxxxx, Xx. and Xxxxxxx
X. Xxxxxx, as Joint Tenants
0000 X. Xxxxxxxx Xx.
Xxxxxxxxx Xxxxxxx, XX 00000
Xxxxxxx Family Trust
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
Xxxxxxx X. Xxxxxx
0000 Xxx Xxxx Xxxx
Xxxxxxx, XX 00000
Xxxxx X. Xxxxxx
0000 Xxx Xxxx Xxxx
Xxxxxxx, XX 00000
Xxxxx X. Xxxxxxx
0000 Xxxxx Xxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxx
Xxxxx, XX 00000
Xxxxxxx X. Xxxxxxx, Xx.
00 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
18
GC&H Investments
C/o Cooley Godward LLP
Xxx Xxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
Xxxxxxx X. Xxxxxxxx
C/x Xxxxxx Brothers
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Xxxx X. Xxxxxx
00000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Xxxxxxx Brothers Investments
0000 Xxxxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxx
0000 Xxxxxxx
Xxxx 000
Xxxxxx, XX 00000-0000
Xxxxxxx X.X. Xxxxx III
Credit Suisse First Boston
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Xxxxxxx X. Xxxx and Xxxxxxx X.
Xxxxxx, joint tenants w/right of
survivorship
00 Xxxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Xxxxx X. Xxxxxxxxx and
Xxxxxx Foderavo, Trustees
Xxxxxxxxx Family Trust UTA
DTD 9/14/91
Credit Suisse First Boston
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
19
Xxx X. and Xxxxx X. Xxxxxxx
0000 X. Xxxxxx Xxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxxxxx Xxxxxxxx
0000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Xxxx Xxxxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxx, XX 00000
Benefactor Funding Corp.
000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Xxxxxxx & Xxxxx X. Xxxx
JTWROS
00 Xxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Xxxxxx X. Xxxxxxx III
00 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Xxxxx X. Xxxxx, Xx.
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Xxxx X. Xxxxx
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxxxxx Xxxxx
0000 Xxxxxx Xxxxx #0-X
Xxxxxx, XX 00000
Xxxxxx X. Xxxxx
0000 Xxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxxx Xxxxxxx
00000 X. Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
20
SERIES C HOLDERS
NAME AND ADDRESS
Xxxxxxxx X, L.P.
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
Xxxxxxxx Associates Fund IV, L.P.
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
Xxxxxxxx Principals Fund, L.L.C.
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
Crest Communications Partners L.P.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxxxxx
CEA Capital Partners USA, L.P.
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx XxXxxx
CEA Capital Partners USA CI, L.P.
00 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx XxXxxx
ABN AMRO Capital (USA), Inc.
000 X. XxXxxxx Xxxxxx
00xx Xxxxx
00
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
I Eagle Trust
000 X. XxXxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
ABN AMRO Incorporated
000 X. XxXxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
Access Technology Partners, X.X.
Xxxxxxxxx & Xxxxx
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
Access Technology Partners Brokers Fund, X.X.
Xxxxxxxxx & Xxxxx
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
Xxxxxxxxx & Xxxxx California
Xxxxxxxxx & Xxxxx
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
Xxxxxxxxx & Xxxxx Employee
Venture Fund, X.X. XX
Xxxxxxxxx & Xxxxx
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
22
H&Q JATO Communications Investors, X.X.
Xxxxxxxxx & Xxxxx
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
TCI Satellite Entertainment, Inc.
0000 X. Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxxxx
Xxxxx Xxxxxxx
00000 X. Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxx
0000 Xxx Xxxx Xxxx
Xxxxxxx, XX 00000
Xxxxx X. Xxxxxx
0000 Xxx Xxxx Xxxx
Xxxxxxx, XX 00000
Xxxx X. Xxxxxx, Xx. and Xxxxxxx
X. Xxxxxx, as Joint Tenants
0000 X. Xxxxxxxx Xx.
Xxxxxxxxx Xxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx. X
Xxx Xxxxxxxxx, XX 00000
23
Xxxxxx X. Xxxxxxxx
c/o Jato Communications Corp.
0000 00xx Xxxxxx
Xxxxxx, XX 00000
Xxxxxx X. Xxxxxx
000 Xxxxxxxxxx Xxxxx
Xxxxxx Xxxx, XX 00000
Xxxxxx X. Xxxxx and Xxxx X.
Xxxxx, as Joint Tenants
0 Xxxxx Xxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxxx X. Xxxxxx
0000 X. Xxxxxxxx Xxxxx
Xxxxxxxxx Xxxxxxx, XX 00000
Xxx Xxxxxxx
0000 X. Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Xxxxxx Xxxxx
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, XX 00000
24
Trustee F.B.O. FWD Corporation
Savings & Profit Sharing Trust,
Xxxxx X. Xxxxx, Segregated
Account
c/o - Xxxxx X. Xxxxxx, President
Pension Inc., Trustee
000 X. Xxxxx Xxxxxx
Xxxxx Xxx, XX 00000
COPY OF ANY CORRESPONDENCE TO :
Xxxxx X. Xxxxx, Segregated Account
X0000 Xxxxxxxxxx Xxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxx
00000 X. 00xx Xxxxx
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxx and Xxxx X.
Xxxxx, as Joint Tenants
0000 Xxxxx Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Xxxxx X. Xxxxxxx
0000 Xxxxx Xxx Xxxxx
Xxxxxxxxx, XX 00000
Bato, LLC
0000 X. Xxxxx Xxx
Xxxxxxxxx, XX 00000
SERIES D HOLDERS
NAME AND ADDRESS
25
U.S. Telesource, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn:_____________
Facsimile: 000-000-0000
Microsoft Corporation
Xxx Xxxxxxxxx Xxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
Facsimile:
26
EXHIBIT B
JATO COMMUNICATIONS CORP.,
A DELAWARE CORPORATION
CERTIFICATE OF REPRESENTATIONS
REGARDING QUALIFIED SMALL BUSINESS STOCK
THIS CERTIFICATE OF REPRESENTATIONS REGARDING QUALIFIED SMALL BUSINESS STOCK
(this "Certificate") is executed as of September __, 1999 by Jato
Communications Corp., a Delaware corporation (the "Company"), for the benefit
of Xxxxxxxx ____________, a Delaware Limited Partnership ("Xxxxxxxx"). As
used herein, the term "Stock" means those shares of Company stock issued by
the Company to Xxxxxxxx and described more fully on Schedule A hereto.
REPRESENTATIONS
Subject to the limitations and qualifications set forth below, the Company
hereby represents as follows:
1. The Company has conducted a reasonable investigation into the question
of whether the Stock is "qualified small business stock" ("QSBS") within the
meaning of Section 1202(c) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
2. As of the date first above written, and assuming that Xxxxxxxx has not
sold, distributed, or otherwise transferred the Stock, all of the Stock is
QSBS.
QUALIFICATIONS AND LIMITATIONS
1. Qualification of the Stock as QSBS is based, in part, on the value of
Company stock or other assets at certain relevant times. For purposes of the
representations made in this Certificate, the Company has made a good faith
determination of such values, taking into account all material facts and
circumstances, but cannot guarantee that the Internal Revenue Service will
not successfully assert that such determination is incorrect.
2. Qualification of the Stock as QSBS is based, in part, on whether the
Company has been engaged in the active conduct of one or more qualified
trades or businesses. The term "qualified trade or business" set forth in
Section 1202(e)(3) of the Code is not clearly defined in all respects. For
purposes of the representations made in this Certificate, the Company has
made a good faith effort to apply the definition of qualified trade or
business set forth in Section 1202(e)(3) of the
27
Code, but cannot guarantee that the Internal Revenue Service will not
successfully assert a contrary definition.
3. Qualification of the Stock as QSBS is based, in part, on whether at
least eighty percent (by value) of the Company's assets have been used in the
active conduct of one or more qualified trades or businesses. For this
purpose, assets held as "working capital" of a qualified trade or business
within the meaning of Section 1202(e)(6) of the Code are treated as used in
the active conduct of such trade or business. The term "working capital" set
forth in Section 1202(e)(6) of the Code is not clearly defined in all
respects. For purposes of the representations made in this Certificate, the
Company has made a good faith effort to apply the definition of working
capital set forth in Section 1202(e)(6) of the Code, but cannot guarantee
that the Internal Revenue Service will not successfully assert a contrary
definition.
4. Qualification of the Stock as QSBS is based, in part, on whether the
Company purchased any of its stock from a person related to Xxxxxxxx during a
relevant testing period. For purposes of the representations made in this
Certificate, the Company has made a good faith determination that such
purchases did not occur, but cannot guarantee that the Internal Revenue
Service will not successfully assert that such determination is incorrect.
5. While the representations contained herein are made in good faith, the
Company assumes no liability for the failure of the Stock to qualify as QSBS.
IN WITNESS WHEREOF, the Company has executed this Certificate as of the date
first above written.
BY:
-----------------------------
TITLE:
--------------------------
28
SCHEDULE A
Class/Type of Stock Certificate Number Number of Shares Issue Date
----------------------------------------------------------------------------------
Series C Preferred Stock
EXHIBIT C
JATO COMMUNICATIONS CORP.
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT,
DATED JANUARY 20, 2000
ADDITIONAL PARTY SIGNATURE PAGE
Pursuant to Section 11.4 of that certain Second Amended and Restated
Investors' Rights Agreement dated January 20, 2000 among Jato Communications
Corp. and the Investors set forth therein, the undersigned hereby executes
this Additional Party Signature Page and authorizes this signature page to be
attached as a counterpart of such agreement and agrees to be bound by such
agreement as if the undersigned had executed such agreement on the date of
its original execution.
This Additional Party Signature Page may be executed in counterparts, each of
which shall be deemed an original but all of which shall constitute one and
the same instrument.
DATE:
----------------
------------------------------
Print Name of Investor
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
