Exhibit 10.7
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STOCKHOLDERS' AGREEMENT
By and Among
International Microcircuits, Inc.,
The Continuing Stockholders
as defined herein and set forth
on the signature pages hereto
and
The Investors as defined herein and
set forth on the signature pages hereto
Dated as of December 16 1997
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS............................................................................1
Section 1.1 Construction of Terms..................................................................1
Section 1.2 Terms Not Defined......................................................................1
Section 1.3 Number of Shares of Stock..............................................................1
Section 1.4 Defined Terms..........................................................................1
ARTICLE II REPRESENTATIONS AND WARRANTIES. ...................................................3
Section 2.1 Representations and Warranties of Each Investor........................................3
Section 2.2 Representations and Warranties of the Continuing Stockholders..........................4
Section 2.3 Representations and Warranties of the Company..........................................4
ARTICLE III RESTRICTIONS ON TRANSFER: RIGHT OF LAST REFUSAL;
DRAG-ALONG AND TAG-ALONG PROVISIONS....................................................5
Section 3.1 Restrictions on Transfer...............................................................5
Section 3.2 Right of Last Refusal..................................................................5
Section 3.3 Drag-Along Obligations.................................................................7
Section 3.4 Tag-Along Rights.......................................................................8
Section 3.5 Contemporaneous Transfers..............................................................8
Section 3.6 Assignment.............................................................................8
Section 3.7 Prohibited Transfers...................................................................8
ARTICLE IV RIGHTS TO PURCHASE. ..............................................................9
Section 4.1 Right to Participate in Certain Sales of Additional Securities.........................9
Section 4.2 Assignment of Rights..................................................................10
ARTICLE V REGISTRATION RIGHTS. ..................................................10
Section 5.1 Piggyback Registration Rights.........................................................10
Section 5.2 Demand Registration Rights............................................................11
Section 5.3 Form S-3..............................................................................12
Section 5.4 Registrable Shares....................................................................13
Section 5.5 Further Obligations of the Company....................................................13
Section 5.6 Indemnifications; Contribution........................................................15
Section 5.8 Market Stand-Off......................................................................17
Section 5.9 Transfer of Registration Rights.......................................................17
ARTICLE VI MISCELLANEOUS PROVISIONS. ..................................................17
Section 6.1 Survival of Representations and Covenants.............................................17
Section 6.2 Legend on Securities..................................................................18
Section 6.3 Amendment and Waiver..................................................................18
Section 6.4 Notices...............................................................................18
Section 6.5 Headings..............................................................................19
Section 6.6 Counterparts..........................................................................19
Section 6.7 Dispute Resolution....................................................................19
Section 6.8 Remedies; Severability................................................................19
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TABLE OF CONTENTS
(continued)
Section 6.9 Entire Agreement......................................................................20
Section 6.10 Adjustments...........................................................................20
Section 6.11 Law Governing.........................................................................20
Section 6.12 Successors and Assigns................................................................20
Exhibit A Form of Joinder Agreement
Exhibit B Amended and Restated Articles of Incorporation
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STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement is made as of this 16 day of December,
1997 by and among International Microcircuits, Inc., a California corporation
(the "Company'), the holders of shares of the Common Stock without par value
per share (the "Common Stock"), of the Company identified on the signature
pages hereto (collectively the `Continuing Stockholders," and individually a
"Continuing Stockholder") and the entities and persons listed under the
heading "Investors" on the signature pages hereto (the "Investors"), and any
other stockholder or option holder who from time to time becomes party to
this Agreement by execution of a Joinder Agreement in substantially the form
attached hereto as EXHIBIT A (a "Joinder Agreement").
WITNESSETH
WHEREAS, the Continuing Stockholders own shares of the Company's
outstanding Common Stock; and
WHEREAS, reference is made to the Stock Purchase Agreement, dated as
of the date hereof, by and between the Company and the Investors (the
"Investment Agreement"), pursuant to which the Investors have purchased or
will purchase shares of the Company's Convertible Participating Preferred
Stock without par value per share (the "Convertible Preferred Stock," and
together with all other classes of preferred stock of the Company, the
"Preferred Stock").
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I DEFINITIONS
SECTION 1.1 CONSTRUCTION OF TERMS. As used herein, the
masculine, feminine or neuter gender, and the singular or plural number,
shall be deemed to be or to include the other genders or number, as the case
may be, whenever the context so indicates or requires.
SECTION 1.2 TERMS NOT DEFINED. Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them in the
Investment Agreement.
SECTION 1.3 NUMBER OF SHARES OF STOCK. Whenever any provision of
this Agreement calls for any calculation based on a number of shares of
capital stock held by a Continuing Stockholder or an Investor, the number of
shares deemed to be held by that Continuing Stockholder or Investor shall be
the total number of shares of Common Stock, then owned by a Continuing
Stockholder or Investor, plus the total number of shares of Common Stock
issuable upon conversion of any Preferred Stock or other convertible
securities (whether debt or equity) or exercise of any vested options,
warrants, subscription or other rights to acquire any shares of the capital
stock of the Company then owned by the Continuing Stockholders or the
Investors.
SECTION 1.4 DEFINED TERMS. The following capitalized terms, as
used in this Agreement, shall have the meanings set forth below.
An "Affiliate" of any Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with the first mentioned Person. A Person shall be
deemed to control another Person if such first Person possesses directly or
indirectly the power to direct, or cause the direction of, the management and
policies of the second Person, whether through the ownership of voting
securities, by contract or otherwise.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock without par value per share,
of the Company, as the context requires, and any other common equity
securities now or hereafter issued by the Company (but not including the
Preferred Stock), and any other shares of stock issued or issuable with
respect thereto (whether by way of a stock dividend or stock split or in
exchange for or upon conversion of such shares or otherwise in connection
with a combination of shares, recapitalization, merger, consolidation or
other corporate reorganization).
"Conversion Price" shall have the meaning ascribed to such term in
the Company's Amended and Restated Articles of Incorporation.
"Convertible Preferred Stock" means the Convertible Participating
Preferred Stock, without par value per share, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations promulgated thereunder.
"Independent Third Party" means any person who, immediately prior to
the contemplated transaction, does not own in excess of 10% of the Company's
Common Stock on a fully-diluted basis, who is not controlling, controlled by
or under common control with any such 10% owner of the Company's Common Stock
and who is not the spouse or descendent (by birth or adoption) of any such
10% owner of the Company's Common Stock.
"Offer Notice" has the meaning specified in Section 3.2(a)
"Offeror" has the meaning specified in Section 3.2.
"Permitted Transferee" has the meaning specified in Section 3. 1.
"Person" means an individual, a corporation, an association, a
partnership, an estate, a trust, and any other entity or organization,
governmental or otherwise.
"Preferred Stock: means the Convertible Participating Preferred
Stock and the Redeemable Preferred Stock and any other class of preferred
stock, each issued or to be issued in accordance with and subject to the
terms of the Amended and Restated Articles of Incorporation of the Company
substantially in the form attached hereto as EXHIBIT B (as the same may
hereafter be amended, the "Charter"), together with any other shares issued
or issuable with respect thereto (whether by way of a stock dividend or stock
split or in exchange for or in replacement or of such shares or otherwise in
connection with a combination of shares, recapitalization, merger,
consolidation or other corporate reorganization).
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"Qualified Public Offering" means the first underwritten public
offering pursuant to an effective registration statement under the Securities
Act, covering the offer and sale of Common Stock to the public in which the
proceeds received by the Company, net of underwriting discounts and
commissions, equal or exceed $20 million, at a price per share not less than
$13.22 (as appropriately adjusted for any stock split, combination,
reorganization, stock dividend or similar event).
"Redeemable Preferred Stock means the Company's Redeemable Preferred
Stock, without par value per share, issued by the Company.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Shares" means the shares of Common Stock, Preferred Stock and any
other equity securities now or hereafter issued by the Company, together with
any options thereon and any other shares of stock issued or issuable with
respect thereto (whether by way of a stock dividend, stock split or in
exchange for or upon conversion of such shares or otherwise in connection
with a combination of shares, recapitalization, merger, consolidation or
other corporate reorganization).
"Transaction Offer" has the meaning specified in Section 3.2.
"Transfer" means any direct or indirect transfer, donation, sale,
assignment, pledge, hypothecation, grant of a security interest in or other
disposal or attempted disposal of all or any portion of a security or of any
rights. "Transferred" means the accomplishment of a Transfer, and
"Transferee" means the recipient of a Transfer.
"Transferring Stockholder" has the meaning specified in Section 3.2.
ARTICLE II REPRESENTATIONS AND WARRANTIES.
SECTION 2.1 REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.
Each of the Investors, individually and not jointly, hereby represents,
warrants and covenants to the Company and to the Continuing Stockholders as
follows: (a) such Investor has full authority and power under its charter and
by-laws to enter into this Agreement; (b) this Agreement constitutes the
valid and binding obligation of such Investor enforceable against it in
accordance with its terms except as limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and (ii) general principles of
equity that restrict the availability of equitable remedies (provided,
however, that the limitations described in this clause (ii) should not
prevent the practical realization of the benefits intended by this
Agreement); and (c) the execution, delivery and performance by such Investor
of this Agreement: (i) does not and will not violate any laws, rules or
regulations of the United States or any state or other jurisdiction
applicable to such Investor, or require such Investor to obtain any approval,
consent or waiver of, or to make any filing with, any Person that has not
been obtained or made; and (ii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under or give rise to a
right of termination of any material indenture or loan or credit agreement or
any other material agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration
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award to which such Investor is a party or by which the property of such
Investor is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on
any of the assets or properties of such Investor.
SECTION 2.2 REPRESENTATIONS AND WARRANTIES OF THE CONTINUING
STOCKHOLDERS. Each of the Continuing Stockholders, individually and not
jointly, hereby represents, warrants and covenants to the Company and to the
Investors as follows: (a) such Continuing Stockholder has full authority,
power and capacity to enter into this Agreement; (b) this Agreement
constitutes the valid and binding obligation of such Continuing Stockholder
enforceable against him in accordance with its terms except as limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights; and (ii)
general principles of equity that restrict the availability of equitable
remedies (provided, however, that the limitations described in this clause
(ii) should not prevent the practical realization of the benefits intended by
this Agreement); and (c) the execution, delivery and performance by such
Continuing Stockholder of this Agreement: (i) does not and will not violate
any laws, rules or regulations of the United States or any state or other
jurisdiction applicable to such Continuing Stockholder, or require such
Continuing Stockholder to obtain any approval, consent or waiver of, or to
make any filing with, any Person that has not been obtained or made; and (ii)
does not and will not result in a breach of, constitute a default under,
accelerate any obligation under or give rise to a right of termination of any
material indenture or loan or credit agreement or any other material
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which such Continuing Stockholder is a party or by which
the property of such Continuing Stockholder is bound or affected, or result
in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the assets or properties of
such Continuing Stockholder.
SECTION 2.3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents, warrants and covenants to the Continuing
Stockholders and to the Investors as follows: (a) the Company has full
corporate authority and power to enter into this Agreement; (b) this
Agreement constitutes the valid and binding obligation of the Company
enforceable against it in accordance with its terms except as limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights and (ii)
general principles of equity that restrict the availability of equitable
remedies (provided, however, that the limitations described in this clause
(ii) should not prevent the practical realization of the benefits intended by
this Agreement); and (c) the execution, delivery and performance by the
Company of this Agreement: (i) does not and will not violate any laws, rules
or regulations of the United States or any state or other jurisdiction
applicable to the Company, or require the Company to obtain any approval,
consent or waiver of, or to make any filing with, any Person that has not
been obtained or made; and (ii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under or give rise to a
right of termination of any material indenture or loan or credit agreement or
any other material agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which the Company is a party or by
which the property of the Company is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest or
other charge or encumbrance on any of the assets or properties of the Company.
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ARTICLE III RESTRICTIONS ON TRANSFER: RIGHT OF LAST REFUSAL;
DRAG-ALONG AND TAG-ALONG PROVISIONS
The following provisions of this Article III shall terminate
immediately upon, and shall not apply with respect to, the closing of a
Qualified Public Offering.
SECTION 3.1 RESTRICTIONS ON TRANSFER. The Common Stock may not
be transferred by any Continuing Stockholder at any time on or prior to
December 31, 1997. From and after December 31, 1997, each Continuing
Stockholder agrees that it or he will not, without the prior written consent
of two-thirds-in-interest of the Investors, Transfer all or any portion of
the Shares now owned or hereafter acquired by it or him, except in connection
with, and strictly in compliance with the conditions of, any of the following:
(a) Transfers effected pursuant to Sections 3.2, 3.3 and
3.4, in each case made in accordance with the procedures set forth therein;
(b) Transfers by any Continuing Stockholder to his
spouse or children, to a trust of which he is the settlor and a trustee for
the benefit of his spouse or children, or to an irrevocable trust or family
limited partnership, PROVIDED that any such trust does not require or permit
distribution of such Shares during the term of this Agreement, and PROVIDED
FURTHER that the Transferee shall have entered into an enforceable Joinder
Agreement providing that all Shares so Transferred shall continue to be
subject to all provisions of this Agreement as if such Shares were still held
by such Continuing Stockholder, except that no further Transfer shall
thereafter be permitted hereunder except in compliance with Sections 3.2, 3.3
and 3.4; and
(c) Transfers upon the death of any Continuing
Stockholder to his heirs, executors or administrators or to a trust under his
will or Transfers between such Continuing Stockholder and his guardian or
conservator, PROVIDED that the Transferee shall have entered into an
enforceable Joinder Agreement providing that all Shares so Transferred shall
continue to be subject to all provisions of this Agreement as if such Shares
were still held by the Continuing Stockholder, except that no further
Transfer shall thereafter be permitted hereunder except in compliance with
Sections 3.2, 3.3 and 3.4.
Any permitted Transferee described in the preceding clauses (b) or
(c) shall be referred to herein as a "Permitted Transferee." Notwithstanding
anything to the contrary in this Agreement or any failure to execute a
Joinder Agreement as contemplated hereby, Permitted Transferees shall take
any Shares so Transferred subject to all provisions of this Agreement as if
such Shares were still held by the Transferring Continuing Stockholder,
whether or not they so agree with the transferor and/or the Company. Without
limitation of the foregoing, in connection with any otherwise permitted
transfer of shares of capital stock that are restricted shares and are
subject to any stock restriction agreement, any transferee of any such shares
shall agree in writing to be bound by the terms of any such stock restriction
or similar agreement, including, without limitation, any repurchase or
similar right contained therein.
SECTION 3.2 RIGHT OF LAST REFUSAL. In the event that any of the
Continuing Stockholders, including any of their Permitted Transferees,
receives a bona fide offer to purchase all or any portion of the Shares held
by such person (a "Transaction Offer") from an Independent
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Third Party (the "Offeror"), such Continuing Stockholder or Permitted
Transferee (a "Transferring Stockholder") may Transfer such Shares pursuant
to and in accordance with the following provisions of this Section 3.2:
(a) Such Transferring Stockholder shall cause the
Transaction Offer and all of the terms thereof to be reduced to writing and
shall notify each Investor of his wish to accept the Transaction Offer and
otherwise comply with the provisions of this Section 3.2 (such notice, the
"Offer Notice"). The Transferring Stockholder's Offer Notice shall constitute
an irrevocable offer to sell such shares to the Investor on the basis
described below at a purchase price equal to the price contained in, and on
the same terms and conditions of, the Transaction Offer (except to the extent
the provisions of this Section 3.2 apply). The notice shall be accompanied by
a true copy of the Transaction Offer (which shall identify the Offeror and
all relevant information in connection therewith).
(b) Subject to the provisions of Section 3.2(c) below,
each Investor shall have the right (the "Right of Last Refusal") to offer to
purchase up to that number of Shares covered by the Transaction Offer as
shall be equal to the product obtained by multiplying (i) the total number of
Shares subject to the Transaction Offer by (ii) a fraction, the numerator of
which is the total number of shares of Common Stock owned by such Investor on
the date of the Offer Notice on an as converted basis (including for this
purpose any shares of Common Stock that may be received upon conversion of
any Preferred Stock), and the denominator of which is the total number of
Shares of Common Stock, then held by all Investors on the date of the Offer
Notice on an as converted basis as provided above, subject to increase as
hereinafter provided. The number of Shares that each Investor is entitled to
purchase under this Section 3.2 shall be referred to as its "Pro Rata
Fraction". Each Investor shall have the right to transfer its right to any
Pro Rata Fraction or part thereof with respect to any proposed Transaction
Offer to any transferee. In the event an Investor does not wish to purchase
or to transfer its right to purchase its Pro Rata Fraction, then any
Investors who so elect shall have the right to offer to purchase, on a pro
rata basis with any other Investors who so elect, any Pro Rata Fraction not
purchased by an Investor or its transferee. Each Investor shall have the
right to accept the Transaction Offer by giving notice of such acceptance to
the Transferring Stockholder as provided in Section 6.4 within fifteen (15)
days after receipt of the Offer Notice, which notice shall indicate the
maximum number of Shares subject thereto which the Investor and its
transferee(s) are willing to purchase in the event fewer than all Investors
elect to purchase their Pro Rata Fractions; provided that the Investors as a
group may not exercise the Right of Last Refusal with respect to fewer than
all of the Shares which are subject to the Transaction Offer. In the event
that the price set forth in the Offer Notice is stated in consideration other
than cash or cash equivalents, the Board of Directors of the Company with the
agreement of the TA Associates, Inc. as representative of the Investors may
determine the fair market value of such consideration, reasonably and in good
faith, and shall deliver written notice (the "FMV Notice") to the
Transferring Stockholder of such determination not more than fifteen (15)
days after receipt of the Transaction Offer. If the Transferring Stockholder
does not object to such determination within five (5) days of receipt of the
FMV Notice, the Investors may exercise. their Right of Last Refusal by
payment of such fair market value in cash or cash equivalents. In the event
that the Transferring Stockholder objects to the fair market value determined
by TA Associates, the Transferring Stockholder and TA Associates shall
negotiate in good faith for a period of ten (10) days to determine a mutually
acceptable fair market value for such consideration. If after such ten days,
TA Associates and
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the Transferring Stockholder have not reached agreement as to the fair market
value of such consideration, the matter shall be referred to a
nationally-recognized accounting firm (the "Accountants") for final
determination of the fair market value of such consideration (the
"Accountants Determination"), and the Accountants shall make the Accountant
Determination not more than fifteen (15) days after receipt of such matter.
The Accountant's Determination shall be binding on the Investors and the
Transferring Stockholder and shall not be subject to dispute or review. For a
period of fifteen (15) days following delivery of the Accountant's
Determination, the Investors may exercise their Right of Last Refusal by
payment in cash or cash equivalents of the fair market value so determined.
The Transferring Stockholder shall notify the Investors promptly following
any lapse of the Right of Last Refusal without acceptance thereof or any
rejection of the Right of Last Refusal.
Upon the expiration of thirty (30) days following later to occur of
(i) receipt of the Offer Notice by all Investors and (ii) delivery of the
Accountant's Determination to the Transferring Stockholder and to TA
Associates, as representation of the Investors, the number of Shares to be
purchased by each Investor and transferee shall be determined as follows: (x)
there shall first be allocated to each Investor and transferee electing to
purchase a number of Shares equal to the lesser of (A) the number of Shares
as to which such Investor accepted the Transaction Offer or (B) such
Investor's Pro Rata Fraction, and (y) the balance, if any, not allocated
under clause (x) above, shall be allocated to those Investors and transferees
who accepted the Transaction Offer as to a number of Shares which exceeded
their respective Pro Rata Fractions, in each case on a pro rata basis in
proportion to the amount of such excess. The closing for any purchase of
Shares by the Investors and their transferees hereunder shall take place
within thirty (30) days after the later to occur of (i) the first thirty (30)
day period following the Investors' receipt of the Offer Notice-and (ii)
delivery of the Accountant's Determination to the Transferring Stockholder
and to TA Associates, as representation of the Investors at the place and on
the date specified by two-thirds-in-interest of the Investors.
(c) In the event that the Investors do not elect to
exercise the Right of Last Refusal with respect to all of the Shares proposed
to be sold, the Investors shall not be entitled to purchase any such Shares
and the Transferring Stockholder may sell all such Shares proposed to be sold
to the Offeror on the terms and conditions set forth in the Offer Notice. If
the Transferring Stockholder's transfer to an Offeror is not consummated in
accordance with the terms of the Transaction Offer on or before the day which
is ninety (90) days after the expiration of the Right of Last Refusal, the
Transaction Offer shall be deemed to lapse, and any Transfers of Shares
pursuant to such Transaction Offer shall be deemed to be in violation of the
provisions of this Agreement unless the Investors are once again afforded the
Right of Last Refusal provided for herein with respect to such Transaction
Offer.
SECTION 3.3 DRAG-ALONG OBLIGATIONS.
(a) In the event that two-thirds-in-interest of the
Investors determine to sell or otherwise dispose of all or substantially all
of the assets of the Company or all or substantially all of the capital stock
of the Company owned by the Investors to any non-Affiliate(s) of the Company
or any of the Investors, or to cause the Company to merge with or into or
consolidate with any non-Affiliate(s) of the Company or any of the Investors
(in each case, the "Buyer") in a bona fide negotiated transaction (a "Sale'),
each of the Continuing Stockholders, including any
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of their respective Permitted Transferees (collectively, the "Non-Investor
Stockholders'), shall be obligated to and shall upon the written request of
two-thirds-in-interest of the Investors: (i) sell, transfer and deliver, or
cause to be sold, transferred and delivered, to the Buyer, his Shares
(including for this purpose all of such Non-Investor Stockholder's Shares
that presently or as a result of any such transaction may be acquired upon
the exercise of options (following the payment of the exercise price
therefor)) on substantially the same terms applicable to the Investors (with
appropriate adjustments to reflect the conversion of convertible securities,
the redemption of redeemable securities and the exercise of exercisable
securities as well as the relative preferences and priorities of the
Preferred Stock); and (ii) execute and deliver such instruments of conveyance
and transfer and take such other action, including voting such Shares in
favor of any Sale proposed by the Investors and executing any purchase
agreements, merger agreements, indemnity agreements, escrow agreements or
related documents, as the Investors or the Buyer may reasonably require in
order to carry out the terms and provisions of this Section 3.3.
(b) Not less than thirty (30) days prior to the date
proposed for the closing of any Sale, the Investors shall give written notice
to each Non-Investor Stockholder, setting forth in reasonable detail the name
or names of the Buyer, the terms and conditions of the Sale, including the
purchase price, and the proposed closing date.
SECTION 3.4 TAG-ALONG RIGHTS. In the event that the Investors
enter into an agreement (an "Agreement") with one or more third parties (each
a "Third Party") (other than another Investor or any affiliate of any
Investor) pursuant to which such Third Parties shall purchase all or
substantially all of the shares of the Preferred Stock, Common Stock or other
equity securities then held by the Investors, such Agreement shall include,
as a condition precedent to the Investors' obligations thereunder, provisions
requiring such Third Parties to acquire not less than 558,570 shares of
Common Stock then held by certain Non-Investor Stockholders identified on
SCHEDULE 3.4 attached hereto on terms and conditions substantially similar to
those set forth in the Agreement. Not less than thirty (30) days prior to the
date proposed for the closing of any such transaction, the Investors shall
give written notice to each such Non-Investor Stockholder, setting forth in
reasonable detail the name or names of the Buyer, the terms and conditions of
the proposed transaction, including the purchase price, and the proposed
closing date.
SECTION 3.5 CONTEMPORANEOUS TRANSFERS. If two or more Continuing
Stockholders (or their Permitted Transferees) propose concurrent Transfers
which are subject to this Article III, then the relevant provisions of
Section 3.2 shall apply separately to each such proposed Transfer.
SECTION 3.6 ASSIGNMENT. Each Investor shall have the right to
assign its rights under this Article III in connection with any transaction
or series of related transactions involving the transfer of shares of capital
stock of the Company to a transferee or two or more transferees that are
Affiliates of each other or to any fund managed by or associated with
TA Associates, Inc. (each, a "TA Fund"), and upon any such transfer, any such
transferee or TA Fund thereupon shall be deemed an "Investor" in connection
with its ownership of the Shares Transferred for purposes of this Article III.
SECTION 3.7 PROHIBITED TRANSFERS. If any Transfer is made or
attempted contrary to the provisions of this Agreement, such purported
Transfer shall be void AB INITIO; the Company and
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the other parties hereto shall have, in addition to any other legal or
equitable remedies which they may have, the right to enforce the provisions
of this Agreement by actions for specific performance (to the extent
permitted by law); and the Company shall have the right to refuse to
recognize any Transferee as one of its stockholders for any purpose. Without
limitation to the foregoing, each of the Investors and Continuing
Stockholders further agrees that the provisions of Section 6.8 shall apply in
the event of any violation or threatened violation of this Agreement.
ARTICLE IV RIGHTS TO PURCHASE.
Notwithstanding anything herein to the contrary, the following
provisions of this Article IV shall terminate immediately prior to the
closing of a Qualified Public Offering and shall not apply with respect to
any Qualified Public Offering.
SECTION 4.1 RIGHT TO PARTICIPATE IN CERTAIN SALES OF ADDITIONAL
SECURITIES. The Company agrees that it will not sell or issue any shares of
capital stock of the Company, or other securities convertible into or
exchangeable for capital stock of the Company, or options, warrants or rights
carrying any rights to purchase capital stock of the Company unless the
Company first submits a written offer to the Investors (including their
Permitted Transferees) (collectively, the "Offerees') identifying the terms
of the proposed sale (including price, number or aggregate principal amount
of securities and all other material terms), and offers to each Investor
(including each Permitted Transferee) the opportunity to purchase its Pro
Rata Allotment (as hereinafter defined) of the securities (subject to
increase for over-allotment if some Investors do not fully exercise their
rights) on terms and conditions, including price, not less favorable than
those on which the Company proposes to sell such securities to a third party
or parties. Each Offeree's "Pro Rata Allotment" of such securities shall be
based on the ratio which the shares of Common Stock (including shares of
Common Stock issuable upon conversion of Preferred Stock) then owned by it
bears to all of the then issued and outstanding shares of Common Stock
(including shares of Common Stock issuable upon conversion of Preferred Stock
calculated in each case on a fully-diluted basis giving effect to the
conversion of convertible securities and assuming the exercise of all
outstanding vested options, in each case as of the date of such written
offer. The Company's offer pursuant to this Section 4. 1 shall remain open
and irrevocable for a period of 30 days, and the recipients of such offer
shall elect to purchase by giving written notice thereof to the Company
within such 30-day period, including therein the maximum number of shares or
other securities which the Offeree would purchase if other Offerees do not
elect to purchase, with the rights of electing Offerees to purchase such
additional shares to be based upon the relative holdings of Common Stock
(including shares of Common Stock issuable upon conversion of Preferred
Stock) of the electing Offerees in the case of over-subscription. Any
securities so offered which are not purchased pursuant to such offer may be
sold by the Company but only on the terms and conditions set forth in the
initial offer, at any time within 120 days following the termination of the
above-referenced 30-day period but may not be sold to any other person or on
terms and conditions, including price, that are more favorable to the
purchaser than those set forth in such offer or after such 120-day period
without renewed compliance with this Section 4. 1.
Notwithstanding the foregoing, the right to purchase granted under
this Article IV shall be inapplicable with respect to any issuance or
proposed issuance by the Company of (i) securities issued in connection with
the acquisition of another corporation by the Company,
9
whether by merger, purchase of all or substantially all of the assets of such
corporation, or otherwise, (ii) up to 994,407 shares (or options to purchase
shares) of Common Stock (subject to adjustment in the event of stock splits,
stock dividends, recapitalizations and like events) issued or granted to
employees, consultants, officers, directors, advisors or independent
contractors of the Company or of any Affiliate of the Company pursuant to the
Company's 1997 Stock Option and Grant Plan, (iii) securities issued as a
result of any stock split, stock dividend, reclassification or reorganization
of the Company's capital stock or (iv) Common Stock issued upon conversion of
the Convertible Preferred Stock in accordance with the terms of the Company's
Amended and Restated Articles of Incorporation.
SECTION 4.2 ASSIGNMENT OF RIGHTS. Each Investor (including each
Permitted Transferee) shall have to right to assign its rights under this
Article IV in connection with any transaction or series of related
transactions involving the transfer to one or more transferees that are
Affiliates of each other of Shares of capital stock of the Company or to any
TA Fund, and upon any such transfer such transferee or TA Fund shall be
deemed an Offeree for purposes of Sections 4.1 and 4.2 with the rights set
forth in such Sections.
ARTICLE V REGISTRATION RIGHTS.
The Company's obligation to register shares of Common Stock under
this Article V shall terminate seven (7) years following the closing by the
Company of its first underwritten public offering pursuant to a registration
statement under the Securities Act (an "IPO") or, with respect to Shares held
by particular Investors or the Continuing Stockholders (including Permitted
Transferees), whenever such shares are no longer Registrable Shares (as
defined below).
SECTION 5.1 PIGGYBACK REGISTRATION RIGHTS. If at any time or
times after the date hereof, the Company shall determine to register any
shares of its Common Stock or securities convertible into or exchangeable or
exercisable for shares of Common Stock under the Securities Act (whether in
connection with a public offering of securities by the Company (a "primary
offering"), a public offering of securities by stockholders (a "secondary
offering"), or both, but not in connection with a registration effected
solely to implement an employee benefit plan or a transaction to which Rule
145 or any other similar rule of the Commission under the Securities Act is
applicable or a registration effected pursuant to Sections 5.2 or 5.3
hereof), the Company will promptly give written notice thereof to the
Investors and the Continuing Stockholders (including for purpose of this
Section 5. 1 each Permitted Transferee). In connection with any such
registration, if within thirty (30) days after their receipt of such notice
(or 10 days in the case of a proposed registration on Form S-3) any Investor
or Continuing Stockholder requests in writing the inclusion in such
registration of some or all of the Registrable Shares (as hereinafter
defined) owned by such Investor or Continuing Stockholder, or into which any
Shares held by such Investor or Continuing Stockholder are convertible or
exchangeable, the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Shares which such
Investors and Continuing Stockholders so request; PROVIDED, HOWEVER, that in
the case of an underwritten public offering, if the underwriter determines
that a limitation on the number of shares to be underwritten is required,
(i) if such registration is the first registered offering of the Company's
securities to the public, the underwriter may exclude from such registration
and underwriting some or all of the Registrable Shares which would otherwise
be underwritten pursuant to the notice described herein, and (ii) if such
registration is other than the first
10
registered offering of the sale of the Company's securities to the public,
the underwriter may limit the number of Registrable Shares to be included in
the registration and underwriting to not less than thirty percent (30%) of
the securities included therein (based on aggregate market values). The
Company shall advise all Investors and Continuing Stockholders promptly after
such determination by the underwriter, and the number of Registrable Shares
that may be included in the registration and underwriting shall be allocated
among all Investors and Continuing Stockholders requesting registration in
proportion, as nearly as practicable, to their respective holdings of
Registrable Shares. All expenses of the registration and offering (including
the reasonable fees and expenses of one independent counsel for the Investors
as a group and the Continuing Stockholders as a group, elected by a majority
in interest (based on Registrable Shares proposed to be sold) of the
Investors and Continuing Stockholders proposing to sell), shall be borne by
the Company, except that the Investors and the Continuing Stockholders shall
bear underwriting and selling commissions and transfer taxes attributable to
the sale of their Registrable Shares.
SECTION 5.2 DEMAND REGISTRATION RIGHTS. If on any two (2)
occasions (which occasions shall in no event be less than six months apart
from each other) after the earlier of (i) two (2) years after the date of
this Agreement or (ii) three (3) months after the closing of the Company's
first public offering pursuant to a registration statement under the
Securities Act, Investors holding a majority in interest of the Registrable
Shares then held by all of the Investors shall notify the Company in writing
that it or they intend to offer or cause to be offered for public sale all or
any portion of its or their Registrable Shares, the Company will notify all
of the Investors and the Continuing Stockholders (including for purposes of
this Section 5.2 all Permitted Transferees) of its receipt of such
notification from such Investors. If within thirty (30) days after their
receipt of such notice, any Investor or Continuing Stockholder requests the
inclusion of some or all of the Registrable Shares owned by such Investor or
Continuing Stockholder in such registration, the Company will use its best
efforts to cause such Registrable Shares so requested (including the
Registrable Shares held by the Investor(s) or Continuing Stockholder(s)
giving the initial notice of intent to register hereunder) to be registered
under the Securities Act in accordance with the terms of this Section 5.2;
PROVIDED, HOWEVER, that unless such registration becomes effective, the
Investors shall be entitled to require an additional registration pursuant to
this Section 5.2; and, PROVIDED FURTHER that if such registration is
underwritten and the underwriter determines that a limitation on the number
of shares to be underwritten is required, the first shares to be excluded
from such registration shall be any shares registered for the benefit of the
Company, and thereafter any shares which the Investors and the Continuing
Stockholders have requested to be registered shall be limited, to the extent
necessary, based upon the respective holdings of Registrable Shares of the
Investors and Continuing Stockholders proposing to sell.
All expenses of such registrations and offerings (including the
reasonable fees and expenses of one independent counsel for the Investors as
a group, and the Continuing Stockholders as a group, selected in the manner
contemplated by Section 5.1) shall be borne by the Company. The Company may
postpone the filing of any registration statement required hereunder for a
reasonable period of time, not to exceed 90 days during any twelve-month
period, if the Company determines in good faith that such filing would
require the disclosure of a material transaction or other matter and the
Company determines reasonably and in good faith that such disclosure would
have a material adverse effect on the Company or otherwise would
11
not be in the best interest of the Company. The Company shall not be required
to cause a registration statement requested pursuant to this Section 5.2 to
become effective prior to 90 days following the effective date of a
Registration Statement initiated by the Company, if the request for
registration has been received by the Company subsequent to the giving of
written notice by the Company, made in good faith, to the Investors to the
effect that the Company is commencing to prepare a Company-initiated
Registration Statement (other than a registration effected solely to
implement an employee benefit plan or a transaction to which Rule 145 or any
other similar rule of the Commission under the Securities Act is applicable);
provided, however, that the Company shall use its best efforts to achieve
such effectiveness promptly following such 90-day period if the request
pursuant to this Section 5.2 has been made prior to the expiration of such
90-day period. If so requested by any Investor or Continuing Stockholder in
connection with a registration under this paragraph, the Company shall take
such steps as are required to register the Investors' and the Continuing
Stockholders' Registrable Shares for sale on a delayed or continuous basis
under Rule 415, and also take such steps as are required to keep any
registration effective until all of the Investors' and the Continuing
Stockholders' Registrable Shares registered thereunder are sold.
Notwithstanding the foregoing, the Company shall have no obligation to keep
any registration pursuant to this Section 5.2 effective more than 120 days
after the initial date of effectiveness of such registration.
SECTION 5.3 FORM S-3. If the Company becomes eligible to use
Form S-3 under the Securities Act or a comparable successor form, (a) the
Company shall use its best efforts to continue to qualify at all times for
registration of its capital stock on Form S-3 or such successor form, and
(b) holders of Registrable Shares anticipated to have an aggregate sale price
(net of underwriting discounts and Commission, if any) in excess of $500,000
shall have the right on one or more occasions to request and have effected
the registration of their Shares on Form S-3 or such successor form (such
requests shall be in writing and shall state the number of Shares to be
disposed of and the intended method of disposition of such Shares by
Investor(s) or Continuing Stockholder(s), including for purposes of this
Section 5.3 all Permitted Transferees). The Company will use its best efforts
to effect promptly the registration of all Shares on Form S-3 or such
successor form to the extent requested by such Investor(s) or Continuing
Stockholder(s). If so requested by such Investor(s) or Continuing
Stockholder(s) in connection with a registration under this Section 5.3, the
Company shall take such steps as are required to register such Investor's or
Continuing Stockholder's Registrable Shares for sale on a delayed or
continuous basis under Rule 415, and to keep such registration effective
until all of such Investor's or Continuing Stockholder's Registrable Shares
registered thereunder are sold. Notwithstanding the foregoing, the Company
shall have no obligation to keep any registration effective more than 120
days after the initial date of effectiveness of such registration. All
expenses incurred in connection with a registration requested pursuant to
this Section 5.3 (including the reasonable fees and expenses of one
independent counsel for the Investors as a group and the Continuing
Stockholders as a group, selected in this manner contemplated as of Section
5. 1) shall be borne by the Company. The Company may postpone the filing of
any registration statement required hereunder for a reasonable period of
time, not to exceed 90 days during any twelve month period, if the Company
determines in good faith that such filing would require the disclosure of a
material transaction or other matter and the Company determines reasonably
and in good faith that such disclosure would have a material adverse effect
on the Company or otherwise would not be in the best interest of the Company.
The Company shall not be required to cause a Registration Statement requested
pursuant to this Section 5.3 to become
12
effective prior to 90 days following the effective date of a Registration
Statement initiated by the Investors pursuant to Section 5.2 or by the
Company, if the request for registration has been received by the Company
subsequent to the giving of written notice by the Company, made in good
faith, to the Investors and the Continuing Stockholders to the effect that
the Company is commencing to prepare a Company-initiated Registration
Statement (other than a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 or any other similar rule of
the Commission under the Securities Act is applicable); PROVIDED, HOWEVER,
that the Company shall use its best efforts to achieve such effectiveness
promptly following such 90-day period if the request pursuant to this Section
5.3 has been made prior to the expiration of such 90-day period.
SECTION 5.4 REGISTRABLE SHARES. For the purposes of this
Article V, the term "Registrable Shares" shall mean any shares of Common
Stock held by an Investor, Continuing Stockholder or Permitted Transferee or
subject to acquisition by an Investor upon conversion of Preferred Stock,
including any shares issued by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization; provided, however, that if an Investor
owns Preferred Stock that is convertible into Common Stock, the Investor may
exercise its registration rights hereunder by converting the shares to be
sold publicly into Common Stock as of the closing of the relevant offering
and shall not be required to cause such Preferred Stock to be converted to
Common Stock until and unless such Closing occurs, it being understood that
the Company shall at the request of the relevant Investor effect the
reconversion of Common Stock to Preferred Stock if such a conversion occurs
notwithstanding the foregoing and a public offering does not close; and
provided, further, that any Common Stock that is sold in a registered sale
pursuant to an effective registration statement under the Securities Act or
pursuant to Rule 144 thereunder, or that may be sold without restriction as
to volume or otherwise pursuant to Rule 144(k) under the Securities Act (as
confirmed by an unqualified opinion of counsel to the Company), shall not be
deemed Registrable Shares.
SECTION 5.5 FURTHER OBLIGATIONS OF THE COMPANY. Whenever, under
the provisions of Sections 5.1, 5.2 or 5.3 of this Agreement, the Company is
required to register any Registrable Shares, it agrees that it shall also do
the following:
(a) Use its best efforts to diligently prepare and file
with the Commission a registration statement and such amendments,
post-effective amendments and supplements to said registration statement and
the prospectus used in connection therewith as may be necessary to keep said
registration statement effective as contemplated herein and to comply with
the provisions of the Securities Act with respect to the sale of securities
covered by said registration statement for the period necessary to complete
the proposed public offering as provided herein;
(b) Furnish to each selling Investor or Continuing
Stockholder (including for purposes of this Section 5.4 each Permitted
Transferee) such copies of each preliminary and final prospectus and such
other documents as such Investor or Continuing Stockholder may reasonably
request to facilitate the public offering of its Registrable Shares;
(c) Enter into any reasonable underwriting agreement
required by the proposed underwriter for the selling Investors or Continuing
Stockholders, if any (which
13
underwriter shall be selected by the selling Investors in connection with any
registration requested pursuant to Section 5.2); provided, however, that no
Continuing Stockholder or Investor shall be required to make any
representations or warranties or provide any indemnification other than with
respect to its title to the Registrable Shares and any written information
provided by it to the Company specifically for use in the Registration
Statement, and if the underwriter requires that representations or warranties
be made and that indemnification be provided, the Company shall make all such
representations and warranties and provide all such indemnities, including,
without limitation, in respect of the Company's business, operations and
financial information and the disclosures relating thereto in the prospectus;
(d) Use its best efforts to register or qualify the
securities covered by said registration statement under the securities or
"blue-sky" laws of such jurisdictions as any selling Investors or Continuing
Stockholders may reasonably request, provided that the Company shall not be
required to register or qualify the securities in any jurisdictions which
require it to qualify to do business or subject itself to general service of
process therein;
(e) Immediately notify each selling Investor or
Continuing Stockholder, at any time when a prospectus relating to his
Registrable Shares is required to be delivered under the Securities Act, of
the happening of any event as a result of which such prospectus contains an
untrue statement of a material fact or omits any material fact necessary to
make the statements therein not misleading, and, at the request of any such
selling Investor or Continuing Stockholder, prepare a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(f) Cause all such Registrable Shares to be listed on or
included in each securities exchange or quotation system on which similar
securities issued by the Company are then listed;
(g) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its stockholders, in each case as soon as practicable, but not
later than 30 days after the close of the period covered thereby an earnings
statement of the Company which will satisfy the provisions of Section 11(a)
of the Securities Act;
(h) Cooperate with each Investor and Continuing
Stockholder and each underwriter participating in the disposition of
Registrable Shares and their respective counsel in connection with any
filings required to be made with the National Association of Securities
Dealers, Inc.;
(i) During the period when the prospectus is required to
be delivered under the Securities Act, promptly file all documents required
to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act;
(j) Appoint a transfer agent and registrar for all
Registrable Shares covered by a Registration Statement not later than the
effective date of such Registration Statement;
14
(k) In connection with an underwritten offering, to the
extent reasonably requested by the managing underwriter for the offering or
the Investors or the Continuing Stockholders, participate in and support
customary efforts to sell the securities in the offering, including, without
limitation, participating in "road shows"; and
(l) Otherwise cooperate with the underwriter or
underwriters, the Commission and other regulatory agencies and take all
actions and execute and deliver or cause to be executed and delivered all
documents necessary to effect the registration of any Registrable Shares
under this Article V.
SECTION 5.6 INDEMNIFICATIONS; CONTRIBUTION.
(a) Incident to any registration statement referred to
in this Article V, and subject to applicable law, the Company will indemnify
and hold harmless each underwriter, each Investor or Continuing Stockholder
(including for purposes of this Article V each Permitted Transferee) who
offers or sells any such Registrable Shares in connection with such
registration statement (including its partners (including partners of
partners and stockholders of any such partners), and directors, officers,
employees and agents of any of them (a "Selling Stockholder'), and each
person who controls any of them within the meaning of Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934 (the
"Exchange Act") (a "Controlling Person"), from and against any and all
losses, claims, damages, expenses and liabilities, joint or several
(including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), as the same are incurred to which they, or any of them,
may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are
based on (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement (including any related
preliminary or definitive prospectus, or any amendment or supplement to such
registration statement or prospectus), (ii) any omission or alleged omission
to state in such document a material fact required to be stated in it or
necessary to make the statements in it not misleading, or (iii) any violation
by the Company of the Securities Act, any state securities or "blue sky" laws
or any rule or regulation thereunder in connection with such registration;
provided, however, that the Company will not be liable to the extent that
such loss, claim, damage, expense or liability arises from and is based on an
untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information furnished in writing to the
Company by such underwriter, Selling Stockholder or Controlling Person
expressly for use in such registration statement. With respect to such untrue
statement or omission or alleged untrue statement or omission in the
information furnished in writing to the Company by such Selling Stockholder
expressly for use in such registration statement, such Selling Stockholder
will indemnify and hold harmless each underwriter, the Company (including its
directors, officers, employees and agents), and each other Selling
Stockholder (including its partners (including partners of partners and
stockholders of such partners) and directors, officers, employees and agents
of any of them), and each person who controls any of them within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages, expenses and liabilities,
joint or several, to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise to
15
the same extent provided in the immediately preceding sentence. In no event,
however, shall the liability of a Selling Stockholder for indemnification
under this Section 5.6(a) in its capacity as such exceed the lesser of
(i) that proportion of the total of such losses, claims, damages or
liabilities indemnified against equal to the proportion of the total
securities sold under such registration statement which is being sold by such
Selling Stockholder or (ii) the proceeds received by such Selling Stockholder
from its sale of Registrable Shares under such registration statement.
(b) If the indemnification provided for in
Section 5.6(a) above for any reason is held by a court of competent
jurisdiction to be unavailable to an indemnified party in respect of any
losses, claims, damages, expenses or liabilities referred to therein, then
each indemnifying party under this Section 5.6, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages,
expenses or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company, the other Selling Stockholders
and the underwriters from the offering of the Registrable Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company, the other Selling Stockholders and the underwriters in connection
with the statements or omissions which resulted in such losses, claims,
damages, expenses or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company, the Selling
Stockholders and the underwriters shall be deemed to be in the same
respective proportions that the net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholders and
the underwriting discount received by the underwriters, in each case as set
forth in the table on the cover page of the applicable prospectus, bear to
the aggregate public offering price of the Registrable Shares. The relative
fault of the Company, the Selling Stockholders and the underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company, the
Selling Stockholders or the underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Selling Stockholders, and the underwriters agree
that it would not be just and equitable if contribution pursuant to this
Section 5.6(b) were determined by pro rata or per capita allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. In no
event, however, shall a Selling Stockholder be required to contribute any
amount under this Section 5.6(b) in excess of the lesser of (i) that
proportion of the total of such losses, claims, damages or liabilities
indemnified against equal to the proportion of the total Registrable Shares
sold under such registration statement which are being sold by such Selling
Stockholder or (ii) the proceeds received by such Selling Stockholder from
its sale of Registrable Shares under such registration statement. No person
found guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not found guilty of such fraudulent misrepresentation.
(c) The amount paid by an indemnifying party or payable
to an indemnified party as a result of the losses, claims, damages and
liabilities referred to in this Section 5.6 shall
16
be deemed to include, subject to the limitations set forth above, any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim, payable as the same
are incurred. The indemnification and contribution provided for in this
Section 5.6 will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified parties or any officer,
director, employee, agent or controlling person of the indemnified parties.
SECTION 5.7 RULE 144 REQUIREMENTS. If the Company becomes
subject to the reporting requirements of either Section 13 or 15(d) of the
Exchange Act, the Company will use its best efforts thereafter to file with
the Commission such information as is specified under either of said Sections
for so long as any of the Investors hold any Registrable Shares; and in such
event, the Company shall use its best efforts to take all action as may be
required as a condition to the availability of Rule 144 under the Securities
Act (or any successor or similar exemptive rules hereafter in effect). The
Company shall furnish to any holder of Registrable Shares upon request a
written statement executed by the Company as to the steps it has taken to
comply with the current public information requirement of Rule 144 or such
successor rules.
SECTION 5.8 MARKET STAND-OFF. Each Investor and Continuing
Stockholder agrees, if requested by the Company and an underwriter of
Registrable Shares of the Company in connection with the Company's initial
public offering, not to sell or otherwise transfer or dispose of any Shares
held by it for such period, not to exceed 180 days following the effective
date of the relevant registration statement filed under the Securities Act in
connection with such initial public offering, as such underwriter shall
specify reasonably and in good faith.
SECTION 5.9 TRANSFER OF REGISTRATION RIGHTS. The registration
rights and related obligations under this Article V of the Investors and
Continuing Stockholders with respect to their Registrable Securities may be
assigned in connection with any transaction or series of related transactions
involving the transfer of shares of capital stock of the Company to one or
more Permitted Transferee, other than pursuant to an effective registration
statement under the Securities Act or pursuant to Rule 144 thereunder
(subject to adjustments for stock splits, stock dividends and the like and
aggregating all contemporaneous transfers), or to any TA Fund, and upon any
such transfer such transferee or TA Fund shall be deemed to be included
within the definition of an "Investor" or a "Continuing Stockholder" as
applicable, for purposes of this Article V with the rights set forth herein.
ARTICLE VI MISCELLANEOUS PROVISIONS.
SECTION 6.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS. Each of
the parties hereto agrees that each representation, warranty, covenant and
agreement made by it in this Agreement or in any certificate, instrument or
other document delivered pursuant to this Agreement is material, shall be
deemed to have been relied upon by the other parties and shall remain
operative and in full force and effect after the date hereof regardless of
any investigation. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties hereto and their
respective successors and permitted assigns to the extent contemplated herein.
17
SECTION 6.2 LEGEND ON SECURITIES. The Company, the Investors and
the Continuing Stockholders acknowledge and agree that the following legend
shall be typed on each certificate evidencing any of the securities issued
hereunder held at any time by any of the Investors, Continuing Stockholders
or their Permitted Transferees:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (1) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE
UNDER SUCH ACT OR (2) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES. THESE SECURITIES ARE ALSO SUBJECT
TO THE PROVISIONS OF A CERTAIN STOCKHOLDERS' AGREEMENT, DATED AS OF DECEMBER
____, 1997, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A
COMPLETE AND CORRECT COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT
THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN
REQUEST AND WITHOUT CHARGE.
SECTION 6.3 AMENDMENT AND WAIVER. Any party may waive any
provision hereof intended for its benefit in writing. No failure or delay on
the part of any party hereto in exercising any right, power or remedy
hereunder shall operate as a waiver thereof. The remedies provided for herein
are cumulative and are not exclusive of any remedies that may be available to
any party hereto at law or in equity or otherwise. This Agreement may be
amended with the prior written consent of the Company, two-thirds-in-interest
of the Continuing Stockholders (based on the Shares held by the Continuing
Stockholders and their Permitted Transferees as a group) and
two-thirds-in-interest of the Investors (based on the Shares held by the
Investors as a group); PROVIDED, HOWEVER, that any amendment which directly,
materially and adversely affects any right specifically granted to a
particular Investor or Continuing Stockholder in a manner different than
other Investors or Continuing Stockholders shall not be effective unless such
Person has consented to that amendment. All actions by the Company hereunder
shall be taken by or upon the direction of a majority of the members of the
Company's Board of Directors.
SECTION 6.4 NOTICES. All notices and other communications
provided for herein shall be in writing and shall be deemed to have been duly
given, delivered and received (a) if delivered personally or (b) if sent by
telex or facsimile, registered or certified mail (return receipt requested)
postage prepaid, or by courier guaranteeing next day delivery, in each case
to the party to whom it is directed at the following addresses (or at such
other address for any party as shall be specified by notice given in
accordance with the provisions hereof, provided that notices of a change of
address shall be effective only upon receipt thereof). Notices delivered
personally shall be effective on the day so delivered, notices sent by
registered or certified mail shall be effective three days after mailing,
notices sent by telex shall be effective when answered back, notices sent by
facsimile shall be effective when receipt is acknowledged, and notices sent
by courier guaranteeing next day delivery shall be effective on the earlier
of the second business day after timely delivery to the courier or the day of
actual delivery by the courier:
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(a) if to the Company:
International Microcircuits, Inc.
525 Los Coches St.
Milpitas, California 95035
Fax: (408) 934-0823
Attention: President
(b) Frank Deverse
2189 Slaughterhouse Creek Road
P.O. Box 484
Glenbrook, NV 89413
Fax: (702) 749-5757
(c) if to the Investors:
TA Associates, Inc.
435 Tasso Street, Suite 200
Palo Alto, CA 94301
Fax: (650) 326-4933
(d) if to the Continuing Stockholders:
To each Continuing Stockholder
at such address as is contained
in the stock records of the Company
SECTION 6.5 HEADINGS. The Article and Section headings used or
contained in this Agreement are for convenience of reference only and shall
not affect the construction of this Agreement.
SECTION 6.6 COUNTERPARTS. This Agreement may be executed in one
or more counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
together shall be deemed to constitute one and the same agreement.
SECTION 6.7 DISPUTE RESOLUTION. Except with respect to matters
as to which injunctive relief is being sought, any dispute arising out of or
relating to this Agreement that has not been settled within thirty (30) days
by good faith negotiation between the parties to this Agreement shall be
submitted to the American Arbitration Association ("AAA") for final and
binding arbitration pursuant to AAA's Commercial Arbitration Rules. Any such
arbitration shall be conducted in San Francisco, California.
SECTION 6.8 REMEDIES; SEVERABILITY. Notwithstanding Section 6.7,
it is specifically understood and agreed that any breach of the provisions of
this Agreement by any Person subject hereto will result in irreparable injury
to the other parties hereto, that the remedy at law alone
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will be an inadequate remedy for such breach, and that, in addition to any
other legal or equitable remedies which they may have, such other parties may
enforce their respective rights by actions for specific performance (to the
extent permitted by law) and the Company may refuse to recognize any
unauthorized Transferee as one of its stockholders for any purpose,
including, without limitation, for purposes of dividend and voting rights,
until the relevant party or parties have complied with all applicable
provisions of this Agreement.
In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and
of the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
SECTION 6.9 ENTIRE AGREEMENT. This Agreement, together with the
Stock Purchase Agreement and other agreements specifically contemplated
hereby and thereby, is intended by the parties as a final expression of their
agreement and intended to be complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. This Agreement and the Stock Purchase
Agreement and other agreements contemplated hereby and thereby (including the
exhibits hereto and thereto) supersede all prior agreements and
understandings between the parties with respect to such subject matter.
SECTION 6.10 ADJUSTMENTS. All references to share prices and
amounts herein shall be equitably adjusted to reflect stock splits, stock
dividends, recapitalizations and similar changes affecting the capital stock
of the Company.
SECTION 6.11 LAW GOVERNING. This Agreement shall be construed
and enforced in accordance with and governed by the laws of the State of
California (without giving effect to principles of conflicts of law). Each
party also waives trial by jury in any action relating to this Agreement.
SECTION 6.12 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the respective successors and
permitted assigns of the parties hereto as contemplated herein, and any
successor to the Company by way of merger or otherwise shall specifically
agree to be bound by the terms hereof as a condition of such successor. This
Agreement may not be assigned by any Continuing Stockholder or Permitted
Transferee except as contemplated by Article IV without the prior written
consent of two-thirds-in-interest of the Investors, and without such prior
written consent any attempted transfer shall be null and void.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
International Microcircuits, Inc.
s/
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By:
Its: