Exhibit 10.7
DIRECT HIT TECHNOLOGIES, INC.
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
This Second Amended and Restated Rights Agreement (the "Agreement") is
entered into as of the 16th day of July, 1999, by and among Direct Hit
Technologies, Inc., a Delaware corporation (the "Company"), the undersigned
purchasers of Series C Preferred Stock of the Company (the "Purchasers") and the
undersigned holders of Series B Preferred Stock and Series A Preferred Stock of
the Company (collectively, the "Prior Purchasers") (Prior Purchasers and
Purchasers may be collectively referred to as "Preferred Purchasers"), Gary
Culliss and Michael Cassidy (collectively referred to as the "Founders" and
singularly a "Founder") and David Parker ("Parker").
RECITALS
A. The Prior Purchasers and the Founders are parties to that certain
Amended and Restated Rights Agreement dated as of November 12, 1998 among the
Company and such Prior Purchasers and Founders (the "Prior Agreement").
B. Concurrently herewith, the Purchasers and the Company are entering
into a Series C Preferred Stock Purchase Agreement (the "Series C Agreement")
pursuant to which the Purchasers are purchasing from the Company shares of its
Series C Preferred Stock.
C. The Prior Purchasers beneficially owning at least two-thirds of the
Company's outstanding shares held by all Prior Purchasers which are subject to
the Prior Agreement wish to amend the Prior Agreement to grant registration,
information and co-sale rights to the Purchasers identical to the registration,
information and co-sale rights of the Prior Purchasers.
D. The Purchasers desire to become a party to the Prior Agreement as
amended and restated hereby.
E. By this Agreement, the Company, the Purchasers, Prior Purchasers,
Founders and Parker desire to provide for certain registrations and other rights
as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
1. REGISTRATION RIGHTS.
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the following respective meanings:
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(a) "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act (as defined below).
(b) "CONVERSION STOCK" means the Common Stock issued or
issuable upon conversion of the Series A, Series B and Series C Preferred Stock
(which shares of Series A, Series B and Series C Preferred Stock are referred to
herein as the "Preferred Shares").
(c) "EXCHANGE ACT" shall mean the Securities Exchange
Act of 1934, as amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
(d) "HOLDER" shall mean any stockholder of the Company
holding Registrable Securities (including Series A, Series B and Series C
Preferred Stock) and any person holding Registrable Securities to whom the
rights under this Section 1 have been transferred in accordance with Sections
1.11 and 4.3 hereof.
(e) "INITIATING HOLDERS" shall mean any Series A or
Series B Preferred Stock Holder or Holders of at least forty percent (40%) of
the Series A or Series B Registrable Securities (adjusted after the original
issuance thereof for stock splits, stock dividends, recapitalizations and the
like).
(f) "INITIATING PREFERRED C HOLDERS" shall mean any
Series C Preferred Stock Holder or Holders of at least fifty percent (50%) of
the Series C Registrable Securities (adjusted after the original issuance
thereof for stock splits, stock dividends, recapitalizations and the like).
(g) "QUALIFYING PUBLIC OFFERING" shall mean a firm
commitment underwritten public offering pursuant to an effective registration
statement on Form S-1 (or a successor form) under the Securities Act covering
the offer and sale of Common Stock for the account of the Company to the public
at an offering price of at least $11.87 per share (as adjusted for any
combinations, stock splits, stock dividends, recapitalizations and the like)
that values the Company at not less than $253 million and results in gross
proceeds to the Company of at least $20 million.
(h) "REGISTRABLE SECURITIES" means (i) the Conversion
Stock; or (ii) stock issued in respect of the stock referred to in (i) as a
result of a stock split, stock dividend, recapitalization or the like, which has
not been sold to the public. Except for subsections 1.2, 1.4, 1.10, 2.1, 3.1,
3.2 and 4.4, Registrable Securities shall include shares of Common Stock of the
Company issued or issuable to the Founders and to those officers and directors
of the Company to whom the Board of Directors of the Company by unanimous vote
extends the registration rights contained in subsection 1.3.
(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 the effectiveness of such registration statement.
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(j) "REGISTRATION EXPENSES" shall mean all expenses,
except as otherwise stated below, incurred by the Company in complying with
Sections 1.2, 1.3 and 1.4 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company) and the reasonable fees and
disbursements of one counsel for all Holders in the event of each registration
provided for in Sections 1.2, 1.3 and 1.4 hereof.
(k) "SECURITIES ACT" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
(l) "SELLING EXPENSES" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable to the
securities registered by the Holders and, except as set forth above, all
reasonable fees and disbursements of counsel for the selling Holders.
1.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall
receive from Initiating Holders or Initiating Preferred C Holders a written
request that the Company effect any registration in either case with respect to
at least twenty percent (20%) of their Registrable Securities, or any lesser
percentage if the reasonably anticipated aggregate receipts to the Company, net
of underwriting discounts and commissions, would exceed $2,000,000, the Company
will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts
to effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within twenty (20) days after receipt
of such written notice from the Company; PROVIDED, HOWEVER, that the Company
shall not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 1.2:
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
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(B) At any time prior to the earlier of (i)
one hundred eighty days (180) after the effective date of the Company's initial
public offering of its securities pursuant to a registration statement declared
effective under the Securities Act or (ii) April 27, 2001;
(C) Within ninety (90) days of the effective
date of any registration statement pertaining to securities of the Company
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan);
(D) After the Company has effected four (4)
such registrations pursuant to this Section 1.2(a), and such registrations have
been declared or ordered effective, at which time the Company will be deemed to
have satisfied its obligations to register underlying Common Stock for purposes
of this Section 1.2(a)(ii)(D)).
Subject to the foregoing clauses (A) through (D), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) UNDERWRITING. In the event that a registration
pursuant to Section 1.2 is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the notice
given pursuant to Section 1.2(a)(i). In such event, the right of any Holder to
participate in such registration shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 1.2, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders, but subject to the
Company's reasonable approval. Notwithstanding any other provision of this
Section 1.2, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all participating Holders and
the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. No Registrable Securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
To facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to any
Holder to the nearest one hundred (100) shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities, and/or other securities so withdrawn shall also be
withdrawn from registration, and such securities shall not be transferred in a
public distribution prior to ninety (90) days after the effective date of such
registration, or such other shorter period of time as the underwriters may
require.
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If the underwriter has not limited the number of Registrable Securities
to be underwritten, the Company may include securities for its own account (or
for the account of other purchasers) in such registration if the managing
underwriter so agrees and if the number of Registrable Securities that would
otherwise have been included in such registration and underwriting will not
thereby be limited.
1.3 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time
to time the Company shall determine to register any of its securities, either
for its own account or the account of a security holder or holders, other than
(i) a registration relating solely to employee benefit plans, (ii) a
registration relating solely to a Commission Rule 145 transaction or (iii) a
registration effected pursuant to Sections 1.2 or 1.4 hereof, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within twenty (20) days after receipt of such written notice
from the Company, by any Holder.
(b) UNDERWRITING. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 1.3(a)(i). In such event the right of any
Holder to registration pursuant to Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company, but subject to the reasonable approval of Holders holding more than a
majority of the Registrable Securities to be included in such registration.
Notwithstanding any other provision of this Section 1.3, if the managing
underwriter determines that marketing factors require limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration. The Company shall so advise all
Holders and other holders distributing their securities through such
underwriting and the number of shares of securities that may be included in the
registration and underwriting (other than in behalf of the Company) shall be
allocated among all Holders and such other holders (provided that such other
holders have contractual rights to participate in such registration which are
not subordinate to the Holders) in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities or other securities requested to be
included in such registration by such Holders and such other holders; PROVIDED,
HOWEVER, in no event shall the amount of Registrable Securities of the Holders
included in the offering be reduced below thirty percent (30%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's securities in which case the Holders
may be excluded entirely if the underwriters make the determination described
above or the Holders holding a majority of the Registrable Securities consent in
writing to such a reduction. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the
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number of shares allocated to any Holder or holder to the nearest one hundred
(100) shares. If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to ninety (90) days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require.
(c) PARTICIPATION OF FOUNDERS, OFFICERS, DIRECTORS AND
EMPLOYEES. Upon any sale by the Company of shares of its Common Stock to the
public in a firmly underwritten public offering, the Founders and any other
officer, director or employee designated by the Company's Board of Directors
shall be entitled to include any of their shares of Common Stock in any
registration by the Company under this subsection 1.3, if such persons who
choose to include any of their securities in such registration shall continue to
serve the Company as officer, director or employee on the effective date of such
registration statement, and such persons agree to be bound by all other
provisions of this Agreement and participate in any such registration on the
same basis as each Holder in accordance with all applicable provisions of this
Agreement (such persons are collectively referred to as "Employee-Holders").
Notwithstanding the foregoing, if the managing underwriter advises the Company
that the inclusion of all shares requested to be registered would adversely
affect the offering, the securities of the Company held by Employee-Holders
shall be excluded from such registration and underwriting to the extent deemed
advisable by the managing underwriter, and in any event, the securities of the
Company held by any Preferred Purchaser or assignee thereof shall have priority
for inclusion of such shares in such registration and underwriting and in
respect of any underwriters cut-back of shares, ahead of any shares held by
Employee-Holders.
1.4 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders holding in the aggregate
not less than five percent (5%) of the then outstanding Registrable Securities
request that the Company file a registration statement on Form S-3 (or any
successor form to Form S-3) for a public offering of shares of the Registrable
Securities the reasonably anticipated aggregate price to the public of which,
net of underwriting discounts and commissions, would exceed $250,000, and the
Company is a registrant entitled to use Form S-3 to register the Registrable
Securities for such an offering, the Company shall use its best efforts to cause
such Registrable Securities to be registered for the offering on such form and
to cause such Registrable Securities to be qualified in such jurisdictions as
the Holder or Holders may reasonably request and the Company shall use its best
efforts to keep such Form S-3 registration statement effective until the earlier
of (i) one (1) year after the effective date of such registration statement or
(ii) such time as the Registrable Securities can be sold without compliance with
the Registration Requirements of the Securities Act; PROVIDED, HOWEVER, that the
Company shall not be required to effect more than three (3) registrations
pursuant to this Section 1.4 in any twelve (12) month period. The substantive
provisions of Section 1.2(b) shall be applicable to each registration initiated
under this Section 1.4.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 1.4:
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(i) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(ii) if the Company, within ten (10) days of the
receipt of the request of the Initiating Holders, gives notice of its bona fide
intention to effect the filing of a registration statement with the Commission
within sixty (60) days of receipt of such request (other than with respect to a
registration statement relating to a Rule 145 transaction, an offering solely to
employees or any other registration which is not appropriate for the
registration of Registrable Securities); or
(iii) within one hundred eighty (180) days of the
effective date of any registration referred to in Sections 1.2 and 1.3 above,
PROVIDED, THAT the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective.
1.5 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and
after the date hereof, without the approval of the holders of a majority of the
Registrable Securities, the Company shall not enter into any agreement granting
any holder or prospective holder of any securities of the Company registration
rights superior to those of the Preferred Purchasers. Upon obtaining such
approval, the Company will grant the Holders any rights of first refusal or
registration rights granted to subsequent purchasers of the Company's equity
securities to the extent such subsequent rights are superior, in the good faith
judgment of the Company's Board of Directors, to those rights granted in
connection with the issuance of the Series A, Series B and Series C Preferred
Stock to the Preferred Purchasers. Nothing in this Section 1.5 shall be deemed
to restrict the Company's right to permit individual Employee-Holders to
participate in a public offering pursuant to Section 1.3(c) above.
1.6 EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with all registrations pursuant to Sections 1.2, 1.3 and
1.4 shall be borne by the Company; PROVIDED, HOWEVER, that the expenses in
excess of $15,000 of any special audit required in connection with a
registration pursuant to Section 1.2 shall be borne by the Holders of such
securities pro rata on the basis of the number of shares so registered. Unless
otherwise stated, all Selling Expenses relating to securities registered on
behalf of the Holders shall be borne by the Holders of such securities pro rata
on the basis of the number of shares so registered.
1.7 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration and as to the completion thereof. At its expense the Company
will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the registration
statement has been completed;
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(b) Furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(c) Prepare and file with the Commission 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;
(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 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 in the light of the circumstances then
existing; and
(g) Use its best efforts to furnish, at the request of
any Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Section
1, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
1.8 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such person
within the meaning of Section 15
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of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Section 1, and each underwriter,
if any, and each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
or liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable to any such person in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission (or alleged untrue
statement or omission), made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder, controlling person or underwriter and stated to be specifically for use
therein or the preparation thereby.
(b) Each Holder, severally and not jointly, will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors and officers, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein or
the preparation thereby. Notwithstanding the foregoing, the liability of each
Holder under this subsection (b) shall be limited to an amount equal to the
initial public offering price of the shares sold by such Holder, unless such
liability arises out of or is based on willful conduct by such Holder.
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(c) Each party entitled to indemnification under this
Section 1.8 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1 unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party a release from all liability in respect to
such claim or litigation.
1.9 INFORMATION BY HOLDER. The Holders of securities included
in any registration shall furnish to the Company such information regarding such
Holders, the Registrable Securities held by them and the distribution proposed
by such Holders as the Company may request in writing and as shall be required
in connection with any registration, qualification or compliance referred to in
this Section 1.
1.10 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
(b) Use its best efforts to file with the Commission in
a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements); and
(c) So long as a Preferred Purchaser owns any
Registrable Securities, to furnish to the Preferred Purchaser forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of said Rule 144 (at any time after ninety (90) days
after the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company and
other information in the possession of or reasonably obtainable by the Company
as
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a Preferred Purchaser may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Preferred Purchaser to sell any such
securities without registration.
1.11 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted to the Preferred Purchasers under
sections 1.2, 1.3 and 1.4 may be assigned to a transferee or assignee reasonably
acceptable to the Company in connection with any transfer or assignment of
Registrable Securities by a Preferred Purchaser provided that the transferor
provides the Company with written notice of the proposed transfer and: (i) the
transferee acquires all of the transferor's Registrable Securities not sold to
the public; (ii) the transferee acquires at least two hundred thousand (200,000)
shares of the transferor's Registrable Securities not sold to the public; or
(iii) the transferee is a partner, shareholder or affiliate of the Holder and
such transferee agrees to act through a single representative of all such
transferees. The Company agrees that such transfer rights may be transferred by
Mercury Investors, LLC to NeoCarta Ventures, L.P. or to another associated
institutional investor, in one or more transfers.
1.12 STANDOFF AGREEMENT. Each Holder agrees in connection with
the Company's initial public offering of the Company's securities, upon request
of the Company or the underwriters managing any underwritten offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) for the period agreed to by the
Company and the underwriters but which will in no event exceed one hundred
eighty (180) days; PROVIDED, THAT the officers and directors of the Company who
own stock of the Company and any stockholder holding more than five percent (5%)
of the outstanding voting securities of the Company also agree to such
restrictions.
1.13 TERMINATION. Any registration rights granted pursuant to
this Section 1 shall terminate with respect to any Holder at such date, (i) five
(5) years after the closing date of the Company's initial public offering or
(ii) after the Company's initial registered public offering, when all remaining
Registrable Securities held or entitled to be held by such Holder may be sold
under Rule 144 during any three (3) month period.
2. RIGHT OF FIRST REFUSAL UPON ISSUANCE OF SECURITIES BY THE COMPANY.
2.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to each
Preferred Purchaser (provided such Preferred Purchaser is then a current holder
of at least ten percent (10%) of the number of shares of Series A, Series B and
Series C Preferred Stock (or Conversion Stock) originally purchased by such
Preferred Purchaser) and each Founder (provided the Founder remains a director,
officer or employee of the Company) (collectively, hereinafter, the "Rights
Holders") the right of first refusal to purchase, pro rata, all or any part of
New Securities (as defined in this Section 2.1) which the Company may, from time
to time, propose to sell and issue. For purposes of this right of first refusal,
a pro rata share for a Rights Holder is the ratio that the number of shares of
Conversion Stock then held by each Rights Holder bears to the sum of the total
number of shares of Conversion Stock and Common Stock held by all Rights Holders
then outstanding.
(a) "Equity Securities" shall mean any securities having
voting rights in the election of the Board of Directors not contingent upon
default, or any securities evidencing
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an ownership interest in the Company, or any securities convertible into or
exercisable for any shares of the foregoing, or any securities issuable pursuant
to any agreement or commitment to issue any of the foregoing.
(b) Except as set forth below, "New Securities" shall
mean any Equity Securities, whether now authorized or not, and rights, options
or warrants to purchase said Equity Securities. Notwithstanding the foregoing,
"New Securities" does not include (i) Common Stock issued to employees,
officers, consultants or directors of the Company pursuant to options granted at
any time after the date of incorporation of the Company up to a total of
2,487,501 shares (plus any of such shares which are repurchased by the Company
or as to which such options expire unexercised) or pursuant to a plan or
agreement unanimously approved by the Company's Board of Directors; (ii)
securities offered to the public generally pursuant to a registration statement
under the Securities Act; (iii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of all or substantially
all of the assets of the corporation or other reorganization; (iv) the
Conversion Stock; (v) warrant or warrants for the purchase of shares of capital
stock of the Company (and stock issued upon exercise of such warrant or
warrants) which have been unanimously approved by the Board of Directors of the
Company and issued in connection with an equipment lease, equipment financing or
bank line financing from a conventional equipment leasing company; (vi) stock
issued pursuant to any rights or agreements including, without limitation,
convertible securities, options and warrants, PROVIDED, THAT the right of first
refusal established by this Section 2 applies with respect to the initial sale
or grant by the Company of such rights or agreements; or (vii) stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company.
(c) In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Rights Holder written notice of
its intention, describing the type of New Securities, and the price and terms
upon which the Company proposes to issue the same. Each Rights Holder shall have
fifteen (15) days from the date of receipt of any such notice to agree to
purchase up to its respective pro rata share of such New Securities for the
price and upon the applicable terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(d) In the event a Rights Holder fails to exercise his
or its pro rata share within said fifteen (15) day period, the Company will give
the Rights Holders who did so agree (the "Electing Rights Holders") notice of
the number of shares that were not subscribed for. Such notice may be by
telephone if followed by written confirmation within two (2) days. The Electing
Rights Holders shall have fifteen (15) business days from the date of such
notice to agree to purchase pro rata (as defined in Section 2.1 above) all of
the New Securities not purchased by the non-purchasing Rights Holders; PROVIDED,
HOWEVER, that holders of Series C Preferred Stock shall have priority over any
other Rights Holder with respect to any available shares originally offered to
the Series C Preferred Holders as a group.
(e) In the event a Rights Holder fails to exercise the
right of first refusal within said fifteen (15) day period, the Company shall
have ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
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Securities not elected to be purchased by Rights Holders at the price and upon
terms no more favorable to the purchasers of such securities than specified in
the Company's notice. In the event the Company has not sold the New Securities
within said ninety (90) day period (or sold and issued New Securities in
accordance with the foregoing within sixty (60) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities in the manner provided above.
(f) The right of first refusal granted under this
Agreement shall expire upon the closing of the Qualifying Public Offering.
(g) The right of first refusal hereunder may be assigned
to a transferee or assignee reasonably acceptable to the Company in connection
with any transfer or assignment of Registrable Securities provided that the
transferor provides the Company with written notice of the proposed transfer and
(i) the transferee acquires all of the transferor's Registrable Securities not
sold to the public; (ii) the transferee acquires at least two hundred thousand
(200,000) shares of the transferor's Registrable Securities not sold to the
public; or (iii) the transferee is a partner, shareholder or affiliate of the
Holder and such transferee agrees to act through a single representative of all
such transferees. The Company agrees that such right of first refusal may be
transferred by Mercury Investors, LLC to NeoCarta Ventures, L.P., or to another
associated institutional investor, in one or more transfers.
3. RIGHTS UPON TRANSFER BY FOUNDERS OR PARKER. Parker and each
Founder hereby agree as follows:
3.1 RIGHT OF CO-SALE.
(a) THE RIGHT. To the extent the Company does not
exercise any rights of first refusal pursuant to an agreement between the
Company and a Founder or Parker, in the event that a Founder or Parker proposes
to sell shares of Common Stock or other equity securities of the Company
("Transfer Equity Securities"), each Preferred Purchaser shall have the
assignable right, exercisable upon written notice to the Founder or Parker, as
applicable, within thirty (30) days after notice by the Company of such sale, to
participate in such sale of securities pursuant to the specified terms and
conditions of the notice, subject to the following limitations. The Company
shall provide written notice to each Preferred Purchaser within thirty (30) days
after receiving the notice of the proposed transfer from the Founder or Parker.
The notice to the Preferred Purchaser shall state the terms of the proposed
transfer and the date of expiration of the Preferred Purchasers' rights
hereunder. Each participating Preferred Purchaser shall be entitled to sell up
to that number of securities equal to the product obtained by multiplying (i)
the number of shares to be transferred by the Founder or Parker by (ii) a
fraction, (A) the numerator of which is the number of shares of Conversion Stock
of the Company held by such Preferred Purchaser and (B) the denominator of which
is the number of shares of Transfer Equity Securities held by Parker or the
Founder proposing the transfer plus the number of shares of Conversion Stock
held by all Preferred Purchasers.
(b) PROHIBITED TRANSFERS. In the event a Founder or
Parker should sell any Transfer Equity Securities in contravention of the
participation rights of a Preferred Purchaser under this Section 3 (the
"Prohibited Transfer"), each Preferred Purchaser shall have
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the option (the "Put Option") to sell to the Founder or Parker, as applicable, a
number of shares equal to the number of shares that such Preferred Purchaser
would have had the right to sell in connection with the Prohibited Transfer, had
such Founder or Parker complied with Section 3.1, subject to the following terms
and conditions:
(i) The price per share at which such shares are
to be sold to the Founder or Parker shall be equal to the price per share paid
by the third-party purchaser or purchasers.
(ii) The Preferred Purchaser shall deliver to the
Founder or Parker, as applicable, within ninety (90) days after it has received
notice from such Founder or Parker or otherwise become aware of the Prohibited
Transfer, the certificate or certificates representing the shares to be sold,
each certificate to be properly endorsed for transfer.
(iii) The Founder or Parker, as applicable, shall,
upon receipt of the certificates for the repurchased shares, pay the aggregate
purchase price therefor, by certified check or bank draft made payable to the
order of the Preferred Purchaser and shall reimburse the Preferred Purchaser for
any additional expenses, including legal fees and expenses, incurred in
effecting such purchase and resale.
(c) LIMITATIONS ON RIGHTS. Section 3.1 shall not apply
to a sale, assignment or transfer of Transfer Equity Securities:
(i) to the Founder's or Parker's spouse, parents,
grandparents, children or grandchildren or other members of the Founder's or
Parker's family (including relatives by marriage), or to a custodian, trustee or
other fiduciary for the account of the Founder or Parker or members of his
family;
(ii) by way of bequest or inheritance upon death;
(iii) to the Company or Preferred Purchasers
pursuant to the exercise of any right of first refusal; or
(iv) with respect to the right of co-sale,
transfers up to five percent (5%) of the Transfer Equity Securities held by such
Founder or Parker on a cumulative basis (for purposes of this subsection (iv),
shares held and/or sold by the Founder or Parker shall include all shares held
and/or sold by transferees of the Founder or Parker pursuant to subsection (i));
PROVIDED, HOWEVER, that any transferees pursuant to subsections (i) or (ii)
above shall receive and hold such shares subject to the provisions of this
Section 3.1 and there shall be no further transfer of such shares except in
accordance herewith.
3.2 TERMINATION AND AMENDMENT. The right of co-sale described
in Section 3.1 shall expire upon the earlier of (i) the effective date of the
Qualifying Public Offering or (ii) July 16th, 2014.
3.3 STOCK LEGEND. All certificates representing shares of
Common Stock of the Company held by the Founders or Parker and transferees
described in Section 3.1 above shall bear the following legend:
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"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A RIGHT OF FIRST REFUSAL AND CO-SALE SET FORTH IN A RIGHTS
AGREEMENT AMONG THE COMPANY, THE HOLDERS HEREOF AND CERTAIN OTHER
STOCKHOLDERS OF THE COMPANY, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF THE CORPORATION."
4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Delaware as applied to transactions taking
place between Delaware residents and wholly within the State of Delaware.
4.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Preferred
Purchaser and the closing of the transactions contemplated hereby.
4.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
4.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein. With the written consent of the record or
beneficial holders of at least two-thirds (2/3) of each of the Series A, Series
B and Series C Preferred Stock and the written consent of Founders holding at
least two-thirds (2/3) of the total number of shares of Common Stock held by
Founders subject to this Agreement, the obligations of the Company and the
rights of the Holders of the Registrable Securities under this Agreement may be
waived (either generally or in a particular instance, either retroactively or
prospectively, and either for a specified period of time or indefinitely), and
with the same consent the Company, when authorized by resolution of its Board of
Directors, may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement; PROVIDED, HOWEVER, that no such modification, amendment or
waiver shall reduce the aforesaid percentage of Series A, Series B and Series C
Preferred Stock or Transfer Equity Securities held by Founders without the
consent of all of the Preferred Purchasers or the Founders, as applicable;
PROVIDED, FURTHER, HOWEVER, that if such amendment has the effect of affecting
the Transfer Equity Securities held by Parker in a manner (i) materially
different than the Transfer Equity Securities held by the Founders and (ii)
materially adverse to the interests of Parker, then such amendment shall require
the consent of Parker. Upon the effectuation of each such waiver, consent,
agreement or amendment or modification, the Company shall promptly give written
notice thereof to the record holders of the Registrable Securities who have not
previously consented thereto in writing. This Agreement or any provision hereof
may be changed, waived, discharged or terminated only by a statement in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, except to the extent provided in this Section 4.4.
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4.5 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first class
mail, postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to any Holder, Founder or Parker, at such Holder's, Founder's
or Parker's address as set forth in the Company's records, or at such other
address as such Holder, Founder or Parker shall have furnished to the Company in
writing, or (b) if to the Company, at 888 Worcester Street, Wellesley, MA, 02482
or at such other address as the Company shall have furnished to the Holder in
writing.
4.6 DELAYS OR OMISSIONS. Except as expressly provided herein,
no delay or omission to exercise any right, power or remedy accruing to any
holder of any Shares, upon any breach or default of the Company under this
Agreement, shall impair any such right, power or remedy of such holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any holder of any
breach or default under this Agreement, or any waiver on the part of any holder
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
4.7 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.
4.8 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable the remainder of this Agreement and application of such provision
to persons or circumstances shall be interpreted so as best to reasonably effect
the intent of the parties hereto, the parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
4.9 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
[Signatures To Follow]
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The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
DIRECT HIT TECHNOLOGIES, INC.
By: /s/ Michael Cassidy
-------------------------------------
Michael Cassidy, President
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