1
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securities excluded or withdrawn from such underwriting shall be withdrawn from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.
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 1.7 prior to the effectiveness of such registration, whether or
not any Holder has elected to include securities in such registration.
1.8 Limitations on Subsequent Registration Rights. From and after
the date hereof, the Company shall not enter into any agreement granting any
holder or prospective holder of any securities of the Company registration
rights with respect to such securities (unless such new registration rights,
including standoff obligations, are subordinate to the registration rights
granted Holders hereunder), without the prior written consent of the holders of
a majority of the then-outstanding Shares.
1.9 Expenses of Registration. All Registration Expenses (but not
Selling Expenses) shall be borne by the Company. Selling Expenses shall be
borne by the Holder incurring such expenses.
1.10 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, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for at least one
hundred eighty (180) days or until the distribution described in the
registration statement has been completed; provided, however, that in the case
of any registration of Registrable Securities on Form S-3 which are intended to
be offered on a continuous or delayed basis, such period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that if Rule 415, or any successor
rule under the Securities Act, permits an offering on a continuous or delayed
basis, and provided further that if applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (y) includes any prospectus required by
Section 10(a)(3) of the Securities Act or (z) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (y) and (z) above shall be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the
registration statement;
(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
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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 statements 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) Notify each seller of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchaser of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or incomplete in the light of the circumstances then existing;
(e) 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;
(f) Cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed;
(g) Provide a transfer agent and registrar for all
Registrable Securities and a CUSIP number for all such Registrable Securities,
in each case not later than the effective date of such registration;
(h) Make available for inspection by any Holder
participating in such registration, any underwriter participating in any
disposition pursuant to such registration, and any attorney or accountant
retained by any such Holder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers and directors to supply all information reasonably requested
by any such Holder, underwriter, attorney or accountant in connection with such
registration statement; provided, however, that such Holder, underwriter,
attorney or accountant shall agree to hold in confidence and trust all
information so provided;
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(i) Furnish to each Holder participating in such
registration:
(i) in the case of an underwritten public
offering, a copy of any opinion of counsel for the Company
provided to the underwriters participating in such offering,
dated the effective date of the registration statement;
(ii) in the case of an underwritten public
offering, a copy of any "comfort" letters provided to the
underwriters participating in such offering and signed by the
Company's independent public accountants who have examined and
reported on the Company's financial statements included in the
registration statement, to the extent permitted by the
standards of the American Institute of Certified Public
Accountants or other relevant authorities, and
(iii) a copy of all documents filed with and all
correspondence from or to the Commission in connection with
any such offering other than non-substantive cover letters and
the like.
(j) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act.
1.11 Indemnification.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 1, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, or any violation by the Company of any rule or regulation
promulgated under the 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, as such expenses are incurred, provided that the
Company will not be liable in any such
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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 for use therein.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as such expenses are incurred, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an
instrument duly executed by such Holder for use therein; provided that in no
event shall any indemnity under this subparagraph 1.11(b) exceed the net
proceeds received by such Holder in such registration.
(c) Each Indemnified Party shall give notice to each
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 be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense;
provided, however, that an Indemnified Party (together with all other
Indemnified Parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the Indemnifying Party, if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between such Indemnified Party
and any other party represented by such counsel in such proceeding. The
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 1 unless
the failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
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(d) If the indemnification provided for in this Section
1.11 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any claim, loss, damage, liability or action
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such claim, loss, damage, liability or
action in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and the Indemnified Party on the other
in connection with the actions that resulted in such claims, loss, damage,
liability or action, as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact related to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Company and the Holders agree that it would not
be just and equitable if contribution pursuant to this Section were based
solely upon the number of entities from whom contribution was requested or by
any other method of allocation which does not take account of the equitable
considerations referred to above in this Section 1.11. The amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages and
liabilities referred to above in this Section 1.11 shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim, subject to
the provisions of this Section 1.11. Notwithstanding the provisions of this
Section 1.11, no Holder shall be required to contribute any amount or make any
other payments under this Agreement which in the aggregate exceed the net
proceeds (after selling expenses) received by such Holder. No person guilty of
fraudulent misrepresentation (within the meaning of the Securities Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
1.12 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or Holders as the Company
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 1.
1.13 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, 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;
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(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as a Holder owns any Restricted Securities,
to furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities
to the general public), and of the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents of the Company and other information in the possession of or
reasonably obtainable by the Company as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder
to sell any such securities without registration.
1.14 Transfer of Registration Rights. The rights to cause the
Company to register securities granted to the Investors hereunder shall be
deemed to be extended to (i) any Permitted Transferee who acquires not less
than twenty-five percent (25%) of the Series A Shares or the respective
Conversion Shares and who agrees in writing to be bound by the terms of this
Agreement, (ii) any Permitted Transferee who acquires not less than twenty-five
percent (25%) of the Series B Shares or the respective Conversion Shares and
who agrees in writing to be bound by the terms of this Agreement, (iii) any
Permitted Transferee who acquires not less than twenty-five percent (25%) of
the Series C Shares or the respective Conversion Shares and who agrees in
writing to be bound by the terms of this Agreement, (iv) any Permitted
Transferee who acquires not less than twenty-five percent (25%) of the Series D
Shares or the respective Conversion Shares and who agrees in writing to be
bound by the terms of this Agreement, (v) any Permitted Transferee who acquires
not less than twenty-five percent (25%) of the Series E Shares or the
respective Conversion Shares and who agrees in writing to be bound by the terms
of this Agreement, or (vi) to any Permitted Transferee who is a constituent
partner, member or affiliate of an Investor.
1.15 Standoff Agreement. Each Holder agrees in connection with any
registration of the Company's securities (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan) that, upon written 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, pledge or otherwise hypothecate or encumber, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such
period of time (not to exceed one hundred eighty (180) days from the effective
date of such registration in the case of a registration for the Initial Public
Offering and ninety (90) days from the effective date of such registration in
the case of other registrations) as may be requested by the Company or such
managing underwriters; provided, that (i) the officers and directors of the
Company who own stock of the Company, as well as any stockholder party to this
Agreement who owns more than five percent (5%) of the Common Stock of the
Company on a fully diluted, fully converted basis, also agree to such
restrictions, and (ii) the underwriters
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shall not release any party from any lock-up agreement or similar agreement (a
"Lock Up Release") without (x) providing the undersigned at least three (3)
business days' prior written notice of the effective date of the Lock Up
Release and (y) simultaneously releasing the undersigned and their affiliates
to the same extent from any lock-up letter or similar agreement to which they
are a party. Furthermore, notwithstanding anything herein to the contrary,
nothing in this Section 1.15 or elsewhere in this Agreement shall restrict
Goldman, Sachs & Co. and its affiliates from engaging in any brokerage,
investment advisory, financial advisory, anti-raid advisory, merger advisory,
financing, asset management, trading, market making, arbitrage and other
similar activities conducted in the ordinary course of its or its affiliates'
business, so long as such activities are not reasonably expected to result in
the transfer of, or reduction of risk with respect to, the economic ownership
of any Registrable Securities or securities convertible into or exchangeable
for any Registrable Securities held by Goldman, Sachs & Co. or its affiliates
as of the date hereof.
1.16 Termination of Registration Rights. The registration rights
afforded to each Holder under this Section 1 shall terminate upon the earlier
to occur of (i) the fifth anniversary of the Initial Public Offering or (ii)
with respect to each Holder, whenever such Holder is eligible to sell all of
such Holder's Registrable Securities pursuant to Rule 144 within a six month
period.
SECTION 2
Right of First Offer for New Securities
2.1 Right of First Offer. Subject to the terms and conditions
contained in this Section 2, the Company hereby grants to each Investor the
right of first offer to purchase up to its Pro Rata Portion of any New
Securities which the Company may, from time to time, propose to sell and issue.
2.2 Notice of Right. In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Investor 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 Investor
shall have twenty (20) days from the date of receipt of any such notice to
agree to purchase any shares of such New Securities (up to such Investor's Pro
Rata Portion), for the price and upon the terms specified in the notice, by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
2.3 Right of Over Allotment. The Company shall offer to each
Investor who has elected to purchase its full Pro Rata Portion (a "Fully
Exercising Investor"), by the giving of written notice, any New Securities not
previously elected to be purchased by the Investors. The Fully Exercising
Investors shall thereafter have ten (10) days from the date of receipt of such
written notice to agree to purchase all or any portion of such available New
Securities; in the event that the Fully Exercising Investors collectively elect
to purchase more than the available New Securities, the New Securities shall be
made available to the Fully Exercising Investors ratably.
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2.4 Exercise of Rights. If one or more Investors exercises its
right of first offer hereunder, the closing of the purchase of the New
Securities with respect to which such right has been exercised shall take place
within ninety (90) calendar days following the latest receipt of notice of such
exercise, which period of time shall be extended in order to comply with
applicable laws and regulations.
2.5 Lapse and Reinstatement of Right. In the event the Investors
fail to elect to purchase all of the New Securities offered by the Company
within the foregoing notice periods (or if all Investors waive their rights to
purchase such New Securities), the Company shall have sixty (60) 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 thirty (30)
days from the date of said agreement) to sell the New Securities not elected to
be purchased by the Investors at the price and upon the 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 or entered into an
agreement to sell the New Securities within said sixty (60) day period (or sold
and issued New Securities in accordance with the foregoing within thirty (30)
days from the date of said agreement), the Company shall not thereafter issue
or sell any New Securities without first offering such securities to the
Investors in the manner provided above.
2.6 Transfer of Right. The right of first offer granted to the
Investors pursuant to this Section 2 shall be deemed to be extended to
Permitted Transferees.
2.7 Termination of Right; Waiver. The right of first offer
granted to the Investors pursuant to this Section 2 shall not apply to and
shall terminate and be of no further force or effect upon the Initial Public
Offering. Notwithstanding any provision of this Agreement to the contrary, the
right of first offer granted to the Investors pursuant to this Section 2 shall
be subject to waiver by the affirmative vote or consent of holders of at least
two-thirds (2/3) of the Registrable Securities, taken as a whole for this
purpose.
SECTION 3
Affirmative Covenants of the Company
The Company hereby covenants and agrees as follows:
3.1 Financial Information. The Company will furnish to each
Investor the following reports:
(a) As soon as practicable after the end of each fiscal
year, and in any event within one hundred twenty (120) days thereafter,
consolidated balance sheets of the Company and its subsidiaries, if any, as of
the end of such fiscal year, and consolidated statements of income and cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in
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comparative form the figures for the previous fiscal year, all in reasonable
detail and certified by independent public accountants of national standing
selected by the Company;
(b) As soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement,
schedule as to the sources and application of funds for such fiscal quarter and
an unaudited balance sheet and a statement of shareholder's equity as of the
end of such fiscal quarter; and
(c) As soon as practicable after the end of each calendar
month, and in any event within thirty (30) days thereafter, consolidated
balance sheets of the Company and its subsidiaries, if any, as of the end of
each calendar month, and consolidated statements of income and cash flow for
such period and for the current fiscal year to date, together with a comparison
of such statements to the Company's operating plan then in effect.
3.2 Operating Plan and Budget. As soon as practicable following
approval or adoption by the Company's Board of Directors, the Company will
furnish each Investor with the Company's budget and operating plan (including
projected balance sheets and profit and loss and cash flow statements) for the
coming fiscal quarter and fiscal year.
3.3 Inspection. The Company shall permit each Investor, at such
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be
requested by such Investor.
3.4 Delivery of Qualified Small Business Stock Representations.
The Company covenants and agrees to conduct annually, or upon the occurrence of
an Initial Public Offering or the sale, consolidation or merger of the Company,
a reasonable investigation into the question of whether the Shares or
Conversion Shares are "qualified small business stock" within the meaning of
the Code, and to thereafter deliver to each Investor who so request a duly
executed Certificate of Representations in the form attached hereto as Exhibit
A (the "QSBS Certificate"). If the Company is unable to deliver an executed
QSBS Certificate because representation statement 2 in the QSBS Certificate is
inaccurate, the Company covenants and agrees to deliver a statement explaining
the reasons for such inaccuracy.
3.5 Transfer of Rights. The rights to financial and other
information granted to the Investors pursuant to this Section 3 shall be
extended to Permitted Transferees.
3.6 Termination of Rights. The rights to financial and other
information granted to the Investors pursuant to this Section 3 shall terminate
upon the Initial Public Offering.
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SECTION 4
Board of Directors
4.1 Board Representation. Each Holder hereby covenants and agrees
to vote its Shares, and otherwise use its best efforts as a stockholder of the
Company, to fix the number of directors of the Company at eight (8). Each
Holder further covenants and agrees to vote, consent or otherwise act as a
stockholder of the Company (or, if applicable, as a director of the Company) in
any election of directors of the Company held during the term of this Agreement
for (i) one individual designated by the holders of a majority of the
outstanding Series A Preferred Stock, (ii) one individual designated by the
holders of a majority of the outstanding Series B Preferred Stock, (iii) for so
long as at least fifty thousand (50,000) shares of Series C Preferred Stock
remain outstanding, two individuals designated by the holders of a majority of
the outstanding Series C Preferred Stock and (iv) for so long as at least
seventeen thousand (17,000) shares of Series E Preferred Stock remain
outstanding, one individual designated by the holders of a majority of the
outstanding Series E Preferred Stock. The initial designee of the holders of a
majority of the outstanding Series E Preferred Stock shall be Dennis H. Jones.
Any vacancy on the Board of Directors created by the resignation, removal,
incapacity or death of any person designated by the holders of any Series of
Preferred Stock shall be filled by another person designated by the holders of
a majority of that Series of Preferred Stock. The Company shall use its best
efforts to effectuate the terms and provisions of this Section 4.1.
Notwithstanding the foregoing, the provisions of this Section 4.1 shall
terminate and shall be of no further force and effect upon a merger or
consolidation to which the Company is a party and which results in, or is
effected in connection with, a change in ownership of a majority of the
outstanding shares of voting stock of the Company.
4.2 Termination of Rights. The rights granted to Holders pursuant
to Section 4.1 shall terminate upon the Initial Public Offering.
4.3 Board Observation Rights.
(a) The Company covenants and agrees that The Goldman
Sachs Group, Inc., or any of its affiliates ("Goldman Sachs"), shall have the
right to designate a representative to attend all meetings of the Company's
Board of Directors in a non-voting observer capacity, and, in this respect, the
Company shall give Goldman Sachs copies of all notices, minutes, consents and
other materials that it provides to its directors; provided, however, that (i)
Goldman Sachs agrees, and any representative of Goldman Sachs shall agree in
writing, to hold in confidence all information so provided and not to use or
disclose any confidential information provided to or learned by Goldman Sachs
or such representative in connection with its rights under this Agreement, and
any such representative or any employee or partner of Goldman Sachs working
with such representative shall not use any such confidential information in any
improper manner; and (ii) in no event shall the failure to provide the notice
described above invalidate in any way any action taken at a special meeting of
the Board of Directors or taken by written consent. The covenants and
agreements contained in this Section 4.3(a) shall terminate upon the earlier of
(i)
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the date Goldman Sachs ceases to own, for its own account, any capital stock of
the Company, and (ii) the Initial Public Offering.
(b) The Company covenants and agrees that DBV
Investments, LLC, or any of its affiliates ("DBV"), shall have the right to
designate a representative to attend all meetings of the Company's Board of
Directors in a non-voting observer capacity, and, in this respect, the Company
shall give DBV copies of all notices, minutes, consents and other materials
that it provides to its directors; provided, however, that (i) DBV agrees, and
any representative of DBV shall agree in writing, to hold in confidence all
information so provided and not to use or disclose any confidential information
provided to or learned by DBV or such representative in connection with its
rights under this Agreement; and (ii) in no event shall the failure to provide
the notice described above invalidate in any way any action taken at a special
meeting of the Board of Directors or taken by written consent. The covenants
and agreements contained in this Section 4.3(b) shall terminate upon the
earlier of (i) the date DBV ceases to own, for its own account, any capital
stock of the Company, and (ii) the Initial Public Offering.
(c) The Company covenants and agrees that Dell USA L.P.
("Dell"), shall have the right to designate a representative to attend all
meetings of the Company's Board of Directors in a non-voting observer capacity,
and, in this respect, the Company shall give Dell copies of all notices,
minutes, consents and other materials that it provides to its directors;
provided, however, that (i) Dell agrees, and any representative of Dell shall
agree in writing, to hold in confidence all information so provided and not to
use or disclose any confidential information provided to or learned by Dell or
such representative in connection with its rights under this Agreement; and
(ii) in no event shall the failure to provide the notice described above
invalidate in any way any action taken at a special meeting of the Board of
Directors or taken by written consent. The covenants and agreements contained
in this Section 4.3(c) shall terminate upon the earlier of (i) the date Dell
ceases to own, for its own account, any capital stock of the Company, and (ii)
the Initial Public Offering.
SECTION 5
Miscellaneous
5.1 Aggregation of Stockholdings. All shares of Registrable
Securities held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
5.2 Assignment. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties hereto.
5.3 Third Parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
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5.4 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware without regard to the
conflicts of laws provisions thereof.
5.5 Counterparts. This Agreement may be executed in two or more
counterparts and signature pages may be delivered by facsimile, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
5.6 Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be sent by prepaid registered or certified mail,
return receipt requested, or via a nationally recognized overnight courier,
addressed to the other party at the address shown below or at such other
address for which such party gives notice hereunder. Such notice shall be
deemed to have been given or received three (3) days after deposit in the mail,
or one (1) day after deposit with a nationally recognized overnight courier.
5.7 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
5.8 Amendment and Waiver. Any provision of this Agreement may be
amended with the written consent of the Company and the Holders of a majority
of the outstanding shares of Registrable Securities; provided, however, that
(i) no such amendment shall impose or increase any liability or obligation on a
Holder without the consent of such Holder and (ii) no such amendment having a
disproportionately adverse effect on any Holder in relation to the other
Holders may be made without consent of such Holder; provided, further, that:
(i) the affirmative vote or consent of the Holders holding a majority of the
outstanding Series C Shares shall be required in order to increase the size of
the Board of Directors of the Company to greater than eight (8); (ii) Section
4.3(a) hereof may not be amended without the written consent of The Goldman
Sachs Group, Inc.; (iii) Section 4.3(b) hereof may not be amended without the
written consent of DBV Investments, LLC; and (iv) Section 4.3(c) hereof may not
be amended without the written consent of Dell USA L.P. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
Holder and the Company. In addition, the Company may waive performance of any
obligation owing to it, as to some or all of the Holders, or agree to accept
alternatives to such performance, without obtaining the consent of any Holder.
5.9 Effect of Amendment or Waiver. THE INVESTORS AND THEIR
SUCCESSORS AND ASSIGNS ACKNOWLEDGE THAT BY THE OPERATION OF SECTION 5.8 HEREOF
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING REGISTRABLE SECURITIES, ACTING IN
CONJUNCTION WITH THE COMPANY, WILL HAVE THE RIGHT AND POWER TO DIMINISH OR
ELIMINATE ANY OR ALL RIGHTS PURSUANT TO THIS AGREEMENT.
5.10 Rights of Holders. Each Holder shall have the absolute right
to exercise or refrain from exercising any right or rights that such Holder may
have by reason of this Agreement,
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including, without limitation, the right to consent to the waiver or
modification of any obligation under this Agreement, and such Holder shall not
incur any liability to any other holder of any securities of the Company as a
result of exercising or refraining from exercising any such right or rights.
5.11 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach
or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies,
either under this Agreement, or by law or otherwise afforded to any Holder,
shall be cumulative and not alternative.
5.12 Additional Parties. To the extent that such Holder's
execution of this Agreement is not evidenced by such Holder's execution of a
separate Certification and Signature Page, each Series A Holder, Series B
Holder, Series C Holder, Series D Holder and Series E Purchaser may become a
party to this Agreement at any time after the date of this Agreement by
returning to the Company a signature page executed by such Holder.
[THIS SPACE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WEBMETHODS, INC., a Delaware corporation
By:
--------------------------------------
Phillip Merrick, President
DELL USA L.P.
By: Dell Gen. P. Corp.
Its General Partner
By:
---------------------------------------
FDX CORPORATION, a Delaware corporation
By:
---------------------------------------
Authorized Person
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OTHER INVESTOR
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Number of Series A Shares:
------------------
Number of Series B Shares:
------------------
Number of Series C Shares:
------------------
Number of Series D Shares:
------------------
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Exhibit A
WEBMETHODS, INC.
a Delaware corporation
CERTIFICATE OF REPRESENTATIONS
REGARDING QUALIFIED SMALL BUSINESS STOCK
THIS CERTIFICATE OF REPRESENTATIONS REGARDING QUALIFIED SMALL
BUSINESS STOCK (this "Certificate") is executed as of ________, 1999 by
webMethods, Inc., a Delaware corporation (the "Company"), for the benefit of
____, (collectively, "___________"). As used herein, the term "Stock" means
______.
REPRESENTATIONS
Subject to the limitations and qualifications set forth below, the
Company hereby represents as follows:
1 . The Company has conducted a reasonable investigation into the
question of whether the Stock is "qualified small business stock" ("QSBS")
within the meaning of Section 1202(c) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
2. As of the date first above written, and assuming that
___________ has not sold, distributed, or otherwise transferred the Stock, all
of the Stock is QSBS.
QUALIFICATIONS AND LIMITATIONS
1 . Qualification of the Stock as QSBS is based, in part, on the
value of Company stock or other assets at certain relevant times. For purposes
of the representations made in this Certificate, the Company has made a good
faith determination of such values, taking into account all material facts and
circumstances, but cannot guarantee that the Internal Revenue Service will not
successfully assert that such determination is incorrect.
2. Qualification of the Stock as QSBS is based, in part, on
whether the Company has been engaged in the active conduct of one or more
qualified trades or businesses. The term "qualified trade or business" set
forth in Section 1202(e)(3) of the Code is not clearly defined in all respects.
For purposes of the representations made in this Certificate, the Company has
made a good faith effort to apply the definition of qualified trade or business
set forth in Section 1202(e)(3) of the Code, but cannot guarantee that the
Internal Revenue Service will not successfully assert a contrary definition.
3. Qualification of the Stock as QSBS is based, in part, on
whether at least eighty percent (by value) of the Company's assets have been
used in the active conduct of one or more
17
qualified trades or businesses. For this purpose, assets held as "working
capital" of a qualified trade or business within the meaning of Section
1202(e)(6) of the Code are treated as used in the active conduct of such trade
or business. The term "working capital" set forth in Section 1202(e)(6) of the
Code is not clearly defined in all respects. For purposes of the
representations made in this Certificate, the Company has made a good faith
effort to apply the definition of working capital set forth in Section
1202(e)(6) of the Code, but cannot guarantee that the Internal Revenue Service
will not successfully assert a contrary definition.
4. Qualification of the Stock as QSBS is based, in part, on
whether the Company purchased any of its stock from a person related to
___________ during a relevant testing period. For purposes of the
representations made in this Certificate, the Company has made a good faith
determination that such purchases did not occur, but cannot guarantee that the
Internal Revenue Service will not successfully assert that such determination
is incorrect.
IN WITNESS WHEREOF, the Company has executed this Certificate as of the
date first above written.
BY:
--------------------------------
TITLE:
-----------------------------
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