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SECOND RESTATED AND AMENDED INVESTOR RIGHTS AGREEMENT
THIS SECOND RESTATED AND AMENDED INVESTOR RIGHTS AGREEMENT (this
"Agreement") is entered into as of the 4th day of November, 1999, by and among
(i) WEBMETHODS, INC., a Delaware corporation (the "Company"), (ii) certain
holders of Series A Preferred Stock of the Company (the "Series A Holders"),
(iii) certain holders of Series B Preferred Stock of the Company (the "Series B
Holders"), (iv) certain holders of Series C Preferred Stock of the Company (the
"Series C Holders"), (v) certain holders of Series D Preferred Stock of the
Company (the "Series D Holders") and (vi) certain purchasers of Series E
Preferred Stock of the Company (the "Series E Purchasers").
WHEREAS, the Company, the Series A Holders, the Series B Holders, the
Series C Holders and the Series D Holders are parties to that certain Restated
and Amended Investor Rights Agreement dated May 12, 1999 (the "May 1999
Agreement");
WHEREAS, pursuant to that certain Series E Preferred Stock Purchase
Agreement of even date herewith, by and among the Company and the Series E
Purchasers (the "Series E Agreement"), the Company has agreed to sell and issue
not more than an aggregate of 68,770 shares of Series E Preferred Stock
("Series E") to the Series E Purchasers; and
WHEREAS, as an inducement for the Series E Purchasers to enter into
the Series E Agreement, the Company, the Series A Holders, the Series B
Holders, the Series C Holders and the Series D Holders have agreed to enter
into this Agreement in order to restate and amend the May 1999 Agreement, and
to provide the Series E Purchasers with certain registration and other rights.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1
Restrictions on Transferability;
Registration Rights
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, par value One Cent
($0.01) per share, of the Company, as authorized on the date of this Agreement.
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"Conversion Shares" means the Common Stock issued or issuable
upon conversion of the Series A Shares, Series B Shares, Series C Shares,
Series D Shares and Series E Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
"Holder" means any Investor and any Permitted Transferee.
"Indemnified Party" means each party entitled to
indemnification under Section 1.11 hereof.
"Indemnifying Party" means each party required to provide
indemnification under Section 1.11 hereof.
"Initial Public Offering" means the first public offering of
the Common Stock of the Company to the general public which is effected
pursuant to a registration statement filed with, and declared effective by, the
Commission under the Securities Act.
"Initiating Holders" means Investors or Permitted Transferees
who in the aggregate are Holders of not less than fifty percent (50%) of the
outstanding Registrable Securities.
"Investor" means each Series A Holder, Series B Holder, Series
C Holder, Series D Holder and Series E Purchaser who is or becomes a party to
this Agreement in accordance with Section 5.12 hereof.
"New Securities" means any shares of capital stock of the
Company, including Common Stock and Preferred Stock, whether now authorized or
not, and rights, options or warrants to purchase said shares of Common Stock or
Preferred Stock, and securities of any type whatsoever that are, or may become,
convertible into said shares of Common Stock or Preferred Stock, which involve
aggregate net proceeds to the Company of not less than $500,000.00; provided,
however, that "New Securities" does not include (i) the Shares, the Conversion
Shares or any other shares of Company capital stock issuable upon exercise
and/or conversion of convertible securities outstanding as of the date hereof,
(ii) securities offered to the public generally pursuant to a registration
statement under the Securities Act, (iii) up to 7,000,000 shares of the
Company's Common Stock or related options convertible into or exercisable for
such Common Stock issued to employees, officers and directors of, and
consultants, customers, and vendors to, the Company, pursuant to any
arrangement approved by the Board of Directors of the Company, (iv) stock
issued pursuant to any rights or agreements, including, without limitation,
convertible securities, options and warrants, issued after the date hereof,
provided that the Company shall have complied with the right of first offer
established by Section 2 hereof with respect to the initial sale or grant by
the Company of such rights or agreements, (v) stock issued in connection with
any stock split, stock dividend or recapitalization by the Company, (vi)
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securities issued in connection with an acquisition of another business entity
(whether by way of merger, consolidation or purchase of all or substantially
all of the assets or otherwise), products or technologies by the Company, or
(vii) securities issued in connection with a joint venture by the Company, or
to consultants, vendors, lenders, equipment lessors, or customers of the
Company, or in connection with technology licensing and/or corporate partnering
transactions, in each case as approved by the Board of Directors.
"Permitted Transferee" means (i) any person holding
Registrable Securities to whom Conversion Shares have been transferred in
accordance with Section 1.4 hereof and applicable securities laws, and who is
not an actual or potential competitor of the Company, as determined in the
reasonable judgment of the Company's Board of Directors, and (ii) any person
who is a partner, member or affiliate of an Investor who receives such
Registrable Securities in accordance with such partner, member or affiliate
ownership interest in the Investor.
"Pro Rata Portion" means, with respect to an Investor, the
ratio that the Conversion Shares held by such Investor bears to the aggregate
number of shares of Common Stock held by all stockholders of the Company on a
fully diluted, fully converted basis.
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.
"Registration Expenses" means all expenses (excluding Selling
Expenses) of the Company and the Holders participating in a registration
incurred in complying with Sections 1.5, 1.6 and 1.7 hereof, including, without
limitation, all registration, qualification, listing and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company and
one special counsel for the selling shareholders, blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).
"Registrable Securities" means (i) the Conversion Shares and
(ii) any Common Stock issued or issuable in respect of the Shares or Conversion
Shares for any reason; provided, however, that shares of Common Stock shall
only be treated as Registrable Securities if and so long as they have not been
(A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale.
"Restricted Securities" means the securities of the Company
required to bear a legend as set forth in Section 1.3(a) or Section 1.3(b)
hereof.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar successor federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Selling Expenses" means all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for one or more Holders
(other than the fees and disbursements of one special counsel for all of the
selling shareholders as described in "Registration Expenses" above).
"Series A Shares" means the shares of Series A Preferred Stock
held by the Investors.
"Series B Shares" means the shares of Series B Preferred Stock
held by the Investors.
"Series C Shares" means the shares of Series C Preferred Stock
held by the Investors.
"Series D Shares" means the shares of Series D Preferred Stock
held by the Investors.
"Series E Shares" means the shares of Series E Preferred Stock
held by the Investors.
"Shares" means Series A Shares, Series B Shares, Series C
Shares, Series D Shares and Series E Shares.
1.2 Restrictions. The Shares and the Conversion Shares shall not
be sold, assigned, transferred or pledged except upon the conditions specified
in this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Investor will cause any proposed
purchaser, assignee, transferee or pledgee of the Shares and the Conversion
Shares held by such Investor to agree to take and hold such securities subject
to the provisions and upon the conditions specified in this Agreement.
1.3 Restrictive Legend.
(a) Each certificate representing (i) the Series E Shares,
(ii) the Conversion Shares, and (iii) any other securities issued in respect of
the securities referenced in clauses (i) and (ii) upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 1.4 below) be stamped
or otherwise imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR
A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT."
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"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY."
(b) Each outstanding certificate representing Series A
Shares, Series B Shares, Series C Shares and Series D Shares shall bear the
legend currently imprinted thereon. In the event of any transfer of such
shares, the newly-issued certificate representing such shares shall bear the
legend set forth in Section 1.3(a) of this Agreement.
(c) Each Investor consents to the Company making a
notation on its records and giving instructions to any transfer agent of the
Restricted Securities in order to implement the restrictions on transfer
established in this Section 1.
1.4 Notice of Proposed Transfers; Transfers. The holder of each
certificate representing Restricted Securities, by acceptance thereof, agrees
to comply in all respects with the provisions of this Section 1. Prior to any
proposed sale, assignment, transfer or pledge of any Restricted Securities,
unless there is in effect a registration statement under the Securities Act
covering the proposed transfer, the holder thereof shall give written notice to
the Company of such holder's intention to effect such transfer, sale,
assignment or pledge. Each such notice shall describe the manner and
circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and, if reasonably requested by the Company, shall be
accompanied at such holder's expense by either (i) a written opinion of legal
counsel who shall, and whose legal opinion shall, be reasonably satisfactory to
the Company, addressed to the Company, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, or (iii) any other evidence reasonably satisfactory to counsel to the
Company to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. The Company will not require such a legal opinion
or "no action" letter (a) in any transaction in compliance with Rule 144 or (b)
in any transaction in which such holder distributes Restricted Securities to
its constituent partners, majority-owned subsidiaries or affiliates (each an
"Affiliate") for no consideration; provided that each Affiliate agrees in
writing to be subject to the terms of this Section 1.4. The Company may waive
compliance with this Section 1.4 in its sole discretion; the Company's failure
to object promptly in writing to a proposed transfer allegedly in violation of
this Section 1.4 shall deemed to be such a waiver; provided, however, that no
holder of Restricted Securities may sell, assign or otherwise transfer any
Restricted Securities to any actual or potential competitor of the Company, as
determined in the reasonable judgment of the Company's Board of Directors;
provided further that a Holder who is a corporation, partnership or limited
liability company may distribute Restricted Securities to its constituent
partners,
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members or affiliates in accordance with such partners', members' or affiliates'
ownership in such Holder. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
1.3 above, except that such certificate shall not bear such restrictive legend
if, in the opinion of counsel for such holder and the Company, such legend is
not required in order to establish compliance with any provisions of the
Securities Act. Notwithstanding the foregoing, a Holder of Restricted
Securities may transfer such Restricted Securities to any third party in
connection with the merger, acquisition, consolidation or other business
combination involving such Holder and such third party, without any restriction
whatsoever, other than the restrictions imposed under applicable state and
federal securities laws.
1.5 Demand Registration.
(a) Demand Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to Registrable
Securities, 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, file and use its best
efforts to effect such registration, qualification or compliance (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act 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 thirty (30) 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 1.5:
(1) 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;
(2) Prior to the earlier of (i)
September 21, 2003, and (ii) the six- month anniversary of the effective date
of the Initial Public Offering;
(3) During the period starting with the
date ninety (90) days prior to the Company's estimated date of filing of, and
ending on the date six (6) months immediately following 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
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an employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective and that the Company's estimate of the date of filing such
registration statement is made in good faith;
(4) During the period commencing on the
date on which a registration pursuant to this subparagraph 1.5(a) has been
declared or ordered effective, and ending one (1) year after such date;
(5) After the Company has effected a
second registration pursuant to this subparagraph 1.5(a), and such registration
has been declared or ordered effective;
(6) If the aggregate proceeds from the
sale of Registrable Securities described in the registration statement will not
exceed $2,000,000; or
(7) If the Company shall furnish to such
Holders a certificate, signed by the President of the Company, stating that in
the good faith and reasonable judgment of the Board of Directors it would be
seriously detrimental to the Company or its shareholders for a registration
statement to be filed in the near future, then the Company's obligation to use
its best efforts to register, qualify or comply under this Section 1.5 shall be
deferred for a period not to exceed ninety (90) days from the date of receipt
of written request from the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve (12) month
period.
Subject to the foregoing clauses (1) through (7), 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 1.5 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 1.5(a)(i). The right of any Holder to registration
pursuant to Section 1.5 shall be conditioned upon such Holder's participation
in the underwriting arrangements required by this Section 1.5 and the inclusion
of such Holder's Registrable Securities in the underwriting, to the extent
requested, to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into and perform its
obligations under an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by a majority in interest of the
Initiating Holders (which managing underwriter shall be reasonably acceptable
to the Company). Notwithstanding any other provision of this Section 1.5, 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 Holders of Registrable
Securities 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; provided, however, that no
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Registrable Securities shall be so excluded unless and until all securities
sought to be registered other than the Registrable Securities are first
excluded. 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 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 Registrable Securities shall not be
transferred in a public distribution prior to ninety (90) days after the
effective date of such registration.
1.6 Form S-3 Registration.
(a) If any Holder or Holders holding twenty-five percent
(25%) or more of the 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 Registrable Securities, the reasonably anticipated aggregate
price to the public of which, net of underwriting discounts and commissions,
would exceed $500,000.00, and the Company is a registrant entitled to use Form
S-3 (or such successor form) to register the Registrable Securities for such an
offering, the Company shall use its best efforts to cause such Registrable
Securities to be registered on such form for the offering and to cause such
Registrable Securities to be qualified in such jurisdictions as the Holder or
Holders may reasonably request; provided, however, that the Company shall not
be required to effect more than one such registration in any twelve (12) month
period, and shall not be required to effect more than two such registrations in
the aggregate. After the Company's first public offering of its securities,
the Company will use its best efforts to qualify for Form S-3 registration or a
similar short-form registration. The provisions of Section 1.5(b) shall be
applicable to each registration initiated under this Section 1.6.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 1.6: (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)
during the period starting with the date ninety (90) days prior to the
Company's estimated date of filing of, and ending on the date six (6) months
immediately following, 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), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iii) if the Company shall furnish to such Holder a certificate signed by the
President of the Company stating that in the good faith and reasonable judgment
of the Board of Directors it would be detrimental to the Company or its
stockholders for registration statements to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed ninety (90) days from
the receipt of the
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request to file such registration by such Holder; provided, however, that the
Company shall not exercise such right more than once in any twelve-month
period.
1.7 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, or (ii) a
registration relating solely to a Commission Rule 145 transaction, 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 fifteen (15) 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 1.7(a)(i). In such event, the right of any
Holder to registration pursuant to Section 1.7 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities in the underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into and perform its obligations under an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company (or by the holders who have demanded such
registration). Notwithstanding any other provision of this Section 1.7, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
number of Registrable Securities to be included in the registration and
underwriting, on a pro rata basis based on the total number of securities
(including, without limitation, Registrable Securities) entitled to
registration pursuant to registration rights granted to the participating
stockholders by the Company; provided, however, that if such offering is the
Initial Public Offering, such reduction may reduce the number of securities
being sold by the participating Holders to zero (0); and provided further that
if such offering is not the Initial Public Offering, such reduction may reduce
the number of securities being sold by the Holders to not less than thirty
percent (30%) of the shares being sold in such offering. Securities to be
excluded from registration shall be determined in the following order of
priority: (i) securities held by any person not having contractual incidental
registration rights; (ii) securities held by any person having contractual
incidental registration rights pursuant to an agreement which is not this
Agreement; and (iii) securities held by the Holders on a pro rata basis (based
on the aggregate number of securities held by all such holders). 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 or
other holder to the nearest 100 shares. If any Holder or other holder
disapproves of the terms of any such underwriting, he or she may elect to
withdraw
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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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13
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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14
(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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15
(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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16
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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17
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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18
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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19
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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20
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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22
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:
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Number of Series A Shares:
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25
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
26
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:
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TITLE:
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