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EXHIBIT 4.03
EGREETINGS NETWORK, INC.
FOURTH AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
OCTOBER 1, 1999
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FOURTH AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of September __, 1999 by and among
E-GREETINGS NETWORK, a California corporation (the "Company"), and the persons
identified on the signature page hereof (the "Investors").
RECITALS
WHEREAS, certain Investors entered into a Third Amended and Restated
Investors' Rights Agreement with the Company dated as of March 19, 1999 (the
"Rights Agreement"); and
WHEREAS, the existing Investors and the Company desire that the Company
sell shares of its Series G Preferred Stock to additional Investors, and the
existing Investors acknowledge that such sale will be conditioned upon such new
Investors being made a party to this Agreement, which amends and restates the
Rights Agreement, and the existing Investors are therefore willing to enter into
this Agreement with the Company and the new Investors in order to induce the new
Investors to make such an investment in the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, all parties hereto agree as follows:
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
(a) "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(c) "HOLD" shall mean any Investor who holds Registrable
Securities and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 1.11 hereof.
(d) "INITIATING HOLDER" shall mean any Holder or Holders who
in the aggregate hold not less than thirty-three percent (33%) of the
outstanding Registrable securities. For purposes of such calculation, holders of
Shares shall be considered to hold the shares of Common Stock then issuable upon
conversion of such Shares.
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(e) "OTHER STOCKHOLDER" shall mean persons other than Holders
who, by virtue of agreements with the Company, are entitled to include their
securities in certain registrations.
(f) "RESTRICTED SECURITIES" shall mean the securities of the
Company required to bear or bearing a legend stating that the shares have not
been registered under the Securities Act.
(g) "REGISTRABLE SECURITIES" shall mean (i) shares of Common
Stock issued or issuable pursuant to the conversion of the Shares and (ii) any
Common Stock issued as a dividend or other distribution with respect to or in
exchange for or in replacement of the shares referenced in (i) above, provided,
however, that Registrable Securities shall not include any shares of Common
Stock that have been sold to the public pursuant to a registration statement or
Rule 144 or sold in a private transaction in which the transferor's rights
pursuant to this Agreement have not been assigned.
(h) The terms "REGISTER," "REGISTERED" and "REGISTRATION"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement by the Commission.
(i) "REGISTRATION EXPENSES" shall mean all expenses incurred
in effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, expenses of any regular or special audits incident to or required
by any such registration, but shall not include Selling Expenses or, except as
expressly set forth in Section 1.4 of this Agreement, fees and disbursements of
counsel for the Holders (and excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
(j) "RULE 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(k) "RULE 145" shall mean Rule 145 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time, corresponding
to such act.
(m) "SELLING EXPENSES" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder except as set forth in Section
1.4 of this Agreement.
(n) "SHARES" shall mean the Company's Series A Preferred
Stock; the Company's Series B Preferred Stock; the Company's Series C Preferred
Stock; the Company's
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Series D Preferred Stock; the Company's Series E Preferred Stock, including any
shares of Series E Preferred Stock issuable upon exercise of those certain
warrant rights issued by the Company to Gibson Greetings, Inc. ("Gibson") to
purchase up to 1,470,000 shares of Series E Preferred Stock of the Company,
pursuant to Section 5.1 of that certain Series D Preferred Stock Purchase
Agreement dated as of December 4, 1997 by and between the Company and Gibson;
the Company's Series F Preferred Stock; and the Company's Series G Preferred
Stock.
1.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If the Company shall receive
from Initiating Holders at any time or times not earlier than the earlier of (i)
September __, 2002, or (ii) six months after the effective date of the first
registration statement filed by the Company covering an underwritten offering of
any of its securities to the general public (an "initial public offering"), a
written request specifying that it is made pursuant to this Section 1.2 and
requesting that the Company effect any registration with respect to all or a
part of the Registrable Securities having, in the case of an initial public
offering, a reasonably anticipated aggregate offering price, net of underwriting
discounts and commissions, that exceeds $15,000,000 and, in the case of a
subsequent public offering, a reasonably anticipated aggregate offering price,
net of underwriting discounts and commissions, that exceeds $5,000,000, the
Company will:
(i) promptly give written notice of the proposed
registration to all other Holders;
(ii) and as soon as practicable, use its diligent
best efforts to effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue sky
or other state securities laws and appropriate compliance with the Securities
Act) as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after such written notice from the
Company described in clause (i) above is effective.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(B) After the Company has effected two such
registrations pursuant to this Section 1.2(a) and each such registration has
been declared or ordered effective by the Commission;
(C) During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of filing
of, and ending on a date one hundred eighty (180) days after the effective date
of, a registration pursuant to Section 1.3
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hereof, provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;
(b) Subject to the foregoing clauses (A) through (C), the
Company shall prepare and 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; provided, however, that if
(i) in the good faith judgment of the Board of Directors of the Company, such
registration would be seriously detrimental to the Company and the Board of
Directors of the Company concludes, as a result, that it is essential to defer
the filing of such registration statement at such time, and (ii) the Company
shall furnish to such Holders a certificate signed by the president or chief
executive officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company for such registration statement to be filed in the near future and that
it is, therefore, essential to defer the filing of such registration statement,
then the Company shall have the right to defer such filing for the period during
which such registration would be seriously detrimental, provided, that the
Company may not defer the filing for a period of more than 180 days after
receipt of the request of the Initiating Holders, and, provided further, that
(except as provided in clause (C) above) the Company shall not defer its
obligation in this manner more than once in any 12-month period.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of this Section 1.2(b) and
Section 1.12 hereof, include other securities of the Company and may include
securities of the Company being sold for the account of the Company.
(c) UNDERWRITING. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 1.2 and the Company shall include such information in
the written notice referred to in Section 1.2(a)(i) above. In such event, the
right of any Holder to registration pursuant to this Section 1.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder with respect to such participation and inclusion) to the extent
provided herein. A Holder may elect to include in such underwriting all or a
part of the Registrable Securities he holds.
(d) PROCEDURE. If the Company shall request inclusion in any
registration pursuant to this Section 1.2 of securities being sold for its own
account, or if persons other than Holders shall request inclusion of their
securities in any registration pursuant to this Section 1.2, the Initiating
Holders shall, on behalf of all Holders, offer to include such securities in the
underwriting and may condition such offer on their acceptance of the further
applicable provisions of this Section 1. If the Initiating Holders' intend to
distribute the Registrable Securities covered by their request pursuant to this
Section 1.2 by means of an underwriting, the Company shall (together with all
Holders and other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by a majority in interest of the Initiating Holders, which underwriter(s) are
reasonably acceptable to
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the company. Notwithstanding any other provision of this Section 1.2, if the
representative of the underwriters advises the Initiating Holders in writing
that marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 1.12 hereof. If the
person who has requested inclusion in such registration as provided above does
not agree to the terms of any such underwriting, such person shall be excluded
therefrom by written notice from the Company, the underwriter or the Initiating
holders. The securities so excluded shall also be withdrawn from registration.
Any Registrable Securities or other securities excluded shall also be withdrawn
from such registration. If shares are so withdrawn from the registration and if
the number of shares to be included in such registration was previously reduced
as a result of marketing factors pursuant to this Section 1.2(d), then the
Company shall offer to all Holders who have retained rights to include
securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares withdrawn,
with such shares to be allocated among such Holders requesting additional
inclusion in accordance with Section 1.12.
1.3 COMPANY REGISTRATION.
(a) If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising their respective demand registration rights (other than
pursuant to Section 1.2 hereof), other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Commission Rule
145 transaction, or a registration on any registration form which does not
permit secondary sales, the Company will:
(i) promptly give to each Holder written notice
thereof, and
(ii) use its best efforts to include in such
registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 1.3(b) below, and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made by any Holder within twenty (20) days after
the written notice from the Company described in clause (i) above is effective.
Such written request may specify all or a part of a Holder's Registrable
Securities.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the holders of other securities of the Company
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the
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number of shares to be underwritten, the representative may (subject to the
limitations set forth below) exclude all Registrable Securities from, or limit
the number of Registrable Securities to be included in, the registration and
underwriting. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated first to the
Company for securities being sold for its own account and thereafter as set
forth in Section 1.12. If any person does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.12 hereof
1.4 EXPENSES OF REGISTRATION. All Registration Expenses, together with
reasonable fees of one counsel for the selling Holders, incurred in connection
with all registrations pursuant to Section 1.3 hereof, up to two (2)
registrations per year pursuant to Section 1.5 hereof and two (2) registrations
pursuant to Section 1.2 hereof, shall be borne by the Company; provided,
however, that if the Holders bear the Registration Expenses for any registration
proceeding begun pursuant to Section 1.2 and subsequently withdrawn by the
Holders registering shares therein, such registration proceeding shall not be
counted as a requested registration pursuant to Section 1.2 hereof. In the event
that such withdrawal is based upon material adverse information relating to the
Company that is materially different from the information known or available
(upon request from the Company or otherwise) to the Holders requesting
registration at the time of their request for registration under Section 1.2,
such registration shall not be treated as a counted registration for purposes of
Section 1.2 hereof even though the Holders do not bear the Registration Expenses
for such registration. All Selling Expenses relating to securities registered
shall be borne by the holders of such securities pro rata on the basis of the
number of shares of securities so registered on their behalf.
1.5 REGISTRATION ON FORM S-3.
(a) After its initial public offering as described in Section
1.2(a) above, the Company shall use its best efforts to qualify for registration
on Form S-3 or any comparable or successor form or forms. After the Company has
qualified for the use of Form S-3, in addition to the rights contained in the
foregoing provisions of this Section 1, the Holders of Registrable Securities
shall have the right to request registrations on Form S-3 (such requests shall
be in writing and shall state the number of shares of Registrable Securities to
be disposed of and the intended methods of disposition of such shares by such
Holder or Holders), provided, however, that the Company shall not be obligated
to effect any such registration if (i) the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) on
Form S-3 at an aggregate price to the public of less than $1,000,000, or (ii) in
a given 12-month period, after the Company has effected two (2) such
registrations pursuant to this Section 1.5 in any such period.
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(b) If a request complying with the requirements of Section
1.5(a) hereof is delivered to the Company, the provisions of Sections 1.2(a)(i)
and (ii) (other than Section 1.2(a)(ii)(B)) and Section 1.2(b) hereof shall
apply to such registration. The provisions of Sections 1.2(c) and 1.2(d) hereof
shall apply to all registrations pursuant to this Section 1.5.
1.6 REGISTRATION PROCEDURE. In the case of each registration effected
by the Company pursuant to this Section 1, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one
hundred twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs; provided, however that (i) such 120-day period shall be extended
for a period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company; and (ii) 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 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that 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 (i) includes any prospectus required by Section
10(a)(3) of the Securities Act or (ii) 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 (i) and (ii) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents
incident thereto, including a preliminary prospectus and any amendment of or
supplement to the prospectus, as a Holder from time to time may reasonably
request;
(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 a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material
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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) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;
(g) 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;
(h) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof the Company will
enter into an underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests, the underwriting agreement will contain customary contribution
provision; and
(i) Furnish, at the request of a majority in interest of
Holders participating in the registration, on the date that such Registered
Securities are delivered to the underwriters for sale, or if such securities are
not being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion dated as of
such date, of the counsel representing the Company for purposes of such
registration, in a form and substance as is customarily provided to underwriters
in an underwritten public offering and reasonably satisfactory to a majority in
interest of Holders requesting registration, addressed to the underwriters, if
any, and Holders and (ii) a letter dated as of such date from the independent
public accountants of the Company in form and substance as is customarily
provided to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders, addressed to the
underwriters, if any, and, if permitted, by applicable accounting standards, the
Holders requesting registration.
1.7 INDEMNIFICATION.
(a) To the extent permitted by law, the Company will indemnify
each Holder, each of its officers, directors and partners, legal counsel and
accountants 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 for such Holder, if any, and each person who controls within
the meaning of Section 15 of the Securities Act any underwriter, against all
expenses, claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based
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on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, preliminary or final, offering circular or other
document (including any related registration statement, notification or the
like) 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 not misleading,
or any violation by the Company of the Securities Act, the Exchange Act, any
state securities laws or any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
such Holder, each of its officers, directors, partners, legal counsel and
accountants 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 and defending or
settling any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
such Holder or, its agents, underwriter or persons who control such Holder and
stated to be specifically for use therein. It is agreed that the indemnity
agreement contained in this Paragraph 1.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent has not
been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel and accountants and 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, each other such Holder and Other Stockholder
and each of their officers, directors and partners, and each person controlling
such Holder or Other Stockholder, against all expenses, claims, losses, damages
and liabilities (or actions, proceedings or settlements 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,
preliminary or final, 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 and such Holders, Other Stockholders, directors, officers, partners,
legal counsel and accountants, 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, 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 such Holder
its agents, underwriter or persons who control such Holder and stated to be
specifically for use in connection with such registration; provided, however,
that the obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld) and provided further
that in no event shall any indemnity under this Section 1.7(b) exceed the net
proceeds from the offering received by such Holder.
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(c) Each party entitled to indemnification under this Section
1.7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.7, to the extent such
failure is not prejudicial. 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. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense 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 loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense 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 relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission provided that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and the Holders under this
Section 1.7 shall survive completion of any offering of Registrable Securities
and the termination of this Agreement.
1.8 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company or its underwriters may
reasonably request in writing and as shall be
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reasonably required in connection with any registration, qualification or
compliance referred to in this Section 1.
1.9 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information available as those terms
are understood and defined in Rule 144 under the Securities Act at all times
following the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general public;
(b) File with the 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;
(c) So long as a Holder owns any Restricted Securities,
furnish to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety (90) days following 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 so filed 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.
1.10 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted to a Holder by the Company under
Sections 1.2, 1.3 and 1.5 may be transferred or assigned by a Holder only to a
transferee or assignee who holds or will hold, subsequent to such transfer not
less than 150,000 shares of Registrable Securities (as presently constituted and
subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits and the like), or to a transferee or assignee who holds or will
hold, subsequent to such transfer not less than 45,000 shares of Registrable
Securities (as presently constituted and subject to subsequent adjustments for
stock splits, stock dividends, reverse stock splits and the like) that (i) is a
subsidiary, parent, shareholder, general partner, limited partner or retired
partner of Holder, or (ii) is a Holder's family member (or a family member of a
Holder's spouse) or trust for the benefit of such person or persons; and
provided that the Company is given written notice at the time of or within a
reasonable time after said transfer or assignment, stating the name and address
of said transferee or assignee and identifying the securities with respect to
which such registration rights are being transferred or assigned, and provided
further that the transferee or assignee of such rights agrees in writing to
assume the obligations of such Holder under this Section 1.
1.11 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, an Investor
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such an Investor (other than those included
in the registration) during the one hundred eighty
11.
13
(180) day period following the effective date of a registration statement of the
Company filed under the Securities Act in connection with an initial public
offering, provided that:
(a) all Holders and officers and directors of the Company
enter into similar agreements; and
(b) such agreements shall provide that any discretionary
waiver or termination of the restrictions of such agreements by the
representatives of the underwriters shall apply to all persons subject to such
agreements pro rata based on the number of shares held.
The obligations described in this Section 1.11 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms which may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms which may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or other securities)
subject to the foregoing restriction until the end of said one hundred eighty
(180) day period.
1.12 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issued or issuable upon conversion of
shares of any currently unissued series of Preferred Stock of the Company) with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or other selling shareholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares which may be so included, the number of
shares of Registrable Securities and Other Shares which may be included shall be
allocated first to the Holders pro rata based on the number of shares of
Registrable Securities held by each, and second to holders of Other Shares
(including Holders) pro rata based on the number of shares of Other Shares held
by each (on an as converted basis); provided, however, that, if any Holder does
not request inclusion of the maximum number of shares of Registrable Securities
allocated to him pursuant to the above-described procedure, the remaining
portion of his allocation shall be reallocated first among those requesting
Holders with respect to their shares of Registrable Securities and second among
holders of Other Shares (including Holders) and this procedure shall be repeated
until all of the shares of Registrable Securities and Other Shares that may be
included in the registration on behalf of the Holders and other selling
shareholders have been so allocated. The Company shall not limit the number of
Registrable Securities to be included in a registration pursuant to this
Agreement (i) in order to include shares held by shareholders with no
registration rights or to include stock issued prior to the date of this
Agreement, other than to the Holders, or any other shares of stock issued to
employees, officers, directors or consultants pursuant to the Company's equity
incentive plans, or (ii) with respect to registrations under Sections 1.2 and
1.5 hereof, in order to include in such registration securities registered for
the Company's own account.
1.13 RESTRICTION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without prior written consent of the
Holders of a majority of the Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company that
would grant such Holder registration rights senior to those granted to the
Holders hereunder.
12.
14
1.14 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.15 TERMINATION OF REGISTRATION RIGHT. The right of any Holder to
request registration or inclusion in any registration pursuant to this Section 1
shall terminate on the fourth anniversary of the closing of the Company's sale
of its Common Stock in an underwritten public offering under the Act at a per
share public offering price of at least $15.00 (as appropriately adjusted for
stock splits, recapitalizations, combinations and the like) for an aggregate
public offering price of not less than $15,000,000; provided that, with respect
to any Holder of less than two percent (2%) of the Company's outstanding stock,
the right of any such Holder to request registration or inclusion in any
registration pursuant to this Section 1 shall terminate at such earlier time as
any such Holder shall be able to sell all shares of Registrable Securities held
or entitled to be held upon conversion by such Holder under Rule 144 during any
90-day period.
1.16 LIMITATIONS ON DISPOSITION. Each Investor agrees not to make any
disposition of any Shares or Registrable Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 1.16 provided and to the extent this Section is then applicable,
and:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) (i) such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company that
such disposition will not require registration of such shares under the
Securities Act, provided that the Company will not require opinions of counsel
for transactions made pursuant to Rule 144 except in unusual circumstances.
Notwithstanding the foregoing, no such registration statement or
opinion of counsel shall be necessary for a transfer which complies with all
applicable federal and state securities laws by an Investor (i) that is a
partnership to its partners or former partners in accordance with their
partnership interests, (ii) that is a corporation to its shareholders in
accordance with their equity interests therein or (iii) to family members of an
Investor or a trust for the benefit of an individual Investor or family member
thereof, provided in each case that the transferee agrees to be bound by this
Section 1.16.
SECTION 2
RIGHTS OF FIRST REFUSAL
2.1 RIGHTS OF FIRST REFUSAL. The Company hereby grants to each
Investor, as long as the Investor holds at least 150,000 shares of Registrable
Securities (as appropriately adjusted for
13.
15
stock splits, recapitalizations, combinations and the like), the right of first
refusal to purchase, pro rata, a portion of any New Securities (as defined in
Section 2.1(a) below) that the Company, from time to time, may propose to sell
and issue. Each Investor's pro rata share of the New Securities will be the
ratio of (i) the number of shares of Common Stock issued and held, and issuable
upon the conversion of the Shares then held, by such Investor as of the date of
the Rights Notice (as defined below) to (ii) the total number of shares of
Common Stock issued and held, and issuable upon the conversion of the Shares
then held by all shareholders of the Company as of such date plus the total
number of shares of Common Stock issuable upon exercise of all then-outstanding
options, warrants and rights issued by the Company. This right of first refusal
will be subject to the following provisions:
(a) "NEW SECURITIES" will mean any shares of Common Stock or
Preferred Stock of any kind of the Company, whether now or hereafter authorized;
rights, options, or warrants to purchase said Common Stock or Preferred Stock
and securities carrying any such right, option or warrant; and securities of any
type whatsoever that are, or may become, convertible into said Common Stock or
Preferred Stock, provided that "New Securities" will not include: (i) any shares
of Common Stock or Preferred Stock of the Company that would be deemed "Excluded
Shares" for purposes of paragraph D(4) of Article IV of the Company's Amended
and Restated Articles of Incorporation; (ii) securities issued in connection
with the acquisition of another corporation by the Company by merger,
consolidation, purchase of substantially all of the assets, or other
reorganization as a result of which the Company owns more than fifty percent
(50%) of the voting power of such corporation; or (iii) shares of the Company's
Common Stock or Preferred Stock issued in connection with any stock split, stock
dividend, recapitalization, reclassification or similar event.
(b) If the Company proposes to issue New Securities, it will
give each Investor that holds at least 150,000 shares of Registrable Securities
(as appropriately adjusted for stock splits, recapitalizations, combinations and
the like) written notice (the "Rights Notice") of the Company's intention to do
so, describing the New Securities, the price, and the general terms upon which
the Company proposes to issue them. Each such Investor will have 15 days from
the date of delivery of the Rights Notice to agree to purchase its pro rata
share of such New Securities for the price and upon the general terms specified
in the Rights Notice by giving written notice to the Company setting forth the
quantity of New Securities to be purchased.
(c) If any Investor fails to exercise in full its rights of
first refusal hereunder, the Company will have 90 days after the date of
delivery of the Rights Notice to sell the New Securities that were not purchased
by the Investor, at a price and upon general terms no more favorable to the
purchasers thereof than the price and general terms specified in the Rights
Notice. If the Company does not sell the New Securities within said 90 day
period as provided in the preceding sentence, the Company will not thereafter
issue or sell any of such New Securities without complying with the provisions
of Section 2.l(b) above.
(d) TERMINATION. The rights of first refusal granted in this
Section 2 shall not apply to, and shall terminate upon the earlier of (i) the
closing of the Company's sale of its Common Stock in an underwritten public
offering with an aggregate public offering price of $15,000,000 or more, or (ii)
a sale of all or substantially all of the assets of the Company or a merger or
consolidation of the Company with or into any other corporation or corporations
in
14.
16
which the shareholders of the Company immediately prior to such event retain
less than a fifty percent (50%) interest in the surviving entity.
(e) TRANSFER OF RIGHT. The rights of first refusal of each
Holder under this Section 2.1 may be transferred to the same parties subject to
the same restrictions as any transfer of registration rights pursuant to Section
1.10.
SECTION 3
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as any Holder owns any
Registrable Shares as follows:
3.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to each Holder:
(a) As soon as practicable after the end of each fiscal year
of the Company, and in any event within ninety (90) days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the end of such fiscal year, and consolidated statements of income and sources
and applications of funds of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles
consistently applied, setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail, and audited in each case
by independent public accountants of national standing selected by the Company,
and a Company prepared comparison to the Company's operating plan for such year.
(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Company, and
in any event within forty-five (45) days thereafter, an unaudited consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of each
such quarterly period, and unaudited consolidated statements of income and
statements of cash flows of the Company and its subsidiaries, if any, for such
period and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in comparative form the figures for the corresponding periods of the previous
fiscal year and to the Company's operating plan then in effect and approved by
its Board of Directors, subject to changes resulting from normal year-end audit
adjustments, all in reasonable detail and certified by the principal financial
or accounting officer of the Company, except that such balance sheet need not
contain the notes or the end-of-period adjustments required by generally
accepted accounting principles.
(c) From the date the Company becomes subject to the reporting
requirements of the Exchange Act, and in lieu of the financial information
required pursuant to Sections 3.1(a) and (b), copies of its annual reports on
Form 10-K and its quarterly reports on Form 10-Q respectively.
15.
17
3.2 ADDITIONAL INFORMATION AND RIGHTS.
(a) The Company will permit any Investor, so long as such
Investor (or its representative) owns at least 300,000 Shares, or such number of
shares of Common Stock issued upon conversion of 300,000 or more Shares, or any
combination thereof (as presently constituted and subject to subsequent
adjustment for stock splits, stock dividends, reverse stock splits,
recapitalizations and the like) (a "Significant Holder") (or a representative of
any Significant Holder) to visit and inspect any of the properties of the
Company, including its books of account and other records (and make copies
thereof and take extracts therefrom), and to discuss its affairs, finances and
accounts with the Company's officers and its independent public accountants, all
at such reasonable times and as often as any such person may reasonably request.
(b) Until the earlier to occur of (x) the date on which the
Company is subject to the reporting requirements of Sections 13(a) or 15(d) of
the Exchange Act, or (y) the date on which quotations for the Common Stock of
the Company are reported by the automated quotations systems operated by the
National Association of Securities Dealers, Inc., or by an equivalent quotations
system, the Company will deliver the reports described below in this Section 3.2
to each Significant Holder:
(i) As soon as practical after the end of each month
and in any event within thirty (30) days thereafter copies of any financial
reports or statements for the Company and for its subsidiaries, if any, that the
Company actually prepares for internal use or for other purposes, including but
not limited to any statements of income and sources and applications of funds of
the Company and its subsidiaries, together with any comparisons of such
statements to the corresponding periods of the prior fiscal year and to the
Company's operating plan then in effect and approved by its Board of Directors;
provided, however, that this Section 3.2(b)(i) shall not be construed to require
the Company to create reports that it would not otherwise create as part of its
monthly analysis of the Company's business or as otherwise required by its Board
of Directors.
(ii) Annually (but in any event at least thirty (30)
days prior to the commencement of each fiscal year of the Company) the financial
plan of the Company, in such manner and form as approved by the Board of
Directors of the Company, which financial plan shall include a projection of
income and a projected cash flow statement for such fiscal year and a projected
balance sheet as of the end of such fiscal year. Any material changes in such
financial plan shall be submitted as promptly as practicable after such changes
have been approved by the Board of Directors of the Company.
(iii) With reasonable promptness, but without unduly
interfering with the Company's business, such other information and data with
respect to the Company and its subsidiaries as any such person may from time to
time reasonably request.
(iv) As soon as practicable after transmission or
occurrence and in any event within ten (10) days thereof, copies of any reports
or communications delivered to any class of the Company's security holders or
broadly to the financial community, including any
16.
18
filings by the Company with any securities exchange, the Commission or the
National Association of Securities Dealers, Inc.
(c) The provisions of Section 3.1 and this Section 3.2 shall
not be in limitation of any rights which any Holder or Significant Holder may
have with respect to the books and records of the Company and its subsidiaries,
or to inspect their properties or discuss their affairs, finances and accounts,
under the laws of the jurisdictions in which they are incorporated.
3.3 PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto, and provided further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, or in
conformance with customary trade terms or otherwise in accordance with policies
related thereto adopted by the Company's Board of Directors, all other
indebtedness incident to operations of the Company.
3.4 MAINTENANCE OF PROPERTIES AND LEASE. The Company will keep its
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries will at all times comply with each
material provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such provision might have a
material and adverse effect on the condition, financial or otherwise, or
operations of the Company.
3.5 INSURANCE. Except as otherwise decided in accordance with policies
adopted by the Company's Board of Directors, the Company will keep its assets
and those of its subsidiaries which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
explosion and other risks customarily insured against by companies in the
Company's line of business, and the Company will maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated.
3.6 ACCOUNTS AND RECORDS. The Company will keep true records and books
of account in which full, true and correct entries will be made of all dealings
or transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
3.7 INDEPENDENT ACCOUNTANTS. The Company will retain independent public
accountants of recognized national standing who shall certify the Company's
financial statements at the end of each fiscal year. In the event the services
of the independent public accountants so selected, or any firm of independent
public accountants hereafter employed by the Company are terminated, the Company
will promptly thereafter notify the Holders and will
17.
19
request the firm of independent public accountants whose services are terminated
to deliver to the Holders a letter from such firm setting forth the reasons for
the termination of their services. In the event of such termination, the Company
will promptly thereafter engage another firm of independent public accountants
of recognized national standing. In its notice to the Holders the Company shall
state whether the change of accountants was recommended or approved by the Board
of Directors of the Company or any committee thereof.
3.8 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The
Company and all its subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets.
3.9 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall maintain
in full force and effect its corporate existence, rights and franchises and all
licenses and other rights in or to use patents, processes, trademarks, trade
names or copyrights owned or possessed by it or any subsidiary and deemed by the
Company to be necessary to the conduct of their business.
3.10 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. The Company
will cause each person now or hereafter employed by it or any subsidiary with
access to confidential information to enter into a proprietary information and
inventions agreement substantially in the form approved by the Board of
Directors.
3.11 EMPLOYEE AND OTHER STOCK ARRANGEMENTS. The Company will not,
without the approval of the Board of Directors, issue any of its capital stock,
or grant an option or rights to subscribe for, purchase or acquire any of its
capital stock, to any employee, consultant, officer or director of the Company
or a subsidiary. Each acquisition of any shares of capital stock of the Company
or any option or right to acquire any shares of capital stock of the Company by
an employee, officer or director of the Company will be conditioned upon the
execution and delivery by the Company and such employee, officer or director of
an agreement substantially in a form approved by the Board of Directors of the
Company.
3.12 BOARD OF DIRECTORS. Immediately following the execution of this
Agreement and at all times thereafter until the time of effectiveness of its
initial public offering as defined in Section 1.2 above, the Company shall take
all appropriate actions to fix and maintain a Board of Directors of no more than
seven (7) persons. The makeup of the Board of Directors immediately following
the execution of this Agreement shall be Stewart Alsop, Charles Holloway,
Brendon Kim, Peter Nieh, Frank O'Connell, Lee Rosenberg and Gordon Tucker. The
Investors agree that upon the death or resignation of Peter Nieh, Brendon Kim or
Frank O'Connell as a Director of the Company, they will vote their Shares in
favor of a nominee to fill such vacancy or vacancies only if each nominee
therefor (i) has, in their reasonable judgment, significant business experience
and (ii) does not serve as an officer or director of, or hold a controlling
interest in, a direct competitor of the Company.
3.13 TRANSACTIONS WITH AFFILIATES. The Company shall not, without the
approval of a majority of the disinterested members of the Company's Board of
Directors, engage in any loans, leases, contracts or other transactions with any
director, officer or key employee of the Company, or any member of any such
person's immediate family, including the parents, spouse, children and other
relatives of any such person, on terms less favorable than the Company would
18.
20
obtain in a transaction with an unrelated party, as determined in good faith by
the Board of Directors.
3.14 AUDITS BY INVESTORS. Investors holding a majority of the Shares
shall have the right, through independent certified public accountants retained
at their expense, to audit the books and records of the Company. At such
Investors' request the Company shall provide an employee to assist in such
audit.
3.15 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance upon conversion of the Shares, at least
that number of shares of Common Stock issuable from time to time upon conversion
of the Shares.
3.16 QUALIFIED SMALL BUSINESS. The Company will use reasonable efforts
to comply with the reporting and record keeping requirements of Section 1202 of
the Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder.
3.17 TERMINATION OF COVENANTS. The covenants set forth in this Section
3 shall terminate and be of no further force and effect after the time of
effectiveness of the Company's first firm commitment underwritten public
offering registered under the Securities Act.
SECTION 4
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, as if entered into by and between
California residents exclusively for performance entirely within California.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
4.3 ENTIRE AGREEMENTS AMENDMENT; WAIVER. This Agreement (including the
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof, and is
intended to amend, restate and supersede the 1997 Rights Agreement in its
entirety. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated, except by a written instrument signed by the Company
and the holders of at least fifty percent (50%) of the Registrable Shares and
any such amendment, waiver, discharge or termination shall be binding on all the
holders of Registrable Securities, but in no event shall the obligation of any
holder of Registrable Securities hereunder be materially increased, except upon
the written consent of such holder of Registrable Securities.
4.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally addressed by hand or
special courier (a) if to a Holder, as indicated on the list of Holders attached
hereto as Exhibit A, or at such other address as such Investor or permitted
assignee shall have furnished to the Company in writing, or (b) if to the
Company, at 501 Second Street, Suite 114, San Francisco, California, 94107,
attention: Chief
19.
21
Executive Officer, or at such other address as the Company shall have furnished
to each holder in writing. All such notices and other written communications
shall be effective (i) if mailed, five (5) days after mailing and (ii) if
delivered, upon delivery.
4.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be 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.
4.6 RIGHTS; SEPARABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
4.7 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto is confidential and for its use
only on behalf of the Company, and it will not use such confidential information
in violation of the Exchange Act or reproduce, disclose or disseminate such
information to any other person (other than its partners, parent, subsidiaries,
employees or agents having a need to know the contents of such information, and
its attorneys), except in connection with the exercise of rights under this
Agreement, unless the Company or some other party other than the Holder has made
such information available to the public generally, or such Holder is required
to disclose such information by a governmental body (or order thereof) or
pursuant to any law, statute, rule or regulation.
4.8 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
20.
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year, first above written.
COMPANY: SHAREHOLDERS:
EGREETINGS NETWORK, INC. AUSTIN VENTURES]
By: By: AV Partners VI, L.P.
-------------------------------- Its: General Partner
Gordon M. Tucker
Chief Executive Officer By:
501 Second Street, Suite 114 ------------------------------------
San Francisco, CA 94107
------------------------------------
Its: Managing Director
Address: 114 West 7th Street
Suite 1300
Austin, TX 78701
AUSTIN VENTURES VI AFFILIATES
FUND, L.P.
By: AV Partners VI, L.P.
Its: Managing Member
By:
-------------------------------------
-------------------------------------
Its: Managing Member
Address: 114 West 7th Street
Suite 1300
Austin, TX 78701
TRANS COSMOS USA, INC.
By:
-------------------------------------
Yasuki Matsumoto
President
Address: 777 10th Avenue NE, Suite 2300
Bellevue, WA 98004
23
WEISS, PECK & GREER VENTURE
ASSOCIATES IV, L.L.C.
By:
------------------------------------
Peter Nieh
Its: Managing Member
Address: 555 California Street
Suite 3130
San Francisco, CA 94104
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND, L.P.
By: WPG VC Fund Adviser, L.L.C.
Its: General Partner
By:
------------------------------------
Peter Nieh
Its: Managing Member
Address: 555 California Street
Suite 3130
San Francisco, CA 94104
WEISS, PECK & GREER VENTURE
ASSOCIATES IV CAYMAN, L.P.
By: WPG Venture Advisers, Ltd.
Its: General Partner
By:
------------------------------------
Peter Nieh
Its: Managing Member
Address: 555 California Street
Suite 3130
San Francisco, CA 94104
24
WEISS, PECK & GREER VENTURE
ASSOCIATES V-A, L.L.C.
By: WPG VC Fund Adviser II, L.L.C.
Its: Fund Investment Advisory Member
By:
------------------------------------
Peter Nieh
Its: Managing Member
Address: 555 California Street
Suite 3130
San Francisco, CA 94104
WEISS, PECK & GREER VENTURE
ASSOCIATES V CAYMAN, L.P.
By: WPG VC Fund Adviser II, L.L.C.
Its: Fund Investment Advisory Partner
By:
------------------------------------
Peter Nieh
Its: Managing Member
Address: 555 California Street
Suite 3130
San Francisco, CA 94104
INFORMATION TECHNOLOGY VENTURES II, L.P.
By:
------------------------------------
Its: General Partner
By:
------------------------------------
Its:
------------------------------------
Address: 100 Hamilton Ave., Suite 400
Palo Alto, CA 94301
25
ITV AFFILIATES FUND II, L.P.
By:
-------------------------------------
Its: General Partner
By:
-------------------------------------
Its:
------------------------------------
Address: 100 Hamilton Ave., Suite 400
Palo Alto, CA 94301
NEW ENTERPRISE ASSOCIATES VIII,
LIMITED PARTNERSHIP
By: NEA Partners VIII,
Limited Partnership
Its: General Partner
By:
-------------------------------------
Its:
------------------------------------
Address: 2490 Sand Hill Road
Menlo Park, CA 94025
VULCAN VENTURES, INC.
By:
-------------------------------------
Its:
------------------------------------
Address: 110 110th Avenue NE
Bellevue, WA 98004
ALTOS VENTURES I, L.P.
By:
-------------------------------------
Its: General Partner
By:
-------------------------------------
Its:
------------------------------------
Address: 2882 Sand Hill Road, Suite 100
Menlo Park, CA 94025
26
ALTOS PARTNERS I
By:
-------------------------------------
Its: General Partner
By:
-------------------------------------
Its:
------------------------------------
Address: 2882 Sand Hill Road, Suite 100
Menlo Park, CA 94025
E-COMMERCE PARTNERS I, L.P.
By:
-------------------------------------
Its: General Partner
By:
-------------------------------------
Its:
------------------------------------
Address: Two Embarcadero Center,
Suite 2930
San Francisco, CA 94111
GIBSON GREETINGS, INC.
By:
-------------------------------------
Its:
------------------------------------
Address: 2100 Section Road
Cincinnati, OH 45326
KETTLE PARTNERS, L.P.
By:
-------------------------------------
Its: General Partner
By:
-------------------------------------
Its:
------------------------------------
Address: 350 West Hubbard Street
Suite 501
Chicago, IL 60610
27
LEE ROSENBERG
Address:
-------------------------------
-------------------------------
ALTOS PARTNERS I
By:
-------------------------------------
Its: General Partner
------------------------------------
Address:
-------------------------------
-------------------------------
RICHARD M. MOLEY ANNUITY TRUST U/A
DATED 5/12/98
By:
-------------------------------------
Richard M. Moley
Sole Trustee
Address: 19910 Robin Way
Saratoga, CA 95070
COMDISCO,INC.
By:
-------------------------------------
Its:
------------------------------------
Address: Two Embarcadero Center
Suite 2300
San Francisco, CA 94111
DUFF ACKERMAN & GOODRICH, L.P.
By:
------------------------------------
John Duff
Its:
------------------------------------
Address: Two Embarcadero Center
Suite 2300
San Francisco, CA 94111
DEVON GROUP
By:
-------------------------------------
Its:
------------------------------------
Address:
-------------------------------
-------------------------------
WOLTER LINK
Address:
-------------------------------
-------------------------------
-------------------------------
28
TABLE OF CONTENTS
Page
----
SECTION 1 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS.... 1
1.1 Certain Definitions................................................... 1
1.2 Requested Registration................................................ 3
1.3 Company Registration.................................................. 5
1.4 Expenses of Registration.............................................. 6
1.5 Registration on Form S-3.............................................. 6
1.6 Registration Procedure................................................ 7
1.7 Indemnification....................................................... 8
1.8 Information by Holder................................................. 10
1.9 Rule 144 Reporting................................................... 11
1.10 Transfer or Assignment of Registration Rights........................ 11
1.11 "Market Stand-Off" Agreement......................................... 11
1.12 Allocation of Registration Opportunities............................. 12
1.13 Restriction on Subsequent Registration Rights........................ 12
1.14 Delay of Registration................................................ 13
1.15 Termination of Registration Right.................................... 13
1.16 Limitations on Disposition........................................... 13
SECTION 2 RIGHTS OF FIRST REFUSAL.............................................. 13
2.1 Rights of First Refusal.............................................. 13
SECTION 3 COVENANTS OF THE COMPANY............................................. 15
3.1 Basic Financial Information.......................................... 15
3.2 Additional Information and Rights.................................... 16
3.3 Prompt Payment of Taxes, Etc......................................... 17
3.4 Maintenance of Properties and Lease.................................. 17
3.5 Insurance............................................................ 17
3.6 Accounts and Records................................................. 17
3.7 Independent Accountants.............................................. 17
3.8 Compliance with Requirements of Governmental Authorities............. 18
3.9 Maintenance of Corporate Existence, Etc.............................. 18
i.
29
TABLE OF CONTENTS
(CONTINUED)
Page
----
3.10 Proprietary Information and Inventions Agreements.................... 18
3.11 Employee and Other Stock Arrangements................................ 18
3.12 Board of Directors................................................... 18
3.13 Transactions with Affiliates......................................... 18
3.14 Audits by Investors.................................................. 19
3.15 Reservation of Common Stock.......................................... 19
3.16 Qualified Small Business............................................. 19
3.17 Termination of Covenants............................................. 19
SECTION 4 MISCELLANEOUS........................................................ 19
4.1 Governing Law........................................................ 19
4.2 Successors and Assigns............................................... 19
4.3 Entire Agreements Amendment; Waiver.................................. 19
4.4 Notices, Etc......................................................... 19
4.5 Delays or Omissions.................................................. 20
4.6 Rights; Separability................................................. 20
4.7 Information Confidential............................................. 20
4.8 Titles and Subtitles................................................. 20
4.9 Counterparts......................................................... 20
ii.