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EXHIBIT 10.5
ASIA ONLINE, LTD.
SECOND AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
MARCH 24, 2000
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TABLE OF CONTENTS
PAGE
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SECTION 1. GENERAL.............................................................................................1
1.1 Amendment and Restatement of Prior Agreement....................................................1
1.2 Definitions.....................................................................................2
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER..............................................................4
2.1 Restrictions on Transfer........................................................................4
2.2 Demand Registration.............................................................................6
2.3 Piggyback Registrations.........................................................................7
2.4 Form S-3 Registration...........................................................................8
2.5 Expenses of Registration.......................................................................10
2.6 Obligations of the Company.....................................................................10
2.7 Termination of Registration Rights.............................................................11
2.8 Furnishing Information.........................................................................11
2.9 Indemnification................................................................................12
2.10 Assignment of Registration Rights..............................................................14
2.11 Amendment of Registration Rights...............................................................14
2.12 Limitation on Subsequent Registration Rights...................................................14
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information.................................14
2.14 Rule 144 Reporting.............................................................................15
SECTION 3. COVENANTS OF THE COMPANY...........................................................................16
3.1 Basic Financial Information and Reporting......................................................16
3.2 Inspection Rights..............................................................................16
3.3 Confidentiality of Records.....................................................................17
3.4 Reservation of Common Stock....................................................................17
3.5 Stock Vesting..................................................................................17
3.6 Visitation Rights..............................................................................17
3.7 Proprietary Information and Inventions Agreement...............................................17
3.8 Protective Provisions..........................................................................17
3.9 United States Real Property Holding Corporation................................................18
3.10 Termination of Covenants.......................................................................18
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TABLE OF CONTENTS
(CONTINUED)
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SECTION 4. PREEMPTIVE RIGHTS..................................................................................18
4.1 Subsequent Offerings...........................................................................18
4.2 Exercise of Rights.............................................................................18
4.3 Issuance of Equity Securities to Other Persons.................................................19
4.4 Termination and Waiver of Preemptive Rights....................................................19
4.5 Transfer of Preemptive Rights..................................................................19
4.6 Excluded Securities............................................................................19
SECTION 5. VOTING.............................................................................................20
5.1 Holders of Series A Preferred..................................................................20
5.2 Holders of Common Stock........................................................................20
5.3 Holders of Preferred and Common Stock..........................................................20
5.4 Termination....................................................................................21
SECTION 6. MISCELLANEOUS......................................................................................21
6.1 Governing Law..................................................................................21
6.2 Survival.......................................................................................22
6.3 Successors and Assigns.........................................................................22
6.4 Entire Agreement...............................................................................22
6.5 Severability...................................................................................22
6.6 Amendment and Waiver...........................................................................22
6.7 Delays or Omissions............................................................................23
6.8 Notices........................................................................................23
6.9 Attorneys' Fees................................................................................23
6.10 Titles and Subtitles...........................................................................23
6.11 Counterparts...................................................................................23
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EXHIBIT A
SCHEDULE OF INVESTORS
ABN-AMRO Capital Investment Asia Limited
CIBC WMC Inc.
Concentric Network Corporation
Dell USA L.P.
GE Capital Equity Investments, Inc.
GE Equity Investments, Inc.
Hikari Tsushin International Limited
Hikari Tsushin Partners, L.P.
Interliant, Inc.
J.P. Morgan International Capital Corporation
The Manufactures Life Insurance Company (USA)
MLS-I, L.P.
Nexus Capital Partners I, L.P.
Nexus Capital Partners II, L.P.
Nexus Partners, LLC
PW Partners 1998, L.P.
P.W. Exe, L.P.
PW Capital Inc.
Pequot Private Equity Fund II, L.P.
Porcelain Partners, L.P.
Sixty Wall Street Fund, L.P.
Societe Centrale d'Investissements
Systex Capital Group, Inc.
Softbank Technology Ventures V, L.P.
Softbank Technology Advisors Fund V, L.P.
Softbank Technology Entrepreneurs Fund V, L.P.
Softbank Technology Ventures IV, L.P.
Softbank Technology Advisors Fund, L.P.
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ASIA ONLINE, LTD.
SECOND AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the
"AGREEMENT") is entered into as of the 24th day of March, 2000, by and among
ASIA ONLINE, LTD., a Delaware corporation (the "COMPANY"), the purchasers of the
Company's Series C (the "SERIES C PREFERRED") set forth on Exhibit A of that
certain Series C Preferred Stock Purchase Agreement of even date herewith (the
"PURCHASE AGREEMENT"), and the holders of the Company's Series A Preferred Stock
("SERIES A PREFERRED") and Series B Preferred Stock ("SERIES B PREFERRED") set
forth, together with the purchasers of the Series C Preferred, on Exhibit A
hereto. The purchasers of the Series C Preferred and the holders of the Series A
Preferred and Series B Preferred, together with any subsequent holder that
becomes a party to this Agreement, shall be referred to hereinafter as the
"INVESTORS" and each individually as an "Investor."
RECITALS
WHEREAS, the Company has granted registration rights, information
rights and certain other rights pursuant to that certain Amended and Restated
Investors' Rights Agreement, dated as of August 3, 1999, as amended (the "Prior
Agreement").
WHEREAS, the Company proposes to sell and issue up eleven million four
hundred one thousand six hundred fifty-nine (11,401,700) shares of its Series C
Preferred Stock pursuant to the Purchase Agreement; and
WHEREAS, as a condition of entering into the Purchase Agreement, the
Investors have requested that the Company extend to them registration rights,
information rights and other rights as set forth below and the Company and the
parties to the Prior Agreement are willing to amend the rights given to them in
the Prior Agreement by replacing such rights in their entirety with the rights
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENT. All of the undersigned parties
who were parties to the Prior Agreement and who constitute the requisite parties
to amend the Prior Agreement hereby (i) waive any right of first refusal,
preemptive right, or other right to purchase any shares of Series C Preferred
Stock being sold pursuant to that certain Series C Preferred Stock Purchase
Agreement, as of even date herewith, as well as notice of such sale
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of Series C Preferred Stock, on behalf of themselves and all others, and (ii)
agree that the Prior Agreement is null and void and superseded in all respects
by this Agreement.
1.2 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FORM S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
"HOLDER" means (a) any person owning of record Registrable
Securities that have not been sold to the public or (b) any assignee of record
of such Registrable Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"MANAGEMENT HOLDER" means Kevin Randolph.
"PERMITTED TRANSFEREE" means:
(1) with respect to J.P. Morgan International Capital
Corp. ("JPMICC") and Sixty Wall Street Fund, L.P. (the "Fund") (i) each entity
controlled by JPMICC or the Fund or any affiliate of either of them, (ii) a
partnership in which JPMICC or the Fund, and/or one or more affiliates of either
of them, constitute a majority of the general partners, or (iii) an investment
fund or unit trust managed by JPMICC or the Fund, or any affiliate of either of
them, or the fund manager of JPMICC or the Fund, or an affiliate of either of
them; provided that (i) any transferee shall be an "accredited investor" as such
term is defined in Regulation D of the Securities Act of 1933, as amended, and
(ii) such transfer shall not result in the Company losing its exemption for the
sale of the Shares to the Purchasers as such term is defined in the Purchase
Agreement; or
(2) with respect to ABN AMROCapital Investment Asia
Limited and ABN AMRO Holding N.V. ("AA Holding"), (i) each entity that directly
or indirectly controls, is under common control with, or is controlled by AA
Holding, (ii) a partnership in which AA Holding and/or any entity described
under (i) above constitute a majority of the general partners or (iii) an
investment fund or unit trust where AA Holding or any entity described under (i)
or (ii) above serves as the manager of the investment fund or unit trust or is
responsible for designating the manager of the investment fund or unit trust;
provided that (i) any transferee shall be an "accredited investor" as such term
is defined in Regulation D of the Securities Act of 1933, as amended, and (ii)
such transfer shall not result in the Company losing its exemption for the sale
of the Shares to the Purchasers as such term is defined in the Purchase
Agreement; or
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(3) with respect to either Hikari Tsushin Partners,
L.P. or Hikari Tsushin, Inc., any affiliate or subsidiary of Hikari Tsushin
Partners, L.P. or Hikari Tsushin, Inc. including but not limited to Golden Power
International Holdings Limited; provided that (i) any transferee shall be an
"accredited investor" as such term is defined in Regulation D of the Securities
Act of 1933, as amended, and (ii) such transfer shall not result in the Company
losing its exemption for the sale of the Shares to the Purchasers as such term
is defined in the Purchase Agreement; or
(4) with respect to Paribas, including any successor
thereof ("Paribas"), and Societe Centrale d'Investissements, (i) each entity
that directly or indirectly controls, is under common control with, or is
controlled by Paribas, (ii) a partnership in which Paribas and/or any entity
described under (i) above constitute a majority of the general partners or (iii)
an investment fund or unit trust where Paribas or any entity described under (i)
or (ii) above serves as the manager of the investment fund or unit trust or is
responsible for designating the manager of the investment fund or unit trust;
provided that (i) any transferee shall be an "accredited investor" as such term
is defined in Regulation D of the Securities Act of 1933, as amended, and (ii)
such transfer shall not result in the Company losing its exemption for the sale
of the Shares to the Purchasers as such term is defined in the Purchase
Agreement.
"QUALIFIED IPO" means the Company's first firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Class A Common Stock for
the account of the Company in which (i) the per share price is at least $12.00
(as adjusted for stock splits, dividends, recapitalizations and the like), and
(ii) the gross cash proceeds to the Company (before underwriting discounts,
commissions and fees) are at least $20,000,000.
"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
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company
issued or issuable upon conversion of the Shares; (b) the ten (10) shares, in
the aggregate, of Common Stock acquired by Softbank Technology Ventures IV, L.P.
and Softbank Technology Advisors Fund, L.P. in January, 1999; (c) for purposes
of Section 2 only (other than Section 2.2), shares of Common Stock held by or
issuable upon exercise or conversion of outstanding options or other rights to
acquire Common Stock of the Company held by the Management Holder (and by
permitted assignees of such Management Holder); and (d) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number
of shares determined by calculating the total number of shares of the Company's
Common Stock that are
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Registrable Securities and either (a) are then issued and outstanding or (b) are
issuable pursuant to then exercisable or convertible securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, reasonable fees and disbursements
not to exceed twenty-five thousand dollars ($25,000) of a single special counsel
for the Holders, 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).
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SHARES" shall mean (i) the shares of the Company's Series A
Preferred Stock issued pursuant to the certain Series A Preferred Stock Purchase
Agreement, dated February 26, 1999, or held by the Management Holder, (ii) the
shares of the Company's Series B-1 Preferred Stock and Series B-2 Preferred
Stock issued pursuant to the certain Series B Preferred Stock Purchase
Agreement, dated August 3, 1999, and (iii) the shares of the Company's Series C
Preferred Stock issued pursuant to the Purchase Agreement.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) 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
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Holder 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 (C) if reasonably requested by the Company, such Holder 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. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder which is (A) a partnership to its
partners or former partners in accordance with partnership
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interests, (B) a corporation to its stockholders, in accordance with their
interest in the corporation, or its affiliates, (C) a limited liability company
to its members or former members in accordance with their interest in the
limited liability company, (D) to the Holder's family member or trust for the
benefit of an individual Holder, or (E) to a Permitted Transferee; provided that
in each case the transferee shall agree to become, and will be subject to the
terms of this Agreement to the same extent as if such person or entity were an
original Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with legends substantially similar to the
following (in addition to any legend required under applicable state securities
laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE
TERMS AND CONDITIONS OF AN AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT, WHICH PLACES CERTAIN
RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED
HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH
SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME
BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED EXCEPT IN COMPLIANCE WITH THE INVESTORS'
RIGHTS AGREEMENT, COPIES OF WHICH ARE ON FILE AT THE
OFFICE OF THE ISSUER.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed
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upon receipt by the Company of an order of the appropriate blue sky authority
authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request that the Company file a registration
statement under the Securities Act having an aggregate offering price, net of
underwriting discounts and commissions, exceeding $10,000,000 (a "QUALIFIED
PUBLIC OFFERING") from the Holders of greater than (a) 20% of the Registrable
Securities then outstanding (excluding for purposes of this calculation any
Registrable Securities held by the Management Holders or any of their permitted
transferees), or (b) 40% of the outstanding shares of Series B Preferred,
including Common Stock issued on conversion of Series B Preferred, or (c) 40% of
the outstanding shares of Series C Preferred, including Common Stock issued on
conversion of Series C Preferred (in each case, the "INITIATING HOLDERS"), then
the Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.
(b) 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 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration 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
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to February 26, 2002; unless the Company's
Initial Offering occurs before February 26, 2002, in which case the Company
shall be required to effect registrations pursuant to this Section 2.2 beginning
the day following the date one hundred eighty (180) days after the Company's
Initial Offering.
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(ii) after the Company has filed three (3)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective and either: (A) such registration has been
declared or ordered effective; or (B) the request for such registration has been
subsequently withdrawn by the Initiating Holders, unless the withdrawal is based
upon material adverse information concerning the Company of which the Initiating
Holders were not aware at the time of such request; provided, however, that if
the Initiating Holders shall pay all expenses of such withdrawn registration,
then such withdrawn registration shall not be considered for purposes of
determining whether the Company has satisfied its obligations under this Section
2.2(c)(ii).
(iii) during the period starting with the date of
filing of, and ending on the date one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Company's Initial
Offering; provided that the Company makes reasonable good faith efforts to cause
such registration statement to become effective;
(iv) if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 2.2(a), the Company
gives notice to the Holders of the Company's intention to make a public offering
within ninety (90) days;
(v) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 2.2, a certificate
signed by the Chairman of the Board stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such registration statement to be effected at
such time, in which event the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the Initiating Holders; provided that such right to delay a request shall be
exercised by the Company not more than once in any twelve (12) month period; or
(vi) without prejudice to the rights of the Holders
under Section 2.4 hereof, if the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within thirty (30) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or
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registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 2.3 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 Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any stockholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall (i) reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting,
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five percent (25%) of the total amount of securities
included in such registration, unless such offering is the Initial Offering and
such registration does not include shares of any other selling stockholders, in
which event any or all of the Registrable Securities of the Holders may be
excluded in accordance with the immediately preceding sentence. In no event will
shares of any other selling stockholder be included in such registration which
would reduce the number of shares which may be included by Holders without the
written consent of Holders of not less that sixty-six and two-thirds (66 2/3%)
of the Registrable Securities proposed to be sold in the offering. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership, limited liability corporation or corporation, the
partners, members, retired partners, retired members, and stockholders of such
Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing person shall,
unless such persons also directly own Registrable Securities for their own
account, be deemed to be a single "HOLDER", and any pro rata reduction with
respect to such "Holder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "Holder," as defined in this sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a
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registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliance as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders, or
(ii) if 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) at an
aggregate price to the public of less than five hundred thousand dollars
($500,000), or
(iii) if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 2.2(a), the Company
gives notice to the Holders of the Company's intention to make a public offering
within ninety (90) days;
(iv) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors 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 and its stockholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(v) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
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2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2, in which event such right shall be forfeited by all Holders). If the
Holders are required to pay the Registration Expenses, such expenses shall be
borne by the holders of securities (including Registrable Securities) requesting
such registration in proportion to the number of shares for which registration
was requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to ninety (90) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto. The Company shall not be required to file, cause to become effective or
maintain the effectiveness of any registration statement that contemplates a
distribution of securities on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.
(b) Prepare and file with the SEC 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 for the period set forth in
paragraph (a) above.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, and such amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as they may reasonably request in order to facilitate
the disposition of Registrable Securities owned by them.
(d) Use its reasonable 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.
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(e) Use its reasonable best efforts to cause all securities
covered by such registration statement to be registered with or approved by such
other governmental authorities in the United States as may be necessary by
virtue of the business and operations of the Company to enable the sellers to
consummate the disposition thereof;
(f) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(g) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and, at the request of any Holder of securities participating in the
registration, promptly prepare a supplement or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers of such
securities, 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 in light of the circumstances
under which they were made.
(h) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
(i) Use its reasonable best efforts to cause all securities
covered by such registration statement to be listed on a national securities
exchange in the united States or on the National Association of Securities
Dealers, Inc. National Market System (if such securities are not already so
listed), and on each other securities exchange on which similar securities
issued by the Company are then listed, if the listing of such securities covered
by the such registration statement is then permitted under the rules of such
exchange.
2.7 TERMINATION OF REGISTRATION RIGHTS. A Holder's registration rights
shall expire if (a) the Company has completed its Initial Offering and is
subject to the provisions of the Exchange Act, (b) all Registrable Securities
held by and issuable to such Holder (and its affiliates, partners, former
partners, members and former members) may be sold under Rule 144 during any
ninety (90) day period, and (c) such Holder holds less than one-half (1/2)
percent of the issued and outstanding shares of the Company, on an as if
converted basis.
2.8 FURNISHING INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2.2, 2.3 or
2.4 that the selling Holders shall
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furnish to the Company such information regarding themselves, the Registrable
Securities held by them and the intended method of disposition of such
securities as shall be required to effect the registration of their Registrable
Securities.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers, employees, agents,
advisors and directors of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or in any application or other document or
communication executed by or on behalf of the Company or based upon written
information by or on behalf of the Company filed in any jurisdiction in order to
qualify any securities covered by such registration statement under the "blue
sky" or securities laws thereof, (ii) the 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 (iii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, any state securities law
or any rule or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law in connection with the offering covered by such
registration statement; and the Company will pay as incurred to each such
Holder, partner, officer, director, underwriter, employee, agent, advisor or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
this Section 2.9(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 shall not be unreasonably withheld,
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, employee, agent, advisor, underwriter
or controlling person of such Holder.
(b) To the extent permitted by law, each Holder, severally and
not jointly, will, if Registrable Securities held by such Holder are included in
the securities as to which such registration qualifications or compliance is
being effected, indemnify and hold harmless the Company, each of its directors,
employees, agents, advisors, officers and each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter and any other
Holder selling securities under such registration statement or any of such other
Holder's partners, directors, officers, employees, agents, advisors or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, employee, agent, advisor, controlling person, underwriter or other such
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Holder, or partner, director, officer, employee, agent, advisor or controlling
person of such other Holder may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder under an instrument duly executed by such
Holder and stated to be specifically for use in connection with such
registration; and each such Holder will pay as incurred any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, employee, agent, advisor, underwriter or other Holder, or
partner, officer, director, employee, agent, advisor or controlling person of
such other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action if it is judicially determined that there was
such a Violation; provided, however, that the indemnity agreement contained in
this Section 2.9(b) 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 such Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own 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 to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve such indemnifying
party of any liability that it may have to any indemnified party otherwise than
under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability 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 Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law 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,
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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) The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. 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.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, affiliate, parent, general partner, limited partner, retired
partner, member or retired member of a Holder, (b) is a Holder's family member
or trust for the benefit of an individual Holder, (c) acquires at least two
hundred fifty thousand (250,000) shares of Registrable Securities (as adjusted
for stock splits and combinations), (d) acquires all of such Holder's shares of
Registrable Securities, or (e) is a Permitted Transferee; provided, however, (i)
the transferor shall, within ten (10) days after such transfer, furnish to the
Company written notice of the name and address of such transferee or assignee
and the securities with respect to which such registration rights are being
assigned and (ii) such transferee shall agree to be subject to all restrictions
set forth in this Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least sixty percent (60%)
of the Registrable Securities then outstanding; provided that any amendment or
waiver of Section 2.2 may be effected with the written consent of the holders of
at least sixty percent (60%) of the Registrable Securities then outstanding,
excluding shares held by the Management Holders. Any amendment or waiver
effected in accordance with this Section 2.11 shall be binding upon each Holder
and the Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of at least a majority of the Registrable Securities then outstanding,
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.
2.13 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION.
Each Holder hereby agrees that such Holder shall not sell, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, or otherwise
reduce its risk of ownership or investment in, any Common Stock (or other
securities) of the Company held by such Holder (other than those included in the
registration) for a period (if any) specified by the representative of the
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underwriters of Common Stock (or other securities) of the Company with respect
to each such transaction not to exceed one hundred eighty (180) days following
the effective date of a registration statement of the Company filed under the
Securities Act; provided that all officers and directors of the Company and
holders of at least one percent (1%) of the Company's voting securities enter
into similar agreements, and such agreements have not been waived with respect
to any such officer, director or holder of at least 1% of the Company. The
Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of said one hundred eighty (180) day period.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.13 shall
not apply to a registration relating solely to employee benefit plans on Form
S-1 or Form S-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future.
2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable 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 SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of 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 as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
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SECTION 3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with United States generally accepted accounting principles
consistently applied, and will set aside on its books all such proper accruals
and reserves as shall be required under generally accepted accounting principles
consistently applied.
(b) As soon as practicable after the end of each fiscal year
of the Company, and in any event within ninety (90) days thereafter, to the
extent requested by an Investor the Company will furnish each Investor a balance
sheet of the Company, as at the end of such fiscal year, and a statement of
income and a statement of cash flows of the Company, for such year, all prepared
in accordance with United States generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
public accountants of recognized international standing selected by the
Company's Board of Directors.
(c) The Company will furnish each Investor, 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, to the extent requested by such Investor a balance sheet
of the Company as of the end of each such quarterly period, and a statement of
income and a statement of cash flows of the Company for such period and for the
current fiscal year to date, prepared in accordance with United States generally
accepted accounting principles, with the exception that no notes need be
attached to such statements and year-end audit adjustments may not have been
made.
(d) So long as an Investor (together with its Permitted
Transferees and its affiliates) shall own not less than five hundred thousand
(500,000) shares of Registrable Securities (as adjusted for stock splits and
combinations and similar transactions) (a "MAJOR INVESTOR"), the Company will
furnish each such Major Investor (i) at least thirty (30) days prior to the
beginning of each fiscal year an annual budget and operating plans for such
fiscal year (and as soon as available, any subsequent revisions thereto); and
(ii) as soon as practicable after the end of each month, and in any event within
twenty (20) days thereafter, a balance sheet of the Company as of the end of
each such month, and a statement of income and a statement of cash flows of the
Company for such month and for the current fiscal year to date, including a
comparison to plan figures for such period, prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
3.2 INSPECTION RIGHTS. Each Investor shall have the right to visit and
inspect any of the properties of the Company or any of its subsidiaries, and to
discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be
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reasonably requested; provided, however, that the Company shall not be obligated
under this Section 3.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith
would destroy the attorney-client privilege.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary, affiliate or
parent of such Investor for the purpose of evaluating its investment in the
Company as long as such partner, subsidiary or parent is advised of the
confidentiality provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock which may then be issuable upon full
conversion of the Preferred Stock.
3.5 STOCK VESTING. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (a) twenty-five percent (25%) of such stock
shall vest at the end of the first year following the earlier of the date of
issuance or such person's services commencement date with the company, and (b)
seventy-five percent (75%) of such stock shall vest monthly in even amounts over
the remaining three (3) years. With respect to any shares of stock purchased by
any such person, the Company's repurchase option shall provide that upon such
person's termination of employment or service with the Company, with or without
cause, the Company or its assignee (to the extent permissible under applicable
securities laws and other laws) shall have the option to purchase, at the
original price per share paid by such person for such stock, any unvested shares
of stock held by such person.
3.6 VISITATION RIGHTS. The Company shall allow one representative
designated by each Investor holding (together with its Permitted Transferees and
its affiliates) more than nine hundred thousand (900,000) Shares to attend all
meetings of the Company's Board of Directors in a nonvoting capacity, and in
connection therewith, the Company shall give each such representative copies of
all notices, minutes, consents and other materials, financial or otherwise,
which the Company provides to its Board of Directors; provided, however, that
the Company reserves the right to exclude any such representative from access to
any material or meeting or portion thereof if the Company believes upon advice
of counsel that such exclusion is reasonably necessary to preserve the
attorney-client privilege or for other similar reasons.
3.7 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in a form approved by the Company's Board
of Directors.
3.8 PROTECTIVE PROVISIONS. The approval of a majority of the Board of
Directors shall be required for effecting or validating any of the following
actions:
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(a) Any action by the Company or any Subsidiary regarding an
Asset Transfer or Acquisition (as defined in the Company's Restated Certificate
of Incorporation);
(b) Any incurrence of debt in excess of net current assets
(not taking into account cash raised in any Preferred Stock financing) on a
consolidated basis with all Subsidiaries;
(c) Any liquidation or winding up of the Company; and
(d) The acquisition or disposition of any internet service
provider business or any other related business by the Company or any
Subsidiary, for consideration in excess of three million dollars ($3,000,000),
or any other acquisition or disposition for consideration by the Company or any
Subsidiary with a value in excess of three million dollars ($3,000,000).
3.9 UNITED STATES REAL PROPERTY HOLDING CORPORATION. The Company will
not become at any time in the future a United States Real Property Holding
Corporation as such term is defined in Section 897(c)(2) of the Internal Revenue
Code of 1986, as amended.
3.10 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 3 of this Agreement shall expire and terminate as to each Investor
upon the earlier of (i) the closing of the Qualified IPO or (ii) upon the
consummation of an Asset Transfer or Acquisition, as defined in the Company's
Restated Certificate of Incorporation.
SECTION 4. PREEMPTIVE RIGHTS
4.1 SUBSEQUENT OFFERINGS. Each Major Investor shall have a preemptive
right to purchase its pro rata share of all Equity Securities, as defined below,
that the Company may, from time to time, propose to sell and issue after the
date of this Agreement, other than the Equity Securities excluded by Section 4.6
hereof. Each Investor's pro rata share is equal to the ratio of (a) the number
of shares of the Company's Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Shares) which such Investor is deemed
to be a holder immediately prior to the issuance of such Equity Securities to
(b) the total number of shares of the Company's outstanding Common Stock
(including all shares of Common Stock issued or issuable upon conversion of the
Shares or upon the exercise of any outstanding warrants or options) immediately
prior to the issuance of the Equity Securities. The term "EQUITY SECURITIES"
shall mean (i) any Common Stock, Preferred Stock or other equity security of the
Company, (ii) any security convertible, with or without consideration, into any
Common Stock, Preferred Stock or other equity security (including any option to
purchase such a convertible security), (iii) any security carrying any warrant
or right to subscribe to or purchase any Common Stock, Preferred Stock or other
equity security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to
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offer or sell such Equity Securities to any Major Investor who would cause the
Company to be in violation of applicable United States federal securities laws
by virtue of such offer or sale. In connection with any such offer or sale, the
Company will take such actions as are commercially reasonable, or refrain from
taking such actions as is commercially reasonable, as are within its control, so
as to ensure that appropriate exemptions from the registration requirements of
the Securities Act are available.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Major Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Major Investors who do so
elect (each, an "Electing Investor") and shall offer such Major Investors the
right to acquire such unsubscribed shares. Each Electing Investor shall have
five (5) days after receipt of such notice to notify the Company of its election
to purchase all or a portion thereof of the unsubscribed shares. If the Major
Investors fail to exercise in full the rights of first refusal, the Company
shall have ninety (90) days thereafter to sell the Equity Securities in respect
of which the Major Investor's rights were not exercised, at a price and upon
general terms and conditions no more favorable to the purchasers thereof than
specified in the Company's notice to the Major Investors pursuant to Section 4.2
hereof. If the Company has not sold such Equity Securities within ninety (90)
days of the notice provided pursuant to Section 4.2, the Company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Major Investors in the manner provided above.
4.4 TERMINATION AND WAIVER OF PREEMPTIVE RIGHTS. The preemptive rights
established by this Section 4 shall not apply to, and shall terminate upon the
earlier of (i) the closing of the Company's Initial Offering or (ii)
consummation of an Asset Transfer or Acquisition as defined in the Company's
Restated Certificate of Incorporation. The preemptive rights established by this
Section 4 may be amended, or any provision waived with the written consent of
Major Investors holding sixty percent (60%) of the Registrable Securities held
by all Major Investors, or as permitted by Section 5.6.
4.5 TRANSFER OF PREEMPTIVE RIGHTS. The preemptive rights of each Major
Investor under this Section 4 may be transferred to the same parties, subject to
the same restrictions as any transfer of registration rights pursuant to Section
2.10.
4.6 EXCLUDED SECURITIES. The preemptive rights established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) Shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued after the Original Issue Date (as defined in the
Company's Restated Certificate of Incorporation (the "Restated Certificate")) to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors;
(b) Stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement and options and warrants
outstanding as of the date of this Agreement; and stock issued pursuant to any
such rights or agreements granted after the date of this
19.
24
Agreement; provided that the rights of first refusal established by this Section
4 apply with respect to the initial sale or grant by the Company of such rights
or agreements;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination approved by the Board of Directors;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing or loan arrangement, or debt financing from a bank or similar financial
or lending institution approved by the Board of Directors;
(g) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and
(h) shares of the Company's Common Stock or Preferred Stock
issued in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors.
SECTION 5. VOTING
In any and all elections of directors of the Company (whether at a
meeting or by written consent in lieu of a meeting), each Holder shall vote,
consent, or cause to be voted or consented, all shares of capital stock of the
Company owned by such Holder or over which such Holder has voting control to
elect directors as follows:
5.1 HOLDERS OF SERIES A PREFERRED. At each election of directors in
which the holders of the Series A Preferred Stock, voting together as a separate
class, are entitled to elect two directors of the Company pursuant to Section
2(e)(i) of the Restated Certificate, the holders of Series A Preferred Stock
that are parties hereto shall vote their respective shares of Series A Preferred
Stock so as to elect such persons designated by Softbank Technology Ventures IV,
L.P. (which persons shall initially be Scott Russell and Brad Feld).
5.2 HOLDERS OF COMMON STOCK. At each election of directors in which the
holders of Common Stock, voting together as a separate class, are entitled to
elect a director of the Company pursuant to Section 2(e)(ii) of the Restated
Certificate, the holders of Common Stock that are parties hereto shall vote
their respective shares of Common Stock so as to elect the then current Chief
Executive Officer of the Company.
5.3 HOLDERS OF PREFERRED AND COMMON STOCK. At each election of
directors in which the holders of Common Stock and Preferred Stock, voting
together as a separate and single class, are entitled to elect all remaining
directors of the Company pursuant to Section
20.
25
2(e)(iii) of the Restated Certificate, the holders of Common Stock and Preferred
Stock shall vote their respective shares of Common Stock and Preferred Stock so
as to elect (i) such person not employed by the Company as is nominated by the
Chief Executive Officer of the Company and the directors elected pursuant to
Section 2(e)(i) of the Restated Certificate, and who is reasonably acceptable to
the directors nominated pursuant to clause (iii) hereof, (ii) such person not
employed by the Company as is nominated by the directors nominated pursuant to
clause (iii) hereof, and who is reasonably acceptable to the Chief Executive
Officer of the Company and the directors elected pursuant to Section 2(e)(i) of
the Restated Certificate, and (iii) one person nominated by JPMICC (who shall
initially be Karl Fooks) and one person nominated by Pequot Private Equity Fund
II, L.P.("Pequot") (who shall initially be James McNiel). Either the person
nominated by JPMICC or the person nominated by Pequot shall be hereinafter
referred to as the "JPMICC/Pequot Director".
5.4 TERMINATION. The provisions of this Section 5 shall continue in
full force and effect from the date hereof through the earliest of the following
dates, on which they shall terminate in their entirety:
(a) the date of the closing of the Qualified IPO;
(b) ten (10) years from the date of this Agreement;
(c) upon the consummation of an Asset Transfer or Acquisition,
as defined in the Company's Restated Certificate; or
(d) the date as of which the parties hereto terminate this
Agreement pursuant to Section 6.6 of this Agreement.
SECTION 6. MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California, except as to matters of corporate law which shall be governed by the
General Corporation Law of Delaware. Any legal action or other legal proceeding
commenced among the parties hereto with respect to this Agreement shall be
commenced and maintained exclusively in a state or federal court located in the
County of Santa Clara, State of California. Each party hereto expressly and
irrevocably consents and submits to the exclusive jurisdiction of the applicable
state and federal courts located in the County of Santa Clara, State of
California and each appellate court located in the State of California, in
connection with any such proceeding. Each party agrees that such courts shall be
deemed to be a convenient forum in any such legal proceeding, and agrees not to
assert (by way of motion, as a defense or otherwise) any claim that such party
is not subject personally to the jurisdiction of any such courts, that such
legal proceeding has been brought in an inconvenient forum, that the venue of
such legal proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by any such courts. Personal service may be
effected by written notice served upon either party as provided by this
Agreement, or as otherwise permitted or provided by law in the State of
California.
21.
26
6.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 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 and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Purchase Agreement and the other documents delivered pursuant
thereto (including, without limitation, the JPMICC Letter (as defined in the
Purchase Agreement and the Restated Certificate), constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
6.5 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
6.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least sixty percent (60%) of the Registrable Securities, provided that any
amendment or modification affecting the right of J.P. Morgan International
Capital Corporation to designate one JPMICC/Pequot Director as provided in
Section 5.3 shall require the written consent of J.P. Morgan International
Capital Corporation, and that any amendment or modification affecting the right
of Pequot Private Equity Fund II, L.P. to designate one JPMICC/Pequot Director
as provided in Section 5.3 shall require the written consent of Pequot Private
Equity Fund II, L.P.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least sixty percent (60%) of the
Registrable Securities.
22.
27
(c) Notwithstanding the foregoing, this Agreement may be
amended with only the written consent of the Company to include purchasers of
Shares pursuant to the Purchase Agreement at any closing after the First Closing
as "Investors," "Holders" and parties hereto.
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) eight (8) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) three (3) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature pages hereof
or Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
6.9 ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.11 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
23.
28
IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: INVESTOR:
ASIA ONLINE, LTD. SOFTBANK TECHNOLOGY VENTURES IV, L.P.
By: /s/ Kevin H. Randolph By: /s/ Edward Scott Russell
-------------------------- -------------------------
Kevin H. Randolph, President
Name: Edward Scott Russell
-----------------------
Title: Managing Director
----------------------
MANAGEMENT HOLDERS: SOFTBANK TECHNOLOGY ADVISORS FUND, L.P.
/s/ Kevin H. Randolph By: /s/ Edward Scott Russell
- ----------------------------- -------------------------
Kevin H. Randolph
Name: Edward Scott Russell
-----------------------
Title: Managing Director
----------------------
INTERLIANT, INC.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
J.P. MORGAN INTERNATIONAL CAPITAL CORP.
By: /s/ J. Edmund Colloton
-------------------------
Name: J. Edmund Colloton
-----------------------
Title: Vice President
----------------------
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
29
SIXTY WALL STREET FUND, L.P.
BY SIXTY WALL STREET CORPORATION,
ITS GENERAL PARTNER
By: /s/ J. Edmund Colloton
-----------------------------------
Name: J. Edmund Colloton
---------------------------------
Title: Vice President
--------------------------------
PEQUOT PRIVATE EQUITY FUND II, L.P.
By: Pequot Capital Management, Inc. as
investment manager
----------------------------------
Name: /s/ David J. Malat
---------------------------------
David J. Malat
Title: CFO
---------------------------
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Michael Benjamin Gosig
-----------------------------------
Name: Michael Benjamin Gosig
---------------------------------
Title: Vice President
---------------------------
NEXUS CAPITAL PARTNERS I, L.P.
By: /s/ Rob Horning
-----------------------------------
Name: Rob Horning
---------------------------------
Title: Principal, Nexus Group,
LLC - General Partner
---------------------------
MLS-I, L.P.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
30
PORCELAIN PARTNERS, L.P.
By: /s/ Rob Horning
----------------------------------
Name: Rob Horning
--------------------------------
Title: Principal, Nexus Group, LLC-
General Partner
-------------------------------
NEXUS PARTNERS, LLC
By: /s/ Rob Horning
----------------------------------
Name: Rob Horning
--------------------------------
Title: Principal
-------------------------------
CONCENTRIC NETWORK CORPORATION
By: /s/ James L. Isaacs
----------------------------------
Name: James L. Isaacs
--------------------------------
Title: VP, Business Development
-------------------------------
DELL USA L.P.
By: /s/ Thomas H. Welch, Jr.
----------------------------------
Name: Thomas H. Welch, Jr.
--------------------------------
Title: Vice President, Deputy General
Counsel
-------------------------------
SOCIETE CENTRALE D'INVESTISSEMENTS
By: /s/ Edwina Lee
----------------------------------
Name: Edwina Lee
--------------------------------
Title: Authorised Representative
-------------------------------
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
31
PW PARTNERS 1998, L.P.
By: /s/ Dhananjay Pai
----------------------------
Name: Dhananjay Pai
--------------------------
Title: Vice President
-------------------------
P.W. EXE, L.P.
By: /s/ Regina Dolan
----------------------------
Name: Regina Dolan
--------------------------
Title: Executive Vice President
-------------------------
PW CAPITAL INC.
By: /s/ Dhananjay Pai
----------------------------
Name: Dhananjay Pai
--------------------------
Title: President
-------------------------
ABN-AMRO CAPITAL INVESTMENT ASIA LIMITED
By: /s/ Marc Staal
----------------------------
Name: Marc Staal
--------------------------
Title: CEO
-------------------------
CIBC WMC INC.
By: /s/ [ILLEGIBLE]
----------------------------
Name: [ILLEGIBLE]
--------------------------
Title: Managing Director
-------------------------
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
32
THE MANUFACTURERS LIFE INSURANCE COMPANY
(USA)
By: /s/ Myles P. Gilbert/
/s/ William M. Sheehan
----------------------
Name: Myles P. Gilbert/
William M. Sheehan
---------------------
Title: Managing Director/
Managing Director
--------------------
SYSTEX CAPITAL GROUP, INC.
By: /s/ T.J. Huang
-----------------------
Name: T.J. Huang
---------------------
Title: Director
--------------------
HIKARI TSUSHIN PARTNERS, L.P.
By: /s/ Ryoji Kabaya
-----------------------
Name: Ryoji Kabaya
---------------------
Title: President
--------------------
HIKARI TSUSHIN INTERNATIONAL LIMITED
By: /s/ Masahide Saito
-----------------------
Name: Masahide Saito
---------------------
Title: Director
--------------------
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
33
GE EQUITY INVESTMENTS, INC.
By: /s/ Michael Benjamin Gosig
--------------------------------
Name: Michael Benjamin Gosig
------------------------------
Title: Vice President
-----------------------------
NEXUS CAPITAL PARTNERS II, L.P.
By: /s/ Rob Horning
--------------------------------
Name: Rob Horning
------------------------------
Title: Principal, Nexus Group, LLC-
General Partner
-----------------------------
SOFTBANK TECHNOLOGY VENTURES V, L.P.
BY SBTV V LLC, ITS GENERAL PARTNER
By: /s/ Edward Scott Russell
--------------------------------
Name: Edward Scott Russell
------------------------------
Title: Managing Director
-----------------------------
SOFTBANK TECHNOLOGY VENTURES ADVISORS
FUND V, L.P.
BY SBTV V LLC, ITS GENERAL PARTNER
By: /s/ Edward Scott Russell
--------------------------------
Name: Edward Scott Russell
------------------------------
Title: Managing Director
-----------------------------
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
34
SOFTBANK TECHNOLOGY VENTURES
ENTREPRENEURS FUND V, L.P.
BY SBTV V LLC, ITS GENERAL PARTNER
By: /s/ Edward Scott Russell
-------------------------
Name: Edward Scott Russell
-----------------------
Title: Managing Director
----------------------