Investors' Rights Agreement - Roving Software Inc.
ROVING SOFTWARE INCORPORATED
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
DATED AS OF
AUGUST 9, 2001
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TABLE OF CONTENTS
Page
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1. DEFINITIONS........................................................... 1
1.1 Capitalized Terms................................................ 1
1.2 Definitions...................................................... 1
2. REGISTRATION RIGHTS................................................... 4
2.1 Demand Registration Rights....................................... 4
2.2 Company Registration............................................. 6
2.3 Obligations of the Company....................................... 6
2.4 Furnish Information.............................................. 9
2.5 Expenses of Registration......................................... 9
2.6 Damages.......................................................... 10
2.7 Indemnification.................................................. 10
2.8 Reports Under Securities Exchange Act of 1934.................... 12
2.9 Form S-3 Registration............................................ 13
2.10 Assignment of Registration Rights................................ 14
2.11 Limitations on Subsequent Registration Rights.................... 14
2.12 "Market Stand-Off" Agreement..................................... 15
2.13 Obligations of the Holders....................................... 15
3. COVENANTS OF THE COMPANY.............................................. 15
3.1 Pre-emptive Rights............................................... 16
3.2 Delivery of Financial Statements................................. 17
3.3 Budget and Operating Forecast; Inspection........................ 18
3.4 Board of Directors; Meetings; Indemnification.................... 18
3.5 Composition of Board Committees.................................. 19
3.6 Positive Covenants............................................... 19
4. Miscellaneous......................................................... 20
4.1 Survival of Covenants............................................ 20
4.2 Legend on Securities............................................. 20
4.3 Successors and Assigns........................................... 21
4.4 Governing Law.................................................... 21
4.5 Counterparts..................................................... 21
4.6 Titles and Subtitles; Gender..................................... 21
4.7 Notices.......................................................... 21
4.8 Expenses......................................................... 22
4.9 Amendments and Waivers........................................... 22
4.10 Severability..................................................... 22
4.11 Aggregation of Stock............................................. 22
4.12 Entire Agreement; Amendment; Waiver.............................. 22
4.13 Prior Agreements................................................. 22
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AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"Agreement") is made as of the 9th day of August, 2001, by and among Roving
Software Incorporated, a Delaware corporation (the "Company") and the investors
named on Schedule A attached hereto, as its may be amended from time to time in
accordance with this Agreement (collectively, the "Investors," and each
individually, an "Investor").
RECITALS
WHEREAS, certain of the Investors (the "Existing Investors") hold
shares of the Company's Series A Redeemable Convertible Preferred Stock, $0.01
par value per share (the "Series A Preferred Stock"), Series B Convertible
Preferred Stock, $0.01 par value per share (the "Series B Preferred Stock"),
and/or shares of the Common Stock issued upon conversion thereof, and possess
certain rights pursuant to an Investors' Rights Agreement dated as of April 21,
2000, among the Company and the Existing Investors (the "Prior Agreement"); and
WHEREAS, certain Investors are parties to that certain Stock Purchase
Agreement of even date herewith among the Company and certain Investors relating
to the sale and purchase of the Company's Series C Convertible Preferred Stock,
$0.01 par value per share (the "Series C Preferred Stock")(the "Purchase
Agreement"), and certain of the Company's and such Investors' obligations
thereunder are conditioned upon the execution and delivery of this Agreement by
the Existing Investors holding Sixty-Six and Two-Thirds percent (66.67%) of the
Registrable Securities, the holders of Fifty-One percent (51%) of the Series. B
Preferred Stock, the Investors under the Purchase Agreement and the Company.
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the Existing Investors and the Company hereby agree that the
Prior Agreement shall be, amended, restated and superseded and replaced in its
entirety by this Agreement, and the parties hereto further agree as follows:
1. DEFINITIONS.
1.1 Capitalized Terms. Capitalized tensed herein but not defined
herein shall have they meanings ascribe to such terms in the Purchase Agreement.
1.2 Definitions. The following capitalized terms as used in this
Agreement shall have the meanings set forth below.
(a) An "Affiliate" of any Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the first mentioned Person. A
Person shall be deemed to control another Person if such first Person possesses
directly or indirectly the power to direct, or cause the direction of, the
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management and policies of the second Person, whether through the ownership of
voting securities, by contract or otherwise.
(b) The term "Board of Directors" shall mean the Board of
Directors of the Company.
(c) The term "Common Stock" shall mean the Company's Common
Stock, and any other securities into which the Company's Common Stock may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(d) The term "Form S-3" shall mean such form under the Securities
Act as in effect on the date hereof or any registration form under the
Securities Act subsequently adopted by the SEC in lieu of such form as currently
in effect which similarly permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(e) The term "Holder" shall mean any person owning Registrable
Securities or any assignee thereof in accordance with Section 2.10 hereof.
(f) The term "Investor" shall have the meaning set forth in the
Preamble and shall include all Permitted Transferees.
(g) The term "Investors' Nominee" shall mean one (1) director
designated by Morgan Stanley Dean Witter Venture Partners IV, L.P., who shall
initially be Noah Walley, one (1) director designated by Commonwealth Capital
Ventures II L.P., who shall initially be Michael T. Fitzgerald and one (1)
director designated by Longworth Venture Partners, L.P., who shall initially be
James J. Savage.
(h) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(i) The term "Permitted Transferee" shall mean with respect to
any Investor, (i) any such Investor's Affiliates, partners, retired partners,
members, employees, general partners or managing members of such Investor; (ii)
a liquidating trust established solely for the benefit of any partners or
members of such Investor, or (iii) any investment fund or other entity
controlled or managed by an Affiliate of such Investor or any other person who
acquires at least eighty percent (80%) of the shares of Preferred Stock or
Common Stock issued upon conversion of such shares of Preferred Stock; provided
that the Company has been provided written notice of any transfer permitted
under this Section 1.2(i) and such transferee agrees in writing to be bound by
the terms of this Agreement.
(j) The term "Person" shall mean an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated organization, a limited
liability company, and any other entity or organization, governmental or
otherwise.
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(k) The term "Preferred Stock" shall mean the Company's Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, and any
other securities into which the Series A, B and C Preferred Stock may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
(l) The term "Pro Rata Share" shall mean, with respect to any
Holder, the percentage that the Shares held by such Holders then represents of
all Common Stock of the Company then outstanding, giving effect to the
conversion of all securities convertible into or exercisable for Common Stock on
an as converted and as exercised basis, and assuming the exercise of all vested
outstanding options, warrants or subscription rights for capital stock of the
Company.
(m) The term "Qualified Public Offering" shall mean the initial
sale of securities pursuant to an effective registration statement filed by the
Company under the Securities Act (as hereinafter defined) in connection with a
firm commitment underwritten offering of its securities to the general public in
which (i) the aggregate gross proceeds (prior to the deduction of offering
expenses and underwriting discounts and commissions) are at least $30,000,000
and (ii) the price per share of Common Stock offered to the public is at least
four times the initial purchase price of the Company's Series C Preferred Stock.
(n) The terms "register," "registered," and "registration" shall
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(o) The term "Registrable Securities" shall mean (i) the Common
Stock issuable or issued upon conversion of the Series A Preferred Stock, the
Series B Preferred Stock or the Series C Preferred Stock and held by the
Investors or their Permitted Transferees (it being understood that for purposes
of this Agreement, a Person will be deemed to be a Holder (as defined above)
whenever such Person has the right to then acquire or obtain from the Company
any Registrable Securities, whether or not such acquisition has actually been
effected) and (ii) any shares of Common Stock issued or issuable with respect to
any such shares described in clause (i) above by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization; provided, however, that
notwithstanding anything to the contrary contained herein, "Registrable
Securities" shall not at any time include any securities (I) registered and sold
pursuant to the Securities Act or (II) sold to the public pursuant to Rule 144
promulgated under the Securities Act.
(p) The number of shares of "Registrable Securities then
outstanding" shall mean the number of shares of Common Stock outstanding and the
number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities, which are, Registrable Securities.
(q) The term "SEC" shall mean the Securities and Exchange
Commission.
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(r) The term "Securities Act" shall mean the Securities Act of
1933, as amended.
(s) The term "Shares" shall mean, with respect to the Investors,
Common Stock issued and held, or issuable upon conversion of Preferred Stock
then held by the Investors.
2. REGISTRATION RIGHTS.
2.1 Demand Registration Rights.
(a) If the Company shall receive, at any time after December 31,
2001, and so long as the Investors beneficially own at least Twenty Percent
(20%) of the Registrable Securities beneficially owned by them as of the Second
Closing (as defined in the Purchase Agreement), or if there is no Second
Closing, as of the date hereof (as adjusted for stock dividends, combinations,
splits, recapitalizations and the like), a written request from the Investors
holding greater than Fifty Percent (50%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Securities
Act covering the registration and sale of at least Twenty Percent (20%) of the
Registrable Securities then outstanding (or a lesser percentage if the
anticipated aggregate price to the public of the offering shall exceed an amount
equal to Twenty Percent (20%) of the consideration paid by the Investors with
respect to such shares of Preferred Stock), then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Investors; and
(ii) file, as soon as practicable and in any event within
ninety (90) days of the receipt of such request, a registration statement
with the SEC under the Securities Act covering all Registrable Securities
which the Investors request to be registered (such request having been made
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 4.7) subject to the limitations of Section 2.1(b),
and thereafter to use its best efforts to cause the registration statement
to be declared effective as soon as practicable.
(b) If the Investors initiating the registration request
hereunder ("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 Section 2.1(a)(i) and the
Company shall include such information in the written notice referred to in
Section 2.1(a). The managing underwriter will be selected by a majority in
interest of the Initiating Holders and shall be reasonably acceptable to the
Company. In such event, the right of any Investor to include its Registrable
Securities in such registration shall be conditioned upon such Investor's
participation in such underwriting and the inclusion of such Investor's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders, such Investor and the Company)
to the extent provided herein.
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(c) The Company may not cause any other registration of
securities for sale for its own account (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
of the Securities Act is applicable) to become effective within one hundred
eighty (180) days following the effective date of a Qualified Public Offering
and ninety (90) days following the effective date of any registration required
pursuant to this Section 2.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Investors requesting a registration statement pursuant to this Section 2.1 a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors it would be materially
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than ninety (90) days after
receipt of the request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve (12) month
period.
(e) Notwithstanding any other provisions of this Section 2 to the
contrary, if the Company is advised in writing in good faith by any managing
underwriter of the Company's securities being offered in an underwritten public
offering pursuant to such registration statement that the amount to be sold by
persons other than the Company (collectively, "Selling Stockholders") is greater
than the amount which can be offered without adversely affecting the offering,
the Company may reduce the amount offered for the accounts of Selling
Stockholders (including such holders of Registrable Securities) to a number
deemed satisfactory by such managing underwriter; and provided, further, that
the shares to be excluded shall be determined in the following order of
priority: (i) first, securities held by any Persons not having any such
contractual, incidental registration rights, (ii) second, securities held by any
Persons having contractual, incidental registration rights pursuant to an
agreement which is not this Agreement and (iii) third, Registrable Securities
held by the Investors (such Registrable Securities to be excluded pro rata based
on the number of Registrable Securities requested to be registered by each
Investor); provided that in no event shall the amount of Registrable Securities
of the selling Investors to be included in such offering be reduced below Twenty
Percent (20%) of the total amount of securities to be included in such offering,
except that the number of Registrable Securities to be included by them in such
offering may be reduced below twenty percent (20%) of the total amount of
securities to be included in such offering if any managing underwriter advises
as provided above and no other stockholder's securities are included.
(f) The Company shall not be obligated to effect, or to take any
action to effect, any registration pursuant to this Section 2.1:
(i) After the Company has effected two registrations
pursuant to this Section 2.1 and such registrations have been declared or
ordered effective; provided, however, that the Company will not be deemed
to have effected a registration for purposes of this Section 2.1(f)(i) so
long as the Initiating Holders are unable to sell at least Thirty Percent
(30%) of the Registrable Securities sought to be included in such
registration statement;
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(ii) During the period starting with the effective date of,
and ending on a date one hundred eighty (180) days after the effective date
of, a registration subject to Section 2.2 hereof; or
(iii) If the Investors 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 2.9 below.
2.2 Company Registration.
(a) If the Company at any time proposes to register (including
for this purpose a registration effected by the Company for stockholders other
than the Holders) any of its stock or other securities under the Securities Act
in connection with the public offering of such securities solely for cash (other
than a Qualified Public Offering or a registration statement relating either to
the sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan or a SEC Rule 145 transaction), the Company
shall, at such time, promptly give each Holder at least twenty (20) days'
written notice of its intention to do so. Upon the written request of each
Holder given within fifteen (15) days after receipt of such notice by the Holder
in accordance with Section 4.7, the Company shall use its best efforts to cause
to be registered under the Securities Act all of the Registrable Securities that
each such Holder has requested to be registered.
(b) In connection with any offering involving an underwriting of
shares of the Company's capital stock, the Company shall not be required under
this Section 2.2 to include any of the Holders' securities in such underwriting
unless such Holders accept the terms of the underwriting as agreed upon between
the Company and the underwriters selected by the Company (or by other persons
entitled to select the underwriters). If the Company is advised in writing in
good faith by any managing underwriter of the Company's securities being offered
in an underwritten public offering pursuant to such registration statement that
the amount to be sold by Selling Stockholders is greater than the amount which
can be offered without adversely affecting the offering, the Company may reduce
the amount offered for the accounts of Selling Stockholders (including such
Holders of Registrable Securities) to a number deemed satisfactory by such
managing underwriter; provided that the shares to be excluded shall be
determined in the following order of priority: (i) first, securities held by any
Persons not having any such contractual, incidental registration rights, (ii)
second, securities held by any Persons having contractual, incidental
registration rights pursuant to an agreement which is not this Agreement and
(iii) third, Registrable Securities and this Agreement (such Registrable
Securities to be excluded pro rata based on the number of Registrable Securities
requested to be registered by each Investor), and (iv) fourth, securities to be
registered for the Company's own account.
2.3 Obligations of the Company. Whenever required under this Section 2
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as possible:
(a) Prepare and file with the SEC, within ninety (90) days of the
receipt of a request pursuant to this Section 2.1 or 2.9, a registration
statement on the appropriate
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form under the Securities Act with respect to such securities, which form shall
comply in all material respects with the requirements of the SEC, and use its
best efforts to cause such registration statement to become and remain effective
until the completion of the proposed offering (but for no more than one hundred
twenty (120) days); provided, however, that (i) such one hundred twenty (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 one
hundred twenty (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 1934 Act in the registration statement;
(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 sale or other disposition of all of the
securities covered by such registration statement;
(c) Furnish to the selling Holders and the underwriters, if any,
such numbers of copies of such registration statement, any amendments thereto,
any documents incorporated by reference therein, the prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the sale or other disposition of the securities owned by them;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the selling
Holders and do any and all other acts and things that may be necessary under
such securities and blue sky laws to enable such selling Holders to consummate
the sale or other disposition of the securities owned by them; 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, unless the Company is already subject to
service in such jurisdiction and except as may be required by the Securities
Act;
(e) Within a reasonable time before each filing of the
registration statement or prospectus or amendments or supplements thereto with
the SEC, furnish to one (1) counsel selected by the selling Holders (the
"Selling Holders' Counsel") copies of such documents proposed to be filed;
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(f) Promptly notify each selling Holder of Registrable
Securities, the Selling Holders' Counsel and any underwriter and (if requested
by any such Person) confirm such notice in writing, of the happening of any
event which makes any statement made in the registration statement or related
prospectus untrue or which requires the making of any changes in such
registration statement or prospectus so that they will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in the light of the
circumstances under which they were made not misleading; and, as promptly as
practicable thereafter, prepare and file with the SEC and furnish a supplement
or amendment to such prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Securities, such prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(g) Use its commercial best efforts to prevent the issuance of
any order suspending the effectiveness of a registration statement and, if one
is issued, use its commercial best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement at the earliest
possible moment;
(h) If requested by the managing underwriter or underwriters (if
any), any selling Holder, or the Selling Holders' Counsel, promptly incorporate
in a prospectus supplement or post-effective amendment such information as such
Person requests to be included therein with respect to the selling Holder or the
securities being sold by such Holder, including, without limitation, with
respect to the securities being sold by such selling Holder to such underwriter
or underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of an underwritten offering of
the securities to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective amendment;
(i) Make available to each selling Holder, any underwriter
participating in any disposition pursuant a registration statement, and any
attorney, accountant or other agent or representative retained by any such
selling Holder or underwriter (collectively, the "Inspectors"), upon request,
all financial and other records, pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such Inspector in connection with such registration statement
subject, in each case, to such confidentiality agreements as the Company shall
reasonably request;
(j) 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 or underwriters of such offering;
(k) Cause all such Registrable Securities registered pursuant to
such registration statement to be listed on each securities exchange or quoted
on the quotation system on which the Common Stock is then listed or quoted (or
if the Common Stock is not yet listed or
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quoted, then on such exchange or quotation system as the selling Holders and the
Company shall mutually agree);
(l) 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;
(m) Furnish, at the request of any Holder requesting registration
of Registrable Securities pursuant to this Section 2, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 2, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter dated such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any;
(n) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to its security
holders, in each case as soon as practicable, but not later than 45 days after
the close of the period covered thereby, an earnings statement of the Company
which will satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any comparable successor provisions); and
(o) Otherwise cooperate with the underwriter(s), the SEC and
other regulatory agencies and take all reasonable actions and execute and
deliver or cause to be executed and delivered all documents reasonably necessary
to effect the registration of any securities under this Agreement.
2.4 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall reasonably be required to effect the registration of such Holder's
Registrable Securities.
2.5 Expense of Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 2.1, Section 2.2 (which right may be assigned
as provided in Section 2.10) or Section 2.9, including (without limitation ) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company (which counsel shall be reasonably
acceptable to the Investors) and the reasonable fees and disbursements of the
Selling Holders' Counsel shall be borne by the Company.
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2.6 Damages. The Company recognizes and agrees that each holder of
Registrable Securities will not have an adequate remedy if the Company fails to
comply with the terms and provisions of this Agreement and that damages will not
be readily ascertainable, and the Company expressly agrees that, in the event of
such failure, it shall not oppose an application by any holder of Registrable
Securities or any other Person entitled to the benefits of this Agreement
requiring specific performance of any and all provisions hereof or enjoining the
Company from continuing to commit any such breach of this Agreement.
2.7 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) The Company shall indemnify and hold harmless each selling
Holder, each underwriter (as defined in the Securities Act) and each Person who
participates in the offering of securities under such registration statement,
and each other Person, if any, who controls (within the meaning of the
Securities Act) such seller, underwriter or participating Person (individually
and collectively, the "Indemnified Person"), against any losses, claims, damages
or liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (joint or several), or actions in
respect thereof, arise out of or are based upon: (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, (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 1934 Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the 1934 Act or any state securities law, and the Company shall pay to each
such Indemnified Person, as incurred, 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 Company shall
not be liable to any Indemnified Person in any such case for any such loss,
claim, damage, liability, or action the extent that it arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission in such registration statement, preliminary or final prospectus or
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by such Person expressly for use therein.
(b) Each selling Holder of Registrable Securities included in
such registration being effected shall indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each of its agents, each underwriter, any other Holder selling
securities in such registration statement and any Person who controls (within
the meaning of the Securities Act) the Company, such underwriter or such Holder
(individually or collectively, also the "Indemnified Person") against any
losses, claims, damages, or liabilities (joint or several), or actions in
respect thereof, to which they become subject, under the Securities Act or any
other statute or at common law, which arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which securities
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any
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amendment or supplement thereto, or (ii) any omission or alleged omission by
such selling Holder to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading under the
circumstances in which such statements were made, in the case of (i) and (ii) to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such registration
statement, preliminary or final prospectus, amendment or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by such selling Holder specifically for use therein, and such selling
Holder shall reimburse, as incurred, any Indemnified Person for any legal fees
incurred in investigating or defending any such liability; provided, however,
that such selling Holder's obligations hereunder shall be limited to an amount
equal to the proceeds (net of underwriting discounts, commissions and expenses)
to such selling Holder of the securities sold in any such registration; and
provided further, that no selling Holder shall be required to indemnify any
Person against any liability arising from any untrue or misleading statement or
omission contained in any preliminary prospectus if such deficiency is corrected
in the final prospectus or for any liability which arises out of the failure of
any Person to deliver a prospectus as required by the Securities Act.
(c) Promptly after receipt by an indemnified party under this
Section 2.7 of a complaint, claim or notice of the commencement of any liability
or 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 2.7, promptly notify the indemnifying party of such complaint, claim,
notice or action, and such indemnifying party shall have the right to
investigate and assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party;
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the reasonable 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 conflicts of interest between such
indemnified party end any other party represented by such counsel in such
proceeding. The Person claiming indemnification shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
but the fees and the expenses of such counsel shall not be at the expense of the
Person against whom indemnification is sought (unless the indemnifying party
fails to promptly defend, in which case the reasonable fees and expenses of such
separate counsel shall be borne by the Person against whom indemnification is
sought). 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 for any losses,
claims, damages or liabilities for which indemnification would otherwise be
available under this Section 2.7, but the omission to so deliver written notice
to the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 2.7. In no event
shall a Person against whom indemnification is sought be obligated to indemnify
any Person for any settlement of any claim or action effected without the
indemnifying Person's prior written consent which shall not be unreasonably
withheld.
(d) If the indemnification provided for in this Section 2.7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss,
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liability, claim, damage, or expense referred to therein, then each 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 (i) in such proportion as is
appropriate to reflect the relative fault of the Company, the selling Holders of
Registrable Securities, the other Selling Stockholders and the underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative fault referred to in clause (i)
above but also the relative benefits received by the Company, the selling
Holders of Registrable Securities, the other Selling Stockholders and the
underwriters from the offering of Registrable Securities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, the selling Holders of Registrable Securities, the other Selling
Stockholders and the underwriters shall be deemed to be in the same respective
proportions that the proceeds or commissions from the offering received by the
Company, the selling Holders of Registrable Securities, the other Selling
Stockholders and the underwriters, in each case as set forth in the table on the
cover page of the applicable prospectus, bear to the aggregate public offering
price of the Registrable Securities. The relative fault of the Company, the
selling Holders of Registrable Securities, the other Selling Stockholders and
the underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the selling Holders of Registrable Securities, the
other Selling Stockholders or the underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the selling Holders of Registrable Securities agree
that it would not be just and equitable if contribution pursuant to this Section
2.7 were determined solely by pro rata or per capita allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. In no event, however, shall
a selling Holder be required to contribute any amount under this Section 2.7 in
excess of the proceeds (net of underwriting discounts, commissions and expenses)
received by such selling Holder from its sale of Registrable Securities under
such registration statement. No person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not found guilty of
such fraudulent misrepresentation.
(e) The obligations of the Company and selling Holders under this
Section 2.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2 and the termination
of this Agreement.
2.8 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act (and any successor rule) ("SEC Rule 144") and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
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(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public, and take all
reasonable action as may be required as a condition to the availability of SEC
Rule 144;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective, and to maintain such
status;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the 1934 Act and
make such other filings and take such other actions required of the issuer to
effect sales of Registrable Securities in reliance upon SEC Rule 144;
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities Act and the 1934
Act (at any time after it has become subject to such reporting requirements), or
that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form; and
(e) facilitate and expedite transfers of Registrable Securities
pursuant to SEC Rule 144, including providing timely notice to its transfer
agent to expedite such transfers.
2.9 Form S-3 Registration. After the initial public offering of its
securities registered under the Securities Act, the Company shall use its
commercially reasonable efforts to qualify and remain qualified to register
securities on Form S-3 (or any successor form) under the Securities Act. In case
the Company shall receive from any Investor or Investors a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities held by such Investor or Investors, the Company will:
(a) promptly give at least twenty (20) days' written notice of
the proposed registration, and any related qualification or compliance, to all
other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale
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and distribution of all or such portion of the Investor's or Investors'
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 2.9: (1) if
Form S-3 is not available for such offering by the Investors; (2) if the
Investors, 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 One Million Dollars ($1,000,000); (3) if the Company shall
furnish to the Investors a certificate signed by the Chief Executive Officer of
the Company stating that in the good faith judgment of the Board of Directors,
it would be materially 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
Holders under this Section 2.9; provided, however, that the Company shall not
utilize this right more than once in any twelve (12) month period; (4) if the
Company has, within the twelve (12) month period preceding the date of such
request, already effected two (2) registrations on Form S-3 for the Investors
pursuant to this Section 2.9; (5) if the Company has already effected a total of
four (4) registrations on Form S-3 for Investors pursuant to this Section 2.9;
(6) if, at the time of its written request pursuant to this Section 2.9,
Investors beneficially own less than Twenty Percent (20%) of the aggregate
Registrable Securities beneficially owned by them as of the Second Closing, or
if there is no Second Closing, as of the date hereof (as adjusted for stock
dividends, combinations, splits, recapitalizations and the like); or (7) 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
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 Investors. Registrations effected pursuant to this
Section 2.9 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.1 or 2.2, respectively.
2.10 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned (but only with all related obligations) by a Holder to a Permitted
Transferee of such Registrable Securities, provided that: (a) the Company is,
within a reasonable time after such transfer, furnished with 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 (b) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of
Section 2.12 below.
2.11 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Investors holding a majority of the outstanding Registrable Securities
held by the Investors, (a) allow purchasers of the Company's securities to
become a party to this Agreement, except as contemplated by
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Section 4.9 below, or (b) grant any other registration rights to any third
parties other than subordinate piggyback registration rights.
2.12 "Market Stand-Off" Agreement. Each Investor hereby agrees that,
during the ninety (90) day period following the date of the first sale to the
public pursuant to a registration statement of the Company filed under the
Securities Act, it shall not, to the extent requested by the Company and the
underwriter of such registration, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except Common Stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only (i) to the first such
registration statement of the Company which covers Common Stock to be sold on
its behalf to the public in an underwritten offering; and (ii) so long as the
Investors continue to own Twenty Percent (20%) or more of the outstanding equity
securities of the Company, to any subsequent registration statement of the
Company which covers Common Stock to be sold on its behalf to the public in an
underwritten offering;
(b) officers and directors of the Company, all holders of more
than Five Percent (5%) of the outstanding capital stock of the Company, and all
other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements; and
(c) such market stand-off time period shall not exceed ninety
(90) days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Investors (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Notwithstanding the
foregoing, the obligations described in this Section 2.12 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a SEC Rule 145 transaction on Form S-4 or similar forms which may be
promulgated in the future.
2.13 Obligations of the Holders. All selling Holders proposing to
distribute their securities through an underwritten offering shall (together
with the Company as provided in Section 2.3(j)) enter into an underwritten
agreement in customary form with the underwriter or underwriters selected for
such underwriting. All selling Holders proposing to distribute their securities
through an offering pursuant to this Section 2 shall enter into such agreements
and shall execute such other documents in customary form as may reasonably be
requested by the Company or, in the event of an underwritten offering, by any
managing underwriter.
3. COVENANTS OF THE COMPANY.
The Company agrees for the benefit of the Investors that it shall
comply with the following covenants, provided that the covenants set forth in
Section 3.2 shall not be in effect
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during any period in which the Company is subject to the periodic reporting
obligations set forth in Section 13(a) or Section 15(d) of the 1934 Act and that
all of the covenants set forth in this Section 3 shall terminate as of the
closing of (a) a Qualified Public Offering or (b) a sale of all or substantially
all of the assets or business of the Company, whether by merger, sale of assets,
change of voting control, or otherwise.
3.1 Pre-emptive Rights. So long as any shares of Preferred Stock are
outstanding, the Company hereby grants the Holders certain pre-emptive rights
with respect to future sales of equity securities by the Company. The Company
agrees that it will not sell or issue any shares of, or securities convertible
into or exercisable for any shares of, any class of its capital stock
("Securities"), unless the Company shall first submit a written offering of all
such Securities to the Holders in accordance with the following provisions:
(1) The Company shall deliver a notice ("Offer Notice") to each Holder
stating (i) that the Company is offering such Securities, (ii) the number of
such Securities to be offered, and (iii) the price and material terms, if any,
upon which it proposes to offer such Securities, and offering the Holders the
opportunity to purchase its Pro Rata Share of the Securities on terms and
conditions, including price, not less favorable than those on which the Company
proposes to sell such Securities to a third party or parties.
(2) Within ten (10) days after the date of the Offer Notice, each
Holder may elect to purchase or obtain, at the price and on the terms and
conditions specified in the Offer Notice, up to its Pro Rata Share of such
Securities. Within ten (10) days after expiration of such period, the Company
shall provide written notice (an "Undersubscription Notice") to each Holder who
elected to purchase all the Securities available to it pursuant to the preceding
sentence (each a "Fully Exercising Stockholder") of all other Holders' failure
to do likewise and offering the unsubscribed shares to the Fully Exercising
Stockholder in accordance with this Section 3.1(2). Within ten (10) days after
the Undersubscription Notice (the "Second Subscription Period"), each Fully
Exercising Stockholder shall notify the Company in writing if it wishes to
obtain that portion of the Securities not subscribed for by the other Holder
which is equal to the proportion that the number of Shares held by such Fully
Exercising Stockholder as of the date of the Offer Notice bears to the total
number of Shares held by all Fully Exercising Stockholders who wish to purchase
some of the unsubscribed Securities. Each Holder acknowledges and agrees that
any failure to notify the Company within the applicable time periods specified
above shall be deemed a waiver of such Holder's rights to participate in the
applicable offering.
(3) If the Holders do not elect to purchase all Securities referred to
in the Offer Notice at the end of the Second Subscription Period, the Company
may, during the ninety (90) day period following the Second Subscription Period,
offer the remaining unsubscribed portion of such Securities to any person or
persons at a price not less than, and upon terms and conditions no more
favorable to the offeree than those specified in the Offer Notice. If the
Company does not enter into an agreement for the sale of the Securities within
such period, or if such agreement is not consummated within three (3) months of
the execution thereof, the right provided hereunder shall be deemed to be
revived and such Shares shall not be offered unless first re-offered to the
Holders in accordance herewith.
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(4) The pre-emptive rights in this Section 3.1 shall not be applicable
(i) to the issuance of shares of Common Stock (including the grant of options
therefor and the issuance or sale of shares or grants prior to the date hereof)
to officers, directors, employees, advisors and consultants of the Company
pursuant to the Company's 1999 Stock Option/Stock Issuance Plan (the "Stock
Plan") or any other stock or option plan approved by the unanimous consent of
the Compensation Committee of the Company's Board of Directors, (ii) with
respect to, or after consummation of a Qualified Public Offering, (iii) to the
issuance of securities pursuant to the conversion or exercise of convertible or
exercisable securities outstanding on the date hereof, (iv) to the issuance
of not more than Two Million (2,000,000) shares of Common Stock (or an
equivalent amount of securities convertible or exercisable to or for Common
Stock), in the aggregate (as adjusted for stock splits, stock dividends, stock
combinations and similar events), to financial institutions or lessors in
connection with obtaining commercial credit, equipment financings or similar
transactions, (v) to the issuance of securities pursuant to the exercise or
conversion of options, warrants, notes or other rights to acquire Common Stock
outstanding on the date hereof, (vi) to the issuance of securities as
consideration in a bona fide acquisition of or by the Company, whether by
merger, consolidation, sale of assets, sale or exchange of stock or otherwise,
unanimously approved by the Board of Directors or (vii) the issuance of warrants
to Saturn Capital, Inc. to purchase up to one million four hundred three
thousand two hundred twenty-three (1,403,223) shares of Common Stock in
connection with the sale and purchase of the Series C Preferred Stock.
3.2 Delivery of Financial Statements. The Company will maintain a
comparative system of accounts in accordance with generally accepted accounting
principles, keep full and complete financial records and furnish to the
Investors the following reports:
(a) as soon as available and within ninety (90) days after the
end of each fiscal year commencing with the year ending December 31, 2001, a
copy of the balance sheet of the Company as of the end of such year, together
with statements of income and retained earnings and cash flow of the Company for
such year, audited and reported on by independent public accountants of
recognized national standing reasonably satisfactory to the Board of Directors,
prepared in accordance with generally accepted accounting principles and
practices consistently applied;
(b) as soon as available and in any event with forty-five (45)
days after the end of each quarter of each fiscal year commencing with the
quarter ending September 30, 2001, a copy of the balance sheet of the Company as
of the end of such quarter, together with statements of income and retained
earnings and cash flow of the Company for the period commencing at the end of
the previous fiscal quarter and ending with the end of such fiscal quarter, such
balance sheets, statements of income and retained earnings and cash flows
setting forth in comparative form the corresponding figures for the
corresponding fiscal period in the prior fiscal year, all in reasonable detail
and certified (subject to year-end audit adjustments) by the chief financial
officer of the Company as having been prepared in a manner consistent with
generally accepted accounting principles and practices consistently applied; and
(c) as soon as available and in any event within thirty (30) days
after the end of each month commencing with the month ending August 31, 2001, an
unaudited
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balance sheet of the Company as of the end of such month and unaudited
statements of income and retained earnings, and cash flow for the Company for
such month; and
(d) such other information relating to the financial condition,
business, prospects or results of operations as the Investors may reasonably
request, including, without limitation, certificates of the principal financial
officer of the Company concerning compliance with the covenants of the Company
under this Section 3.2.
3.3 Budget and Operating Forecast; Inspection.
(a) The Company will prepare and submit to the Board of Directors
a budget for the Company for each fiscal year of the Company at least thirty
(30) days prior to the beginning of such fiscal year. The budget shall be
accepted as the budget for such fiscal year when it has been approved by a
majority of the Board of Directors and, thereupon, a copy of such budget
promptly shall be sent to each Investor. The Company shall review the budget
periodically and shall advise the Board of Directors and the Investors of all
material changes therein and all material deviations therefrom.
(b) The Company will, upon reasonable prior notice to the
Company, permit authorized representatives (including, without limitation,
accountants and legal counsel) of any Investor, at the Investor's expense, to
visit and inspect any of the properties of the Company, including its books of
account (and to make copies thereof and take extracts therefrom), and to discuss
its affairs, finances and accounts with its officers, administrative employees
and independent accountants, all at such reasonable times during normal business
hours and as often as may be reasonably requested by any Investor; provided,
that in the event any person exercising such inspection rights shall be someone
other than an Investors' Nominee or a director designated by the Investors, the
Company may, as a condition to the exercise of such visitation or inspection
rights, require such person to execute a standard form non-disclosure agreement
in form and substance satisfactory to the Company.
3.4 Board of Directors; Meetings; Indemnification. The Company will
ensure that meetings of its Board of Directors are held at least four (4) times
each year at intervals of not more than three (3) months. The Company shall
reimburse each Investors' Nominee for reasonable travel expenses incurred in
connection with attending meetings or other functions of the Board of Directors
and for the Investors' Nominees' reasonable out-of-pocket costs associated with
any other work performed at the request of, and on behalf of, the Company. The
Charter and By-laws of the Company will in respect of all times during which any
Investors' Nominee serves as a director of the Company provide for exculpation
and indemnification of the directors and limitations on the liability of the
directors to the fullest extent permitted under applicable state law. The
Company shall maintain directors and officers' liability insurance coverage in
such form and amount from such insurance carrier as shall be reasonably
satisfactory to the investors, and shall use its best efforts to obtain, prior
to an initial public offering of the Company's securities, additional directors
and officers' liability insurance coverage to include claims under the
Securities Act and the 1934 Act.
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3.5 Composition of Board Committees. The Company agrees to cause the
Board of Directors to maintain a Compensation Committee (which shall be charged
with exclusive authority over all compensation matters with respect to the
senior management of the Company and shall, together with the Chief Executive
Officer, serve as the administering committee under the Stock Plan) and an Audit
Committee (which shall be charged with reviewing the Company's financial
statements and accounting practices). Each such committee shall consist of
non-management directors. Morgan Stanley Dean Witter Venture Partners IV, L.P.
shall be entitled to nominate at least one (1) representative to each such
committee.
3.6 Positive Covenants. So long as any shares of the Series B
Preferred Stock or the Series C Preferred Stock are outstanding, the Company
agrees, for the benefit of the holders of the Company's Series B and Series C
Preferred Stock, as follows:
(a) The Company will continue to engage principally in the
business now conducted by the Company or a business or businesses substantially
similar thereto. The Company will keep in full force and effect its corporate
existence and all Intellectual Property Rights useful in its business (except
such rights as the Board of Directors has reasonably determined are not material
to the continuing operations of the Company);
(b) The Company will promptly advise the Investors of any event
which represents or is reasonably likely to result in a material adverse effect
on the Company's business, properties, assets, prospects, results of operations
or financial condition (a "Material Adverse Effect"), and of each suit or
proceeding commenced or threatened against the Company which, if adversely
determined, is reasonably likely to have a Material Adverse Effect, other than
events, developments, suits or proceedings which could reasonably be expected to
equally affect all companies within the same or a similar industry. The Company
will promptly advise the Investors of any adverse developments relating to the
Company's products or services, and any suit or proceeding commenced or
threatened which is related to the Company's products or services which, if
adversely determined, in the reasonable judgment of the Company, is reasonably
likely to have a Material Adverse Effect, other than suits or proceedings which
could reasonably be expected to equally affect all companies within the same or
a similar industry;
(c) The compensation and other benefit arrangements of any senior
management of the Company shall be adjusted from time to time only by the
Compensation Committee, unless the Compensation Committee determines otherwise;
(d) All transaction by and between the Company and any officer or
key employee of the Company or persons controlling, controlled by, under common
control with or otherwise affiliated with or members of the families of such
officer or key employee (including compensation matters covered by Section
3.7(c) hereof), shall be conducted on an arm's-length basis, shall be on terms
and conditions no less favorable to the Company than could be obtained from
unrelated persons and shall be approved in advance by a majority of the Board of
Directors after full disclosure of the terms thereof;
(e) The Company shall maintain in full force and effect its
corporate existence, rights, and franchises and all licenses and other rights to
use patents, processes,
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licenses, 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 its
business;
(f) 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
Company's independent public accountants, or any firm of independent public
accountants hereafter employed by the Company are terminated, the Company will
promptly thereafter notify the Investors and will request the firm of
independent public accountants whose services are terminated to deliver to the
Investors 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 Investors the Company shall state
whether the change of accountants was recommended or approved by the Board of
Directors or any committee thereof;
(g) 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; and
(h) The Company will use its best efforts to comply with the
reporting and recordkeeping requirements of Section 1202 of the Internal Revenue
Code of 1986, as amended, any regulations promulgated thereunder and any similar
state laws and regulations, and agrees not to repurchase any stock of the
Company if such repurchase would cause the shares of Common Stock (including the
Common Stock issuable or issued upon conversion of the Preferred Stock),
Preferred Stock and any other equity securities now of hereafter issued by the
Company, together with any options thereon and any other shares of stock issued
or issuable with respect thereto (whether by way of a stock dividend, stock
split or in exchange for or upon conversion of such shares or otherwise in
connection with a combination of shares, recapitalization, merger, consolidation
or other corporate reorganization) not to so qualify as "Qualified Small
Business Stock." The Company further covenants to submit to its stockholders and
to state and federal taxation authorities such form and filings as may be
required to document such compliance, with its franchise or income tax return
for the current income year.
4. MISCELLANEOUS.
4.1 Survival of Covenants. Each of the parties hereto agrees that each
covenant and agreement made by it in this Agreement or in any certificate,
instrument or other document delivered pursuant to this Agreement is material,
shall be deemed to have been relied upon by the other parties and, except as
provided herein, shall remain operative and in full force and effect after the
date hereof regardless of any investigation. This Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
parties hereto and their respective successors and permitted assigns to the
extent contemplated herein.
4.2 Legend on Securities. The Company and the Investors acknowledge
and agree that the legends required by the Purchase Agreement and that certain
Amended and
20
<PAGE>
Restated Stock Restriction Agreement of even date herewith shall be typed on
each certificate evidencing any of the securities issued hereunder held at any
time by any of the Investors or their Permitted Transferees.
4.3 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
the Permitted Transferees). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
4.4 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware, exclusive of the provisions thereof
governing conflicts of laws.
4.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.6 Titles and Subtitles; Gender. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. The use in this Agreement of the
masculine pronoun in reference to a party hereto shall be deemed to include the
feminine member, and vice versa as the context may require.
4.7 Notices. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given, delivered and
received (i) if delivered personally or (ii) if sent by facsimile, registered or
certified mail (return receipt requested) postage prepaid, or by courier
guaranteeing next day delivery, in each case to the party to whom it is directed
at the following addresses (or at such other address for any party as shall be
specified by notice given in accordance with the provisions hereof, provided
that notices of a change of address shall be effective only upon receipt
thereof). Notices delivered personally shall be effective on the day so
delivered, notices sent by registered or certified mail shall be effective three
days after mailing, notices sent by facsimile shall be effective when receipt is
acknowledged, and notices sent by courier guaranteeing next day delivery shall
be effective on the earlier of the second business day after timely delivery to
the courier or the day of actual delivery by the courier:
(a) if to the Company, at the mailing address for the Company
shown on the signature pages hereto, Attention: CEO, with a copy to Lucash,
Gesmer & Updegrove, LLP, 40 Broad Street, Boston, Massachusetts 02109
(facsimile: 617-350-6878), Attention: Thomas H. Durkin, Esq., or such other
address designated by the Company to the Investors and the other parties hereto
in writing;
(b) if to the Investors, to each Investor at the mailing address
as shown on the signature pages hereto, with a copy to Gunderson Dettmer Stough
Villeneuve Franklin &
21
<PAGE>
Hachigian, LLP, 733 Third Avenue, Suite 220, New York, New York 10017,
(facsimile: 646-487-0970), Attention: Kenneth R. McVay, Esq., or at such other
address designated by an Investor to the Company and the other Investors in
writing.
4.8 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
4.9 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement 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 Eighty-Five percent
(85%) of the Registrable Securities held by all Investors; provided, however
that the terms and agreements set forth in Section 3.6 shall 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 Seventy-Seven percent (77%) of the Company's
Series B and Series C Preferred Stock, voting together as a single class. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under the Purchase Agreement then
outstanding, each future holder of all such securities, and the Company.
Notwithstanding the foregoing, the Company may amend Schedule A without the
consent of any other party hereto to reflect the addition of parties pursuant to
the following sentence. Additional parties may be added as Investors after the
date hereof by (i) the execution and delivery of a counterpart to this Agreement
by such additional party, and (ii) the acceptance (by countersigning and
delivery) thereof by the Company, but only if such additional party is an
"Investor" as defined under the Purchase Agreement.
4.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
4.11 Aggregation of Stock. All shares of Preferred Stock held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
4.12 Entire Agreement; Amendment; Waiver. This Agreement and the
documents referred to herein constitute the entire agreement among the parties
with regard to the subjects hereof and thereof.
4.13 Prior Agreement. The provisions hereof shall amend, replace and
supercede in its entirety the Prior Agreement. Without in any way limiting the
foregoing, it is agreed and acknowledged that the Prior Agreement amended,
replaced and superceded in its entirety the Registration Rights Agreement dated
as of June 21, 1999 between the Company and certain Existing Investors, and that
the provisions thereof replaced and superceded. Sections 7.1, 7.2, 7.3 and
Section 8 of that certain Series A Redeemeable Convertible Preferred Stock
Purchase
22
<PAGE>
Agreement among the Company and certain Existing Investors and such
provisions were terminated and are of no further force and effect.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amended and Restated
Investors' Rights Agreement to be duly executed and delivered as of the date
first above written.
THE COMPANY:
ROVING SOFTWARE INCORPORATED
By: /s/ Gail F. Goodman
------------------------------------
Name: Gail F. Goodman
Title: CEO
Address: 117 Kendrick Street, Suite 400
Needham, MA 02494
Facsimile: (781) 444-6155
THE INVESTORS:
MORGAN STANLEY DEAN WITTER
VENTURE PARTNERS IV, L.P.
MORGAN STANLEY DEAN WITTER
VENTURE INVESTORS IV, L.P.
MORGAN STANLEY DEAN WITTER
VENTURE OFFSHORE INVESTORS IV, L.P.
By: MSDW Venture Partners IV, LLC,
as General Partner of each of the
limited partnerships named above
By: MSDW Venture Partners IV, Inc., as
Member
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 1221 Avenue of the Americas
New York, New York 10020
Facsimile: (212) 762-8424
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amended and Restated
Investors' Rights Agreement to be duly executed and delivered as of the date
first above written.
THE COMPANY:
ROVING SOFTWARE INCORPORATED
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 117 Kendrick Street, Suite 400
Needham, MA 02494
Facsimile: (781) 444-6155
THE INVESTORS:
MORGAN STANLEY DEAN WITTER
VENTURE PARTNERS IV, L.P.
MORGAN STANLEY DEAN WTTTER
VENTURE INVESTORS IV, L.P.
MORGAN STANLEY DEAN WITTER
VENTURE OFFSHORE INVESTORS IV, L.P.
By: MSDW Venture Partners IV, LLC,
as General Partner of each of the
limited partnerships named above
By: MSDW Venture Partners IV, Inc.,
as Member
By: /s/ Noah Walley
------------------------------------
Name: Noah Walley
Title: Principal
Address: 1221 Avenue of the Americas
New York, New York 10020
Facsimile: (212) 762-8424
<PAGE>
THE INVESTORS:
COMMONWEALTH CAPITAL VENTURES II L.P.
CCV II ASSOCIATES L.P.
By: Commonwealth Venture Partners II
L.P., as General Partner of each of
the limited partnerships named above
By: /s/ R. Stephen McCormack
------------------------------------
Name: R. Stephen McCormack
Title: General Partner
Address: 20 William Street
Wellesley, MA 02481
Facsimile: (781) 235-8627
LONGWORTH VENTURE PARTNERS, L.P.
By: Longworth Venture Management LLC,
its sole General Partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 1050 Winter Street, Suite 2600
Waltham, MA 02451
Facsimile: (781) 663-3619
VERISIGN CAPITAL MANAGEMENT, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address:
-------------------------------
-------------------------------
Facsimile:
-----------------------------
<PAGE>
THE INVESTORS:
COMMONWEALTH CAPITAL VENTURES II L.P.
CCV II ASSOCIATES L.P.
By: Commonwealth Venture Partners II
L.P., as General Partner of each of
the limited partnerships named above
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 20 William Street
Wellesley, MA 02481
Facsimile: (781) 235-8627
LONGWORTH VENTURE PARTNERS, L.P.
By: Longworth Venture Management LLC,
its sole General Partner
By: /s/ James J. Savage
------------------------------------
Name: James J. Savage
Title: Manager
Address: 1050 Winter Street, Suite 2600
Waltham, MA 02451
Facsimile: (781) 663-3619
VERISIGN CAPITAL MANAGEMENT, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address:
-------------------------------
-------------------------------
Facsimile:
-----------------------------
<PAGE>
THE INVESTORS:
COMMONWEALTH CAPITAL VENTURES II L.P.
CCV II ASSOCIATES L.P.
By: Commonwealth Venture Partners II
L.P., as General Partner of each of
the limited partnerships named above
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 20 William Street
Wellesley, MA 02481
Facsimile: (781) 235-8627
LONGWORTH VENTURE PARTNERS, L.P.
By: Longworth Venture Management LLC,
its sole General Partner
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 1050 Winter Street, Suite 2600
Waltham, MA 02451
Facsimile: (781) 663-3619
VERISIGN CAPITAL MANAGEMENT, INC.
By: /s/ Dana Lejah
------------------------------------
Name: Dana Lejah
Title: Vice President
Address: 300 Delaware Ave., 9th Floor
Wilmington, DE 19801-1607
Facsimile:
-----------------------------
<PAGE>
OTHER INVESTORS:
/s/ Joseph J. Caruso, President
----------------------------------------
Name: Bantam Group Inc.
Address: 50 Bay Colony Drive
Westwood, MA 02090
Attn: Joseph J. Caruso,
President
Facsimile: (781) 329-2238
<PAGE>
SCHEDULE A
INVESTORS
Morgan Stanley Dean Witter Venture Partners IV, L.P.
Morgan Stanley Dean Witter Venture Investors IV, L.P.
Morgan Stanley Dean Witter Venture Offshore Investors IV, L.P.
Commonwealth Capital Ventures II L.P.
CCV II Associates L.P.
Longworth Venture Partners, L.P.
VeriSign Capital Management, Inc.
K. Tucker Andersen
Frank Argano
John Beard
Dominic Chan
Barry Coffman
Richard F. Connolly, Jr.
Michael P. DeBlasio
Theodore Dimitry
Richard Fentin
Ross S. Gale
David D. Holbrook
David C. Hou
Kenneth & Myrna Kustin
Daniel Kwoh
Sydney S. McClendon III
<PAGE>
Benjamin S. Minsk
Najjar Family Ltd Partnership
Irrevocable Instrument of Trust F/B/O Michael E. Najjar dtd 8/10/93
Irrevocable Instrument of Trust F/B/O Elizabeth A. Najjar dtd 8/10/93
Irrevocable Instrument of Trust F/B/O Susann M. Najjar dtd 8/10/93
Rich Nollman and Irene Levitt
Harold L. Osher
Peggy L. Osher
James Philip
Michael Mark
Leon C. Sunstein, Jr.
U.S.A. Fund LLLP
William H. Volkmann
One & Co.
Arnold S. Wood
Zafran Family Trust U/A DTD 12/10/95
Longworth Capital, LLC - Paul Margolis
John Campbell and Jean Campbell
Alan Frohman
Steve Lesser
Kermit Stofer
Judith R. Walsh
Sung Park
Bantam Group, Inc.