Investor Rights Agreement - LinkShare Corp. and Internet Capital Group LLC
LINKSHARE CORPORATION
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of
the 16th day of July 1998, by and among LINKSHARE CORPORATION, a Delaware
corporation (the "Company"), Stephen Messer, Heidi Messer and Jianhao Meng
(collectively, the "Initial Founders") and the purchasers of the Company's
Series A Preferred Stock, par value $0.001 per share ("Series A Stock"), set
forth on Exhibit A attached hereto. The purchasers of the Series A Stock shall
be referred to hereinafter as the "Initial Investors" and each individually as
an "Initial Investor."
RECITALS
WHEREAS, the Company proposes to sell and issue to the Initial
Investors up to Three Million Two Hundred Forty-Two Thousand One Hundred
Forty-Eight (3,242,148) shares of its Series A Stock pursuant to that certain
Series A Preferred Stock Purchase Agreement of even date herewith ("the Purchase
Agreement");
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;
WHEREAS, the Company desires to grant such rights and impose certain
restrictions on to the Investors; and
WHEREAS, the Company and the Investors wish to grant certain rights to
and impose certain restrictions on the Founders, as set forth below.
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 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.
"First Refusal and Co-Sale Agreement" means the Right of First
Refusal and Co-Sale Agreement, dated as of the date of this Agreement,
among the Company, the Founders and the Investors, as the same may be
amended from time to time in accordance with its terms.
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"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.
"Founders" means any and all of the Initial Founders and each
Permitted Transferee (as defined in Section 2.10 hereof) of any Founder
or Initial Founder, in each case so long as such Person continues to
own any Registrable Securities.
"Holder" means any Investor or Founder.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the
Securities Act.
"Investors" means the Initial Investors and each Permitted
Transferee (as defined in Section 2.10 hereof) of any Investor or
Initial Investor, in each case so long as such Person continues to own
any registrable securities.
"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, as of any time, (a) Common
Stock of the Company issued upon conversion of any Shares and then
outstanding (b) Common Stock of the Company then held by any of the
Founders, including, without limitation, any shares of Common Stock
issuable upon exercise of options or other rights or securities
exercisable for or convertible into Common Stock held by any of the
Founders and (c) 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, any 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 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
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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 a sale of Registrable Securities by
the Holders participating in such sale.
"Shares" shall mean the Company's Series A Stock issued
pursuant to the Purchase Agreement and held by the Initial Investors
and each Permitted Transferee (as defined in Section 2.10 hereof) of
any Investor or Initial Investor.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer.
(a) In addition to the restrictions contained in the First
Refusal and Co-Sale Agreement, 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) such disposition is exempt from the registration
requirements of the Securities Act and (D) 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; provided
that subclause (ii)(A) shall not apply to a transferee who
acquires Registrable Securities in a transaction exempt from
registration under Rule 144 under the Securities Act.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the
Agreement) be stamped or otherwise imprinted with a legend
substantially similar to the following (in addition to any legend
required under applicable laws or contract):
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AS AMENDED (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.
(c) The Company shall be obligated to reissue promptly
certificates not bearing the foregoing legend at the request of any
Holder thereof to the extent that the securities evidenced thereby that
are proposed to be disposed of by such Holder have been registered for
such disposition or 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
under the Act 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 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 from either (i) the Investors
holding a majority of the outstanding Registrable Securities held by
all Investors (the "Initiating") or (ii) the Founders holding a
majority of the outstanding Registrable Securities held by all
Founders, that the Company file a registration statement under the
Securities Act covering the registration of at least a majority of the
Registrable Securities then outstanding (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would be equal to or greater than $1,000,000 (a "Qualified
Public Offering")), 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 Investors or the Initiating Founders,
respectively 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
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through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company (which underwriter or underwriters shall be
reasonably acceptable to a majority in interest of the Initiating
Holders). 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 the earlier of (A) the second
anniversary of the date of this Agreement or (B) one hundred
eighty (180) days following the effective date of the
registration statement pertaining to the Initial Offering;
(ii) for the Initiating Investors after the Company
has effected two (2) registrations pursuant to this Section
2.2, and for the Initiating Founders after the Company has
effected two (2) registrations pursuant to this Section 2.2,
and such registrations have been declared or ordered
effective;
(iii) either (A) 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 Initial Offering or (B) during the
period starting with the date of filing of, and ending on the
date ninety (90) days following the effective date of a
registration statement other than the Initial Offering in
which such Initiating Investors or Initiating Founders had the
right to participate pursuant to Section 2.3, including a
registration statement in which the underwriters reduced the
Holders' participation pursuant to Section 2.3(a); 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 an offering described in (A) or
(B) of clause (iii) 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 shareholders 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
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to delay a request shall be exercised by the Company not more
than once in any twelve (12) month period; or
(vi) 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 or such shares may be sold without volume
limitations under Rule 144 under the Securities Act.
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 fifteen (15) 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 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 who have elected to
participate in such underwriting on a pro rata basis based on the
respective total numbers of Registrable Securities held by such
Holders; and third, to any other shareholder of the Company based on
the respective total number of shares of Common Stock held by such
other stockholders on a pro rata basis. No such reduction shall reduce
the securities being offered by the Company for its own account to be
included in the registration and underwriting. In no event will shares
of any other selling shareholder 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 than sixty-six and
two-thirds percent (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
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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.
(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
one or more Investors or Founders holding Registrable Securities a written
request or requests that the Company effect a registration on Form S-3 (or any
successor to Form S-3) or any similar shortform registration statement and any
related qualification or compliance with applicable State Securities laws, if
any, 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 reasonably practicable, effect such
registration and all such qualifications and compliances 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, 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 three million dollars ($3,000,000), or
(iii) 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 shareholders 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
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(iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected
one (1) registration on Form S-3 for any of the Holders
pursuant to this Section 2.4, or
(v) in any particular jurisdiction in which the
Company would be required to qualify to do business, to
execute a general consent to service of process or become
subject to taxation 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 reasonably
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.
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 any Registration Expenses of any registration proceeding begun pursuant
to Section 2.2 or 2.4, the request of which has been subsequently withdrawn by
the Holders participating therein unless (a) the withdrawal is based upon
material adverse information concerning the Company of which the Holders
initiating such registration were not aware at the time of such request or (b)
if the Initiating Holders were any Investors or Founders, one or more Investors
holding a majority of Registrable Securities held by the Investors or one or
more Founders holding a majority of the Registrable Securities held by the
Founders, respectively, agree to forfeit their right to one requested
registration pursuant to Section 2.2 or Section 2.4, as applicable (in which
event such right shall be forfeited by all Investors or Founders, respectively).
If the Holders participating therein are required to pay the Registration
Expenses, such expenses shall be borne by the Holders participating therein 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 or Section 2.4 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
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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, 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.
(e) 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.
(f) 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.
(g) 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.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (a) the
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Company has completed its Initial Offering and is subject to the provisions of
Section 13 or 15(d) of the Exchange Act, (b) such Holder (together with its
affiliates, partners and former partners) holds less than 1% of the Company's
outstanding Common Stock (treating all share of convertible Preferred Stock on
an as converted basis) and (c) 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 without any volume limitations.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
(b) 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 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.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due
to the operation of Subsection 2.2 (b) or due to the withdrawal of such
request by one or more Holders, the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included
in the registration does not equal or exceed the number of shares or
the anticipated aggregate offering price required to originally trigger
the Company's obligation to initiate such registration as specified in
Section 2.2 or Section 2.4, whichever is applicable, but no event due
to the operation of Section 2.2 (b) shall result in the loss of any of
the demand registrations allowed under Section 2.2 (a).
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 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, (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
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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 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, underwriter or controlling person of such
Holder.
(b) To the extent permitted by law, each Holder 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, its officers, any underwriter (as defined in the Securities
Act) for the Company and each person, if any, who controls the Company
or underwriter within the meaning of the Securities Act, and any other
Holder selling securities under such registration statement or any of
such other Holder's partners, directors or officers or any person who
controls such Holder, 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 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
expressly for use in connection with such registration by such Holder,
partner, officer, director, underwriter or controlling person of such
Holder 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, underwriter or other Holder, or partner,
officer, director 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 the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event
shall any indemnity under this Section 2.9 exceed the 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
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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 it 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, 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 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.
(f) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with any public
offering in which any Holders are participating are in conflict with
the foregoing provisions, the provisions in the underwriting agreement
shall control.
2.10 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned to
by a Holder to a transferee or assignee of Registrable Securities, pursuant to a
prior contractual obligation and with no additional
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consideration paid in the case of clauses (b) and (f) below, which (a) is a
subsidiary or parent, (b) is a general partner, limited partner, retired
partner, member or retired member of a Holder, (c) is a Holder's family member
or trust for the benefit of an individual Holder or such Holder's family members
or custodian for the benefit of a Holder's children, (d) is already a party to
this Agreement, (e) is the estate or legal representative of such Holder upon
such Holder's death or adjudication of incompetency (f) is a stockholder,
officer or director of the Company, or (g) acquires at least two hundred fifty
thousand (250,000) shares of Registrable Securities (as adjusted for stock
splits and combinations); 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; and
provided further that, in the case of any transferee specified in this Section
2.10, that (i) such transferee is not a competitor and (ii) the transfer of
Registrable Securities to such transferee is permitted by and made in accordance
with the applicable provisions of the First Refusal and Co-Sale 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-six and
two-thirds percent (66-2/3%) of the Registrable Securities then outstanding. 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 sixty-six and two-thirds percent (66-2/3%) 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 pari passu or 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 or otherwise transfer
or dispose of any Common Stock (or other securities) of the Company held by such
Holder (other than those included in the registration) for a period specified by
the representative of the underwriters of Common Stock (or other securities) of
the Company not to exceed one hundred eighty (180) days following the effective
date of a registration statement of the Company filed under the Securities Act
for a public offering of the Company's securities; provided that all officers
and directors of the Company and holders of at least ten percent (10%) of the
Company's voting securities enter into similar agreements.
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 fifteen (15) days of such request, such information as may be required
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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. 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.
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 Initial Offering and while the Company continues to
be subject to the reporting requirements of Section 15(d) or Section 13
of the Exchange Act;
(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 filed
with the SEC; and such other publicly available 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.
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 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,
the Company will furnish each Holder 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 generally accepted
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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
national standing selected by the Company's Board of Directors.
(c) So long as any Holder (with its affiliates) shall own not
less than two hundred fifty thousand (250,000) shares of Registrable
Securities (as adjusted for stock splits and combinations) (a "Major
Holder"), the Company will furnish each such Major Holder, 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, 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 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) The Company will furnish each such Major Holder (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 such Major Holder 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
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 is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records.
(a) Each Holder agrees to use, and to use its best efforts to
insure that its authorized representatives use, the same degree of care
as such Holder 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 Holder may
disclose such proprietary or confidential information to any partner,
subsidiary, parent or agent of such Holder for the purpose of
evaluating its investment in the Company as long as such partner,
subsidiary, parent or agent is advised of the confidentiality
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provisions of this Section 3.3 and any Confidentiality Agreement
between the Company and such Holder.
(b) Notwithstanding any provision of this Section 3 or any
other provision of this Agreement actually or apparently to the
contrary, the Company shall not be required to, and shall not provide
any Investor with any non-public information or any access or
inspection rights under Section 3.2 or otherwise if the Company
reasonably believes that such Investor (or any of its affiliates) is a
competitor (unless such Investor furnishes the Company with reasonable
evidence that it and its affiliates are not competitors) or unless such
Investor executes and delivers or previously has executed and delivered
to the Company a confidentiality agreement in substantially the form of
the Initial Investor Confidentiality Agreement. The provisions of this
Section 3.3 are supplemental to and do not supersede, terminate or
amend the terms of the Initial Investor Confidentiality Agreement or
any other confidentiality agreement which any Investor may enter into
with the Company.
(c) The Investors hereby acknowledge and agree that (i) by
reason of such Investor being furnished or granted access to material
non-public information regarding the Company as provided herein, such
Investor may be prohibited from purchasing or selling securities of the
Company unless and until such information is disclosed to the public
generally or to the persons with whom such Investor effects such
purchases or sales, (ii) the Company has and will have no obligation to
make such disclosure and (iii) such Investor is and will be prohibited
by the confidentiality provisions of this Agreement and any separate
confidentiality agreement which such Investor has or shall enter into
with the Company from making such disclosure.
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 issuable from time to time upon such
conversion.
3.5 Stock Vesting. Unless otherwise determined by a majority of the
Board of Directors, which majority shall include at least one of the Directors
designated or elected by the Investors and at least one of the Directors
designated or elected by the Founders, 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 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 cost any unvested shares of stock held by such person.
3.6 Key Man Insurance. Unless otherwise determined by a majority of the
Board of Directors, which majority shall include at least one of the Directors
designated or elected by the
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Investors and at least one of Directors designated or elected by the Founders,
the Board of Directors, the Company will use its best efforts to obtain and
maintain in full force and effect term life insurance in the amount of one
million ($1,000,000) dollars on the lives of each of Stephen Messer, Heidi
Messer and Jianhao Meng naming the Company as beneficiary.
3.7 Proprietary Information and Inventions Agreement. Unless otherwise
determined by a majority of the Board of Directors, which majority shall include
at least one of the Directors designated or elected by the Investors and at
least one of Directors designated or elected by the Founders, the Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in the form attached to the Purchase
Agreement.
3.8 Approval. The Company shall not without the approval of a majority
of the Board of Directors, which majority shall include at least one of the
Directors designated by the Investors and at least one of the Directors
designated or elected by the Founders, authorize, approve, agree to take or take
any of the following actions:
(i) approval of annual budgets and business plans;
(ii) disposition, pledge or encumbrance assets otherwise than
pursuant to a budget in effect or in the ordinary course of business;
(iii) acquisitions of assets otherwise than pursuant to a
budget in effect or in the ordinary course of business;
(iv) investments (other than temporary investments in working
capital), formations of subsidiaries and participation in joint
ventures;
(v) appointment, employment, powers and duties, compensation,
termination or removal of the chief executive officer, chief operating
officer, chief financial officer or chief technical officer;
(vi) the payment, or agreement by the Company to pay, cash
compensation to any other officer or employee of the Company whose
aggregate annual cash compensation exceeds, or would exceed by reason
of a contemplated increase, $75,000 (except to the Initial Founders
pursuant to their employment agreements with the Company).
(vii) decisions to enter into, amend, terminate, or exercise,
waive or release or not exercise any Company rights or remedies of the
Company under any significant contract or license including, without
limitation, this Agreement, the Stock Purchase Agreement and the First
Refusal and Co-Sale Agreement;
(viii) deviations from any budget outside of limits to be
determined;
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(ix) loans to or guarantees of liabilities for obligations of
any Person, other than in the ordinary course of business;
(x) incurrence of indebtedness for borrowed money other than
in accordance with a budget or within limits to be established by the
Board of Directors pursuant to this Section 3.7;
(xi) changes in the Company's accountants or attorneys;
(xii) institution or settlement legal proceedings;
(xiii) changes in any significant tax or accounting practice
or principles or making of any significant tax or accounting election;
(xiv) the sale or other disposition of or the granting of any
license or other right to use any technology, intellectual property or
proprietary rights, except in the ordinary course of business;
(xv) merger, consolidation or other business combination;
(xvi) dissolution and winding up;
(xvii) any action that would make it impossible to carry on
ordinary business of the Company;
(xviii) any filing under any bankruptcy, insolvency or similar
law;
(xix) amendment of Certificate of Incorporation, By-laws, any
resolution of the Board of Directors designating any capital stock or
authorizing the execution and delivery of any documents in connection
with sale or issuance of securities of the Company;
(xx) issuance, redemption or repurchase of securities,
including issuances of options under any option plan of the Company,
any private placement or Rule 144A, public or other offering of
preferred or common stock or debt securities;
(xxi) dividends or other distributions;
(xxii) terminating or changing the terms of any employee
benefit plan, program or arrangement in any significant respect adverse
to the Company's employees (including officers);
(xxiii) increase the size of the Board of Directors to more
than five (5) members, except that if the Company hires a new chief
executive officer, the size of the Board of
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Directors shall increase to six (6) members and the new chief executive
officer shall be appointed to the vacant seat.
(xxiv) entry into new lines of business; or
(xxv) any other transaction or action not in the ordinary
course of business.
If the Company acquires or forms any subsidiary, the composition of the
board of directors or comparable body will mirror that of the Company's board
and transactions of the types listed above will be subject to the same approval
requirements.
3.9 Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement except the covenant contained in Section 3.3 shall
expire and terminate upon the earlier of (i) the effective date of the
registration statement pertaining to the Initial Offering or (ii) upon (a) the
acquisition of all or substantially all of the assets of the Company or (b) an
acquisition of the Company by another corporation or entity by consolidation,
merger or other reorganization in which the holders of the Company's outstanding
voting stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the corporation or other entity surviving such transaction (a "Change
in Control"). In addition, Sections 3.1(c), Section 3.1(d) and Section 3.2 shall
no longer apply to a Holder who is no longer a Major Holder.
SECTION 4. RIGHTS OF FIRST REFUSAL
4.1 Subsequent Offerings. Each Major Investor and Founder (each a
"Right Holder") shall have a right of first refusal 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 4.7 hereof. Each Right Holder'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 Right Holder 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, options or other rights) immediately prior
to the issuance of the Equity Securities. The term "Equity Securities" shall
mean (i) any capital stock of the Company, (ii) any security convertible, with
or without consideration, into capital stock of the Company (including any
option to purchase such a convertible security), (iii) any security carrying any
warrant or right to subscribe to or purchase any capital stock of the Company 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 Right Holder 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 Right Holder shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of
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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 offer or sell such Equity Securities to any
Right Holder who would cause the Company to be in violation of applicable
federal securities laws by virtue of such offer or sale.
4.3 Issuance of Equity Securities to Other Right Holders. If not all of
the Right Holders elect to purchase their pro rata share of the Equity
Securities, then the Company shall first promptly notify in writing the Right
Holders who do so elect and shall offer such Right Holders the right to acquire
such unsubscribed shares. The fully participating Right Holders 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 Right
Holders as a group, 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 Right Holders' rights were not exercised, at a price and
upon general terms and conditions materially no more favorable to the purchasers
thereof than specified in the Company's notice to the Right Holders 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 Rights Holders in the manner provided above.
4.4 Sale Without Notice. In lieu of giving notice to the Right Holders
prior to the issuance of Equity Securities as provided in Section 4.2, the
Company may elect to give notice to the Right Holders within thirty (30) days
after the issuance of Equity Securities. Such notice shall describe the type,
price and terms of the Equity Securities. Each Right Holders shall have twenty
(20) days from the date of receipt of such notice to elect to purchase its pro
rata share of Equity Securities (as defined in Section 4.1, and calculated
before giving effect to the sale of the Equity Securities to the purchasers
thereof). Subject to Section 5.12, the closing of such sale shall occur within
sixty (60) days after the date of notice to the Right Holders.
4.5 Termination and Waiver of Rights of First Refusal. The rights of
first refusal established by this Section 4 shall not apply to, and shall
terminate upon the earlier of (i) effective date of the registration statement
pertaining to the Company's Initial Offering or (ii) a Change in Control. The
rights of first refusal established by this Section 4 may be amended, or any
provision waived with the written consent of the Company and the Right Holders
holding at least two-thirds (66-2/3%) of the Registrable Securities held by all
Right Holders, or as permitted by Section 5.6.
4.6 Transfer of Rights of First Refusal. The rights of first refusal of
each Right Holder under this Section 4 may be transferred to the same parties,
subject to the same restrictions and conditions as any transfer of registration
rights pursuant to Section 2.10.
4.7 Excluded Securities. The rights of first refusal established by
this Section 4 shall have no application to any of the following Equity
Securities:
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(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 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 including at
least one director designated by each of the Investors and Founders.
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, 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
Agreement; provided that the rights of first refusal established by
this Section 4 applied 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 that is 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 arrangement, or debt financing from a bank or similar financial
institution; and
(g) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act.
SECTION 5. MISCELLANEOUS
5.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York, including
Section 5-401 of the General Obligations Law of the State of New York.
5.2 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.
5.3 Successors and Assigns. Subject to Section 2.1, except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the
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successors, permitted 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 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. No party may assign
this Agreement or its rights or obligations hereunder without the prior written
consent of the Company, one or more Founders holding a majority of all
Registrable Securities held by the Founders and one or more Investors holding a
majority of all Registrable Securities held by the Investors, except for a
proportionate assignment of rights and obligations hereunder to a transferee of
Registrable Securities in a transfer permitted by this Agreement and the First
Refusal and Co-Sale Agreement.
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, the Purchase Agreement and the other documents delivered pursuant
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof and no party shall be
liable or bound to any other in any manner by any prior representations,
warranties, covenants and agreements except as specifically set forth herein and
therein. This Agreement shall not supersede, merge, terminate or amend the terms
of the Initial Investor Confidentiality Agreement, which shall remain in full
force and effect and is hereby ratified, confirmed and approved by the Company
and the Initial Investor.
5.5 Severability. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.6 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 two-thirds (66-2/3%) of the Registrable
Securities.
(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
two-thirds (66-2/3%) of the Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement shall be
amended to include additional purchasers of Shares as parties hereto
and "Investors" or "Holders," as applicable herewith, such amendment to
be conclusively evidenced by the delivery of an executed signature page
to this Agreement or a joinder agreement by such additional purchasers
and the issuance by the Company of stock certificates representing such
purchased Shares.
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5.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any party, upon any breach,
default or noncompliance of another party 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 party's part of any breach, default or noncompliance under the Agreement or
any waiver on such party'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 any party, shall be cumulative and
not alternative.
5.8 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) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) 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.
5.9 Attorneys' Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, 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.
5.10 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.
5.11 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.
5.12 Government Consents. All time periods specified in this Agreement
for the closing of any sale or purchase of securities pursuant to this Agreement
shall be extended to the tenth business day following the receipt by the Company
or the Holders of all material governmental approvals which may be required, and
the expiration of all applicable waiting periods under applicable laws or
regulations, in connection with such transaction.
[THIS SPACE INTENTIONALLY LEFT BLANK]
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
LINKSHARE CORPORATION INTERNET CAPITAL GROUP, LLC
By: By:
----------------------------------- -----------------------------------
Name: Name:
--------------------------------- ---------------------------------
Title: Title:
-------------------------------- --------------------------------
FOUNDERS
--------------------------------
Stephen Messer
--------------------------------
Heidi Messer
--------------------------------
Jianhao Meng
INVESTOR RIGHTS AGREEMENT
SIGNATURE PAGE
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
Name and Address Shares Shares
Internet Capital Group, LLC .............................. 2,431,611
44 Montgomery Street
Suite 3705
San Francisco, CA 94104
Total 2,431,611