Investor Rights Agreement - MyPoints.com Inc.
MYPOINTS.COM, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This Amended and Restated Investor Rights Agreement (the "Agreement") is
effective as of March 30, 1999 by and among MyPoints.com, Inc. (the "Company"),
the investors listed on Exhibit A attached hereto (the "Investors") and, for the
purposes of Sections 1 and 2 only, certain holders of the Company's Common Stock
listed on Exhibit B attached hereto (the "Common Holders"). This Agreement
amends and restates the Amended and Restated Investor Rights Agreement dated as
of November 30, 1998 ("Prior Agreement").
The Prior Agreement is hereby terminated in its entirety and restated
herein. Such termination and restatement is effective upon the execution of this
Agreement by the holders of at least a majority of the shares of Registrable
Securities (as the term is defined under the Prior Agreement) outstanding as of
the date of this Agreement.
The Company has authorized the issuance and sale of up to an aggregate
of 4,000,000 shares of its Series A Preferred Stock, 1,000,000 shares of its
Series B Preferred Stock, 3,000,000 shares of its Series C Preferred Stock,
5,500,000 shares of its Series D Preferred Stock and 2,000,000 shares of its
Series E Preferred Stock (together, the "Shares" or "Preferred Stock"). The
total amount of Common Stock or other securities issuable upon conversion of the
Preferred Shares is referred to as the "Conversion Stock."
1. Restrictions on Transfer.
1.1 Transfer. Each Holder (as hereinafter defined) agrees not to make
any disposition of all or any portion of the Registrable Securities unless and
until:
(a) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b) (1) The transferee has agreed in writing to be bound by the terms
of this Agreement, (2) 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 (3) 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 Act. It is
agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
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(c) Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder, provided the transferee will
be subject to the terms of this Agreement to the same extent as if he were an
original Holder hereunder.
1.2 Legend.
(a) 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 state securities laws or as
provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
1.3 Legend Removal.
(a) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(b) 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. Registration Rights.
2.1 Definitions. For purposes of this Section 2:
(a) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in
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compliance with the Act, and the declaration or ordering of effectiveness of
such registration statement or document;
(b) The term "Registrable Securities" means (i) all outstanding shares
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock, (ii) the Common Stock
issued or issuable upon conversion of (A) the Series A Preferred Stock issued
pursuant to the Series A Preferred Stock Purchase Agreement dated November 26,
1996, (B) the Series B Preferred Stock issued pursuant to the Series B Preferred
Stock Purchase Agreement dated March 20, 1997, (C) the Series C Preferred Stock
issued pursuant to the Series C Preferred Stock Purchase Agreement dated
November 12, 1997, (D) the Series D Preferred Stock issued pursuant to the
Series D Preferred Stock Purchase Agreement dated November 13, 1998 and (E) the
Series E Preferred Stock issued or issuable pursuant to the Series E Preferred
Stock Purchase Agreement of even date herewith (the "Series E Stock Purchase
Agreement"), (iii) the Common Stock issued or issuable upon conversion of the
Series D Preferred Stock as well as the Common Stock issued to Direct Marketing
Technology, Inc. ("DMT") pursuant to the Interest Purchase Agreement dated
November 30, 1998, (iv) for the purpose of Section 2 only, the Common Stock
issued to the Common Holders in connection with the Agreement and Plan of Merger
among the Company and Enhanced Response Technologies, Inc. dated November 30,
1998 and (v) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Preferred Stock or Common Stock, excluding in all cases,
however, (i) any Registrable Securities sold by a person in a transaction in
which such person's rights under this Section 2 are not assigned, or (ii) any
Registrable Securities sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction; provided, however, that
when referring to securities to be included in or covered by a registration
statement, "Registrable Securities" means Common Stock issued pursuant to the
foregoing;
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities;
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 2.13 hereof;
(e) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the Securities and Exchange Commission (the "SEC") which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC; and
(f) The term "Act" shall mean the Securities Act of 1933, as amended.
(g) The term "Qualified IPO" shall mean the first firmly underwritten
public offering of Common Stock of the Company that is pursuant to a
registration statement filed with, and declared effective by, the SEC (or any
other federal agency at the time administering the
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Act) under the Act, covering the offer and sale of Common Stock to the public at
a public offering price (prior to the underwriter commissions and expenses)
equal to or exceeding five dollars ($5.00) per share of Common Stock
(appropriately adjusted for stock splits, stock dividends, recapitalization,
reorganizations or other similar transactions) and at an aggregate offering
price (before deduction for underwriter commissions and expenses) of not less
than $20,000,000.
2.2 Demand Registration.
(a) If the Company shall receive at any time after the earlier of (i)
October 31, 2000 or (ii) six (6) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than 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), a written request from the Holders of at
least twenty percent (20%) of the Registrable Securities then outstanding that
the Company file a registration statement under the Act covering the
registration of Registrable Securities having an aggregate offering price in
excess of five million dollars ($5,000,000), then the Company shall, within ten
(10) days of the receipt thereof, give written notice of such request to all
Holders and shall, subject to the limitations of Section 2.2(b), effect as soon
as practicable, and in any event within 90 days of the receipt of such request,
the registration under the Act of all Registrable Securities which the Holders
request to be registered within twenty (20) days of the mailing of such written
notice by the Company; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 2.2(a):
(i) During the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date 120
days immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective;
(ii) After the Company has effected two such registrations
pursuant to this Section 2.2(a), and such registrations have been declared or
ordered effective; or
(iii) If the Company shall furnish to such Holders a certificate
signed by the Chairman of the Board of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for a registration statement to be filed at such
time, then the Company's obligation to use its best efforts to register, qualify
or comply under this Section 2.2(a) shall be deferred for a period not to exceed
90 days from the date of receipt of written request from the Holders; provided,
however, that the Company may not utilize this right more than once in any
eighteen month period.
(b) If the Holders initiating the registration request hereunder (the
"Initiating Holders") intend to distribute the Registrable Securities covered by
their request by means of an underwriting, they shall so advise the Company as a
part of their request made pursuant to this Section 2.2 and the Company shall
include such information in the written notice referred to in
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Section 2.2(a). In such event, or if, due to the number of shares for which
Holders have requested registration pursuant to the notice given by the Company
under Section 2.2(a), an underwritten offering is advisable the right of any
Holder to include his 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 (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in Section 2.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 2.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated among all Holders
thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities of the Company owned by
each Holder. In any event, the Holders shall have the first right to include all
of their shares in the offering before any other shares.
2.3 Piggyback Registration. If (but without any obligation to do so)
the Company 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 Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
written notice by the Company, the Company shall, subject to the provisions of
Section 2.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
2.4 Obligations of the Company. Whenever required under this Section 2
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 its best 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 one hundred eighty (180) days, or
other period as required in Section 2.12.
(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
Act with respect to the disposition of all securities covered by such
registration statement.
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(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 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 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 of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement provided that such underwriting agreement
shall not provide for indemnification or contribution obligations on the part of
the Holders greater than the obligations set forth in Section 2.10(b).
(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 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) 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 to the Holders requesting
registration of Registrable Securities and (ii) if such offering is being
underwritten, 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.
2.5 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 be required to effect the registration of such Holder's Registrable
Securities.
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2.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with the
registration, filing or qualification pursuant to Section 2.2, including all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 2.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to a demand
registration pursuant to Section 2.2; provided further, however, that if at the
time of such withdrawal, the Holders have learned of a material adverse change
in the condition, business, or prospects of the Company from that known to the
Holders at the time of their request, then the Holders shall not be required to
pay any of such expenses and shall retain their rights pursuant to Section 2.2.
2.7 Expenses of Piggyback Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 2.3 for each Holder (which right may be assigned as provided
in Section 2.13), including all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto and the fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding underwriting discounts and commissions relating to Registrable
Securities.
2.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 2.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company; provided that such
underwriting agreement shall not provide for indemnification or contribution
obligations on the part of the Holders greater than the obligations set forth in
Section 2.10(b). If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such offering exceeds
the amount of securities sold other than by the Company that the underwriters
reasonably believe is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters believe
will not jeopardize the success of the offering (the securities so included to
be apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders, provided that the Holders shall have the first right to
include all of their shares in the offering before any shares held by other
selling stockholders) and in no event shall the Holder's shares be reduced below
25% of the shares sold in any offering with the exception of the Qualified IPO.
For purposes of apportionment, any selling stockholder which is a Holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and stockholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of
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any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
2.9 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any registration described
in Section 2.3 as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
2.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 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"): (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 Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will pay to each
such Holder, underwriter or controlling 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 indemnity agreement contained in this Section 2.10(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 regarding any Holder,
underwriter or controlling person furnished expressly for use in connection with
such registration by such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder,
severally and not jointly, will indemnify and hold harmless the Company, each of
its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the Act, any
underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims,
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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 regarding any Holder furnished by such Holder expressly for use in
connection with such registration; and each such Holder will pay, as incurred,
any legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 2.10(b), in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 2.10(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, that, in no
event shall any indemnity under this Section 2.10(b) exceed the net proceeds
from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.10 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 2.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. If the indemnified party
fails to deliver written notice to the indemnifying party within a reasonable
time after the indemnified party's receipt of notice of the commencement of any
such action, the indemnity party's liability under this Section 2.10 shall be
reduced to the extent such failure to notify was prejudicial to the indemnifying
party's ability to defend such action, 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 2.10.
(d) If the indemnification provided for in Section 2.10 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
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event shall any contribution by a Holder hereunder exceed the net proceeds from
the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section
2.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 2, and otherwise.
2.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act 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:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times commencing 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;
(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;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(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 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.
2.12 Form S-3 Registration.
(a) In case the Company shall receive from any Holder or Holders
who hold in excess of ten percent (10%) of the Company's Registrable Securities,
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 owned by such Holder or Holders, the Company will:
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(i) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(ii) 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 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 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 2.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the Chairman of the
Board of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 2.12; provided, however,
that the Company shall not utilize this right more than once in any twenty-one
(21) month period; (4) if the Company has already effected one registration on
Form S-3 for the Holders pursuant to this Section 2.12 within six (6) months
prior to the Company's receipt of the request of the Holder or Holders under
this Section 2.12; or (5) 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.
(b) If the Holders initiating the registration request hereunder
(the "Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as part of their request made pursuant to this Section 2.12 and the
Company shall include such information in the written notice referred to in
Section 2.12(a)(i). In such event, the right of any Holder to include his
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 (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
2.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 2.12, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof,
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including the Initiating Holders, in proportion (as nearly as practicable) to
the amount of Registrable Securities of the Company owned by each Holder.
(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 Holders and use its best efforts to keep such
registration statement effective until the registered shares are sold or for six
months, whichever comes first. All expenses incurred in connection with a
registration requested pursuant to Section 2.12, including all registration,
filing, qualification, printer's and accounting fees and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding any underwriters' discounts or commissions associated with Registrable
Securities, shall be borne by the Company. Registrations effected pursuant to
this Section 2.12 shall not be counted as demands for registration or
registrations effected pursuant to Section 2.2 or 2.3, respectively.
2.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee who acquires at least 100,000
shares of Registrable Securities, provided 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 provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. Notwithstanding the above, such rights may be assigned
by a Holder to a limited partner, general partner, former partner or other
affiliate of an Investor (the "Transferee") regardless of the number of shares
acquired by such Transferee. If the Holder is a corporation or Limited Liability
Company such rights may be assigned to stockholders or members, regardless of
the number of shares acquired by such Transferee.
2.14 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of at least a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder to include
such securities in any registration filed under Section 2.2 or Section 2.3
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included.
2.15 "Market Stand-Off" Agreement. Each holder of Registrable
Securities hereby agrees that, during a period not to exceed 180 days, following
the effective date of a registration statement of the Company filed under the
Act, it shall not, to the extent requested by the Company and such underwriter,
sell or otherwise transfer or dispose of (other than to stockholders, Limited
Liability Company members, donees, partners or former partners in accordance
with their partnership interests who agree to be similarly bound) any Common
Stock of the Company held by it at any time during such period except Common
Stock included in such registration; provided, however, that:
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(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors and founders of the Company enter
into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, registered securities of the Company
purchased by a Holder in or following the Company's initial public offering are
specifically excluded from the requirements of this Section 2.15.
2.16 Termination of Registration Rights. No stockholder shall be
entitled to exercise any right provided for in this Section 2 after five (5)
years following the Qualified IPO.
3. Right of First Offer.
3.1 Grant of Right. Subject to the terms and conditions specified in
this Section 3, the Company hereby grants to each Investor a right of first
offer with respect to future sales by the Company of its Future Shares (as
hereinafter defined).
3.2 Future Shares. "Future Shares" shall mean shares of any capital
stock of the Company, whether now authorized or not, and any rights, options or
warrants to purchase such capital stock, and securities of any type that are, or
may become, convertible into such capital stock; provided however, that "Future
Shares" do not include (i) the shares of Preferred Stock held by the Investors
or the Common Stock issued or issuable upon the conversion of such Preferred
Stock, (ii) securities offered pursuant to the Qualified IPO, (iii) securities
issued pursuant to the acquisition of another corporation by the Company by
merger of, purchase of substantially all of the assets of or other
reorganization, and (iv) securities issued or issuable to officers, directors,
employees, consultants, strategic partners, licensors or lessors of the Company
pursuant to any employee or consultant stock offering, plan or arrangement,
provided that any such transaction, plan or arrangement contemplated by (iii),
or (iv) has been approved by the Board of Directors of the Company including the
approval of at least two board members elected by holders of the Preferred
Stock.
3.3 Notice. In the event the Company proposes to offer any of its
Future Shares, the Company shall first make an offering of such Future Shares to
each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail (the
"Notice") to each Investor stating (i) its bona fide intention to offer such
Future Shares, (ii) the number of such Future Shares to be offered, (iii) the
price, if any, for which it proposes to offer such Future Shares,
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and (iv) a statement that thirty (30) calendar days from receipt of such Notice
the Investor must respond to such Notice as set forth in subsection (b) below.
(b) Within 30 calendar days after receipt of the Notice, the
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Future Shares which equals
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Shares then held, by such Investor bears to the
total number of shares of Common Stock issued and outstanding, including shares
issuable upon conversion of convertible securities issued and outstanding. The
Company shall promptly, in writing, inform each Investor which purchases all the
Future Shares available to it (the "Fully-Exercising Investor") of any other
Investor's failure to do likewise. During the ten-day period commencing after
receipt of such information, each Fully-Exercising Investor shall be entitled to
obtain that portion of the Future Shares offered to the Investors which was not
subscribed for, which is equal to the proportion that the number of shares of
Common Stock issued and outstanding or issuable upon conversion of the Shares
then held, held by such Fully-Exercising Investor bears to the total number of
shares of Common Stock issued and outstanding, including shares issuable upon
conversion of convertible securities issued and outstanding then held, held by
all Fully-Exercising Investors who wish to purchase some of the unsubscribed
shares.
3.4 Sale after Notice. If all such Future Shares referred to in the
Notice are not elected to be obtained as provided in Section 3.3 hereof, the
Company may, during the 90-day period following the expiration of the latest
period provided in Section 3.3 hereof, offer the remaining unsubscribed Future
Shares to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than that specified in, the Notice. If the Company does
not enter into an agreement for the sale of the Future Shares within such
period, or if such agreement is not consummated within 90 days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Future Shares shall not be offered unless first reoffered to the Investors in
accordance herewith.
3.5 Assignment. The right of first offer granted under this Section 3
is assignable by the Investors to any transferee of a minimum of 100,000 shares
of Common Stock (including any shares of Common Stock into which shares of
Preferred Stock are convertible).
3.6 Termination of Rights. No stockholder shall be entitled to
exercise any right provided for in this Section 3 following the Qualified IPO or
when the Company first becomes subject to the periodic reporting requirements of
Section 12(g) or 15(d) of the Securities Exchange Act of 1934, whichever event
shall first occur.
4. Covenants of the Company. The Company hereby covenants and agrees as
follows:
4.1 Financial Information. The Company will provide each Investor the
following reports for so long as the Investor is a holder of a minimum of
250,000 Registrable Securities or an equivalent amount of Conversion Stock or of
an equivalent combination of Shares and Conversion Stock (as adjusted for stock
splits, stock dividends, reorganizations, recapitalizations and other similar
transactions) or at least 5% of the Company's securities (on a fully diluted
basis) (a "Major
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<PAGE> 15
Investor"), including for purposes of this Section 4 any such Shares which have
been transferred to a constituent partner of an Investor:
(a) As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income, stockholders' equity and cash flows of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles on a basis consistent with prior years
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and audited by an independent public
accountants of national standing selected by the Company and reasonably
acceptable to the Investors.
(b) As soon as practicable after the end of each quarter, and in
any event within 20 days thereafter, a consolidated balance sheet of the Company
and its subsidiaries, if any, as of the end of each such quarter, consolidated
statements of income, consolidated statements of changes in financial condition,
and a consolidated statement of cash flow of the Company and its subsidiaries
for such period and for the current fiscal year to date, and setting forth in
each case in comparative form the figures for corresponding periods in the
previous fiscal year, and setting forth in comparative form the budgeted figures
for such period and for the current fiscal year then reported, prepared in
accordance with generally accepted accounting principles (other than for
accompanying notes), subject to changes resulting from year-end audit
adjustments, all in reasonable detail and certified by the principal financial
or accounting officer of the Company as having been prepared in compliance with
this paragraph.
(c) 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
(d) As soon as practicable after the end of each month, and in
any event within twenty (20) days thereafter, a consolidated balance sheet of
the Company as of the end of each such month, and a consolidated statement of
income and a consolidated 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 need not have been
made, all in reasonable detail and certified by the Company's chief financial
officer.
(e) Promptly upon receipt thereof (and in any event within five
business days thereafter), the Company shall deliver to each Major Investor
holding copies of all management letters and reports submitted to the Company by
independent certified public accountants in connection with any annual, interim
or special audit of the Company made by such accountants.
4.2 Inspection Rights. Each Major Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs,
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<PAGE> 16
finances and accounts of the Company or any of its subsidiaries with its
officers and to review the books and records and such other 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 4.2 with respect to a competitor of the Company (as
reasonably determined by the Board of Directors in good faith) or with respect
to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
4.3 Observer Rights. For as long as entities affiliated with
Technology Crossover Ventures, Long Island Venture Fund and its affiliates, Dai
Nippon Printing Co., Ltd. and its affiliates, and Applewood Associates, L.P. and
its affiliates, respectively, holds a minimum of 100,000 Shares, Conversion
Stock, or a combination thereof, respectively, a representative of Technology
Crossover Ventures, Long Island Venture Fund, Dai Nippon Printing Co., Ltd. and
Applewood Associates, L.P., respectively, shall be invited to participate in all
meetings of the Board of Directors as an observer. The Company shall send to
each Major Investor a copy of all notices, minutes, consents and other materials
distributed by the Company to the directors.
4.4 Assignment of Rights. Subject to the limitations set forth in
Section 4.1, the rights granted pursuant to Sections 4.1, 4.2 and 4.3 may be
assigned or otherwise conveyed by the Investors or by any subsequent transferee
to an investor who acquires a minimum of 100,000 Shares, Conversion Stock, or a
combination thereof, other than a competitor of the Company, as reasonably
determined by the Board of Directors of the Company excluding any director with
an interest in such transferee, provided that written notice of such assignment
or conveyance is given to the Company.
4.5 Stock Vesting. Unless otherwise approved by the Board of
Directors, which includes the approval of at least two directors nominated by
the Holders, all stock options and other stock equivalents issued to employees,
directors, consultants and other service providers shall be subject to vesting
as follows: (i) one-fourth (1/4) 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 (ii) the remaining
three-fourths (3/4) of such stock shall vest monthly over the remaining three
(3) years. With respect to any shares of stock purchased by any such person, the
Company will have a repurchase option that 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. In the event the Company does not
exercise the repurchase option, the Company hereby agrees to assign such right
to the Investors.
4.6 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.
4.7 Issuance of Additional Shares of Common Stock. With the exception
of the 2,500,000 shares of Common Stock the Company has allocated for founders
and key employees, the Company will not issue additional shares of Common Stock,
other than for the exercise of options exercisable for 935,833 shares of Common
Stock issued under the Company's 1996 Stock Plan and
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options exercisable for 2,966,962 shares of Common Stock issued under the
Company's 1999 Stock Plan or the conversion of the Preferred Stock, without the
prior approval of a majority of the Board of Directors, including those
directors elected by the Investors.
4.8 Real Property Corporation. The Company covenants that it will
operate in a manner such that it will not become a "United States real property
holding corporation" as that term is defined in Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder
("USRPHC"). The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
Section 1.897-2(h), or any supplementary or successor provision thereto. Within
30 days of a request from an Investor or any of its partners, the Company will
inform the requesting party, in the manner set forth in Reg. Section 1. 897-
2(h)(1)(iv) or any supplementary or successor provision thereto, whether that
party's interest in the Company constitutes a United States real property
interest (within the meaning of Internal Revenue Code Section 897(c)(1) and the
regulations thereunder) and whether the Company has provided to the Internal
Revenue Service all required notices as to its USRPHC status.
4.9 Board of Directors. On the date of the Closing (as defined in the
Series E Stock Purchase Agreement), the Board shall consist of seven members and
one vacancy, as follows: Howard Morgan, representing Preferred stockholders,
Larry Phillips representing the Series D Preferred stockholders, Steven M.
Markowitz and Robert Hoyler, representing the Common stockholders, Thomas
Newkirk representing DMT, Mario Rosati and Lester Wunderman (both non-employee
designees nominated by management and elected by the Common and Preferred,
voting together as a single class), and one vacancy, to be filled by a nominee
of Technology Crossover Ventures (pursuant to the terms of the Series E
Preferred Stock Voting Agreement of even date herewith). Subject to being filled
by a nominee of Technology Crossover Ventures, this vacancy shall remain in
place only until the time of the closing of the Company's initial underwritten
public offering pursuant to an effective registration statement filed by the
Company under the Securities Act; after such time, the Company shall have no
obligation to maintain such vacancy or to fill it with a nominee of Technology
Crossover Ventures other than pursuant to the Management Rights Agreement of
even date herewith. The Board of Directors shall also appoint a Compensation
Committee consisting of three members, the Company's CEO and two of the
directors elected by the Investors. The Compensation Committee will be
responsible for all option grants and employee compensation matters. The Board
of Directors will convene at least eight (8) times per year.
4.10 Directors' Expenses. The Company shall reimburse each
non-employee member of the Company's Board of Directors for travel expenses,
incidental expenses and other expenses reasonably incurred in connection with
the performance of their duties as a Director. Otherwise Company shall pay no
compensation to its directors solely for their role as a directors.
4.11 Indemnification of Officers and Directors. For at least as long
as any representative or representatives of the Investors serve on the Board of
Directors of the Company, the Company shall indemnify its officers and directors
to the fullest extent permitted by law.
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4.12 Key Man Insurance. The Company shall obtain life insurance
policies on the key management employees of the Company as such policies are
deemed necessary and reasonable. In all such policies the Company shall be the
sole beneficiary.
4.13 Director's Insurance. The Company shall obtain liability policies
for the protection of the Company's directors as such policies are deemed
necessary and reasonable.
4.14 Qualified Small Business. For at least as long as any Shares are
held by an Investor or by a transferee of any Investor in whose hands the Shares
are eligible to qualify as Qualified Small Business Stock as defined in Section
1202(c) of the Code (the "Investor's Holding Period"), the Company shall use its
best efforts to cause the Shares to qualify as Qualified Small Business Stock.
During the Investor's Holding Period, the Company shall make reasonable efforts
to notify Major Investors fifteen (15) days prior to an event, the occurrence of
which the Company reasonably anticipates and which, to the Company's knowledge,
is expected to cause the Shares held by such Major Investor to cease to be
eligible for classification as Qualified Small Business Stock. Within ten (10)
days of receipt of a Major Investor's written request therefor, the Company
shall deliver to such Major Investor a certificate (the "QSBS Certificate") in a
form reasonably satisfactory to such Major Investor. The QSBS Certificate shall
set forth whether, to the reasonable knowledge of the Company, such Major
Investor's interest in the Company constitutes Qualified Small Business Stock.
4.15 Audit Reports. Promptly upon receipt thereof (and in any event
within five business days thereafter), the Company shall deliver to each
Investor holding 100,000 shares copies of all management letters and reports
submitted to the Company by independent certified public accountants in
connection with any annual, interim or special audit of the Company made by such
accountants.
4.16 Transactions with Affiliates. The Company shall not directly or
indirectly, enter into or be a party to any transaction or arrangement
(including, without limitation, the contribution, transfer, purchase, sale or
exchange of property, leasing, loaning of money or the rendering of any service,
or the payment of management or other service fees) with any of its affiliates
or employees unless such transaction or arrangement is otherwise not prohibited
by this Agreement and is entered into in the ordinary course of and pursuant to
the reasonable requirements of the Company's business and the Board of Directors
of the Company (excluding any director "interested" in such transaction) shall
have determined that the terms of such transaction or arrangement are fair and
reasonable and no less favorable to the Company than those which might be
obtained at the time for a comparable transaction or arrangement on an
arm's-length basis from a non-affiliate.
4.17 Actions Requiring Consent. Without the prior written consent of
the holders of a majority of the Registrable Securities, the Company shall not
directly or indirectly:
(a) authorize or issue shares of any class or series of equity
securities or securities convertible into or exercisable for any equity
securities other than pursuant to this
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Agreement or pursuant to the conversion of the Preferred Stock or upon exercise
of the options granted pursuant to the 1996 Stock Plan or the 1999 Stock Plan;
(b) pay or declare any dividend or distribution on any shares of
the Company's capital stock (except on the Preferred Stock in accordance with
its terms) or declare any stock splits or reverse stock splits on any shares of
capital stock of the Company;
(c) directly or indirectly redeem, repurchase, retire or
otherwise acquire any shares of equity securities of the Company except the
Preferred Stock in accordance with its terms or pursuant to the repurchase
provisions contained in restricted stock purchase agreements with the Company's
founders;
(d) amend or repeal any provision of, or add any provision to,
the Company's Restated Certificate of Incorporation or Bylaws;
(e) issue any shares of Series E Preferred Stock on materially
different terms than those included in the Series E Stock Purchase Agreement;
(f) voluntarily liquidate, dissolve or wind-up the Company or
conduct any form of recapitalization or reorganization of the Company;
(g) merge or consolidate with or into any other person, or permit
any other person to consolidate or merge with or into the Company, or
participate in a share exchange with or sell, license, lease, transfer,
contribute, or otherwise dispose of any of its assets (tangible or intangible)
to any other person other than sales or licenses granted in the ordinary course
of business;
(h) enter into any agreement, understanding or contract or incur
any indebtedness or obligation involving payments or consideration of more than
$100,000, except for short-term borrowing for working capital;
(i) adopt or make any fundamental or substantial change in the
primary nature of the Company's business or engage in any business other than
that presently engaged in and contemplated to be engaged in as set forth in the
Business Plan;
(j) incur any debt or make gifts or advances to or make any
investments in any affiliates or stockholders of the Company or any relatives or
affiliates of such persons, except advances for travel or other similar expenses
in the ordinary course of business;
(k) guaranty, directly or indirectly, any debt except for trade
account of the Company accruing in the ordinary course of business.
Notwithstanding the foregoing provisions of this Section 4.17, the prior
approval of the holders of the Shares shall not be required for the Company to
engage in any of the aforementioned activities as such time as the Investors or
their transferees in the aggregate hold less than 500,000 shares of Registrable
Securities.
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4.18 Termination of Covenants. The covenants set forth in Sections
4.1, 4.2, 4.3 and 4.17 shall terminate and be of no further force or effect upon
the closing of the Company's initial underwritten public offering pursuant to an
effective registration statement filed by the Company under the Securities Act
(for minimum aggregate proceeds of $20,000,000 at a $5.00 per share price)
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan).
4.19 Aggregation of Shares. Notwithstanding anything to the contrary
contained herein, a Holder may, for the purpose of exercising any right herein,
the exercise of which is conditioned upon such Holder holding a minimum number
of shares of Registrable Securities, aggregate all such shares of Registrable
Securities owned by such Holder and its affiliates, partners and members to meet
or otherwise satisfy such minimum holding requirement.
5. Miscellaneous Provisions.
5.1 Waivers and Amendments. 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 at least a majority
of the shares of Registrable Securities. Notwithstanding the foregoing, the
Company and the Investors agree that this Agreement shall be automatically
amended without further action by the then parties to this Agreement to add
additional parties to this Agreement who purchase Series E Preferred Stock under
the Series E Stock Purchase Agreement and agree to be bound by the same terms of
this Agreement as the Investors. Any amendment or waiver effected in accordance
with this Section 5.1 shall be binding upon each person or entity which are
granted certain rights under this Agreement and the Company.
5.2 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, except as otherwise noted herein,
shall be deemed effectively given upon personal delivery, delivery by nationally
recognized courier or five business days after deposit with the United States
Post Office (by first class mail, postage prepaid), addressed: (a) if to the
Company, at 565 Commercial Street, 2nd Floor, San Francisco, California 94111
(or at such other address as the Company shall have furnished to the Investors
in writing) attention of President and (b) if to an Investor, at the latest
address of such person shown on the Company's records.
5.3 Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.
5.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument, but only one of which
need be produced.
5.5 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 attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
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5.6 Successors and Assigns. Except as otherwise expressly provided in
this Agreement, this Agreement shall benefit and bind the successors, assigns,
heirs, executors and administrators of the parties to this Agreement.
5.7 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter of this Agreement.
5.8 Separability; Severability. Unless expressly provided in this
Agreement, the rights of each Investor under this Agreement are several rights,
not rights jointly held with any other Investors. Any invalidity, illegality or
limitation on the enforceability of this Agreement with respect to any Investor
shall not affect the validity, legality or enforceability of this Agreement with
respect to the other Investors. If any provision of this Agreement is judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be affected or impaired.
5.9 Stock Splits. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination, recapitalization, reorganization or other similar transaction of
shares by the Company occurring after the date of this Agreement.
5.10 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any Holder upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power or remedy nor shall it be construed to be a waiver of any such
breach, default or noncompliance or any acquiescence therein or of any similar
breach, default or noncompliance thereafter occurring. It is further agreed that
any waiver, permit, consent or approval of any kind or character on any Holder's
part of any breach, default or noncompliance under the Agreement or any waiver
on such Holder's part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Holders shall be cumulative and not alternative.
6. Waiver of Right of First Offer. The Investors under the Prior Agreement
hereby waive their right of first offer under Section 3 of the Prior Agreement
to purchase the Series E Preferred Stock or Common Stock which may be issued or
issuable pursuant to the Series E Stock Purchase Agreement. This waiver is
effective upon the execution of this Agreement by a majority of the shares of
Registrable Securities held by the Investors under the Prior Agreement.
-21-
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.
COMPANY:
MYPOINTS.COM, INC.
By: /s/ Steven M. Markowitz
Steven M. Markowitz, Chairman and CEO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 23
PREFERRED STOCKHOLDERS
APPLEWOOD ASSOCIATES, L.P.
By: /s/ Irwin Lieber
Irwin Lieber
Title: General Partner
AUBER INVESTMENTS LIMITED
By: /s/ Herbert Selzer
Herbert Selzer
Title: Attorney-in-fact
/s/ Joseph Y. Bae
JOSEPH Y. BAE
/s/ Peter Burnam
PETER BURNIM
By: /s/ Perry Lerner
Perry Lerner, Attorney-in-fact
/s/ Nils P. Brous
NILS P. BROUS
CHACALLIT ASSOCIATES
By: /s/ Richard Beattie
Title: General Partner
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 24
/s/ David H. Chung
DAVID H. CHUNG
COMOROS LDC
By: /s/ signatures illegible
For: MeesPiersen Management (Cayman
Limited)
Title: Director
/s/ India Cutler
INDIA CUTLER
DAI NIPPON PRINTING CO., LTD.
By:
----------------------------------
Title:
----------------------------------
DIRECT MARKETING TECHNOLOGY, INC.
By: /s/ Thomas Newkirk
Title: Chairman
ESSANESS/INTELLIPOST PARTNERS
By: Essaness Theatres Corporation,
its managing partner
By: /s/ Alan Silverman
Alan Silverman, its President
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 25
/s/ James H. Greene, Jr.
JAMES H. GREENE, JR.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 26
/s/ Henry R. Kravis
HENRY R. KRAVIS
LABRADOR VENTURES III, L.P.
By: /s/ Stuart Davidson
Stuart Davidson
Title: Manging Director
/s/ Marc S. Lipschultz
MARC S. LIPSCHULTZ
LONG ISLAND VENTURE FUND
By: Tech Transfer Island Corp., General
Partner
By: /s/ Paul Lowell
Title: Executive Director
/s/ Michael W. Michelson
MICHAEL W. MICHELSON
/s/ Howard Morgan
HOWARD MORGAN
/s/ Alexander Navab
ALEXANDER NAVAB
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 27
/s/ Marc Ostrofsky
MARC OSTROFSKY
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 28
PRIMEDIA VENTURES
By: /s/ Larry Phillips
Larry Phillips
Title: Managing Director
RAETHER FAMILY TRUST
By: /s/ Wendy S. Raether
Wendy S. Raether
Title: Trustee
/s/ Paul E. Raether
PAUL E. RAETHER
RENREL Limited Partnership
By: /s/ Perry Lerner
Perry Lerner
Title:
----------------------------------
RHL VENTURES, LLC
By: /s/ signature illegible
Title:
----------------------------------
RIVERCROFT LIMITED
By: C.G. Malet de Carteret
By: /s/ signature illegible
Title: Authorized Signatory
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 29
/s/ George R. Roberts
GEORGE R. ROBERTS
S7
By: /s/ Jim Simons
Jim Simons
Title:
----------------------------------
TARGETED MARKETING SYSTEMS, INC.
By:
----------------------------------
Title:
----------------------------------
/s/ Michael T. Tokarz
MICHAEL T. TOKARZ
VAN MERKENSTEIJN LLC
By: /s/ signature illegible
Title: Managing Member
/s/ Lester Wunderman
LESTER WUNDERMAN
/s/ David Zelman
DAVID ZELMAN, PhD
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 30
BAYVIEW INVESTORS LTD.
By: /s/ signature illegible
Title:
--------------------------------------------
CLAREX LIMITED
By: /s/ signature illegible
Title: Director and Secretary
By: /s/ signature illegible
Title: Director and Assistant Secretary
TCV III (GP)
a Delaware General Partnership
By: Technology Crossover Management III, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV III, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV III (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV III STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III, L.L.C.,
Its: General Partner
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 31
By: /s/ Robert C. Bensky
Name: Robert C. Bensky
Title: Chief Financial Officer
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 32
/s/ Gene Bernstein
GENE BERNSTEIN
/s/ Jay Bernstein
JAY BERNSTEIN
--------------------------
BURLEIGH COPPICE
DELTA HOLDINGS CORPORATION
By: Herbert Selzer
Title: Attorney-in-fact
--------------------------
LEO A. GUTHART
/s/ James W. Harpel
JAMES W. HARPEL
/s/ Irwin Lieber
IRWIN LIEBER
--------------------------
L. CHARLES MEYTHALER
/s/ Mark Silber
MARK SILBER
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 33
COMMON HOLDERS
ASCENT PARTNERS
By:
-------------------------
Title:
-----------------------
-----------------------------
CRAIG STEVENS
-----------------------------
CRAIG MULLER
-----------------------------
CHARLES RITZKE
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 34
EXHIBIT A
LIST OF INVESTORS
SERIES A PREFERRED STOCKHOLDERS
INVESTOR NAME NUMBER OF SHARES
---------------------------------------------------------------------- ----------------
Long Island Venture Fund 1,000,000
Harold Brierley 1,000,000
S7 866,667
Howard L. Morgan 133,333
TOTAL: 3,000,000
SERIES B PREFERRED STOCKHOLDER S
INVESTOR NAME NUMBER OF SHARES
---------------------------------------------------------------------- ----------------
Dai Nippon Printing Co., Ltd. 500,000
(Remainder of page intentionally left blank)
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 35
SERIES C PREFERRED STOCKHOLDERS
INVESTOR NAME NUMBER OF SHARES
---------------------------------------------------------------------- ----------------
Auber Investments Limited 666,667
RHL Ventures 133,333
Rivercroft Limited 43,333
Long Island Venture Fund, L.P. 333,333
Applewood Associates, L.P. 666,666
S7 300,000
Targeted Marketing Systems, Inc. 200,000
Howard L. Morgan 33,333
Henry R. Kravis 166,667
George R. Roberts 166,667
Paul Raether 25,000
Raether Family Trust c/o Paul Raether 8,333
Michael T. Tokarz 16,667
Nils P. Brous 20,000
Alexander Navab 20,000
Marc S. Lipschultz 20,000
David H. Chung 13,333
Chacallit Associates 66,667
Joseph Y. Bae 3,333
RenRel Limited Partnership 6,667
Lester Wunderman 16,667
----------------
TOTAL: 2,926,666
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 36
SERIES D PREFERRED STOCKHOLDERS
INVESTOR NAME NUMBER OF SHARES
---------------------------------------------------------------------- ----------------
FIRST CLOSING: NOVEMBER 13, 1998
S7 266,990
Applewood Associates, L.P. 291,262
Rivercroft Limited 41,262
Auber Investments Limited 291,262
RENREL Limited Partnership 7,282
Lester Wunderman 24,272
Essaness/Intellipost Partners 121,359
Marc Ostrofsky 100,000
Howard Morgan 24,272
India Cutler 12,137
Comoros LDC 48,544
EXPERIAN CLOSING: NOVEMBER 30, 1998
Direct Marketing Technology, Inc. Series D 1,213,592
Common 2,164,535
ADDITIONAL CLOSING: NOVEMBER 30, 1998
Labrador Ventures III, L.P. 485,437
Primedia Ventures 776,699
David Zelman, PhD 14,563
Van Merkensteijn LLC 48,544
RENREL Limited Partnership 12,136
Peter Burnim 7,282
Nils P. Brous 14,563
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 37
James H. Greene, Jr. 24,271
Henry R. Kravis 48,543
Marc Lipschultz 14,563
Michael Michelson 24,271
George R. Roberts 48,543
----------------
TOTAL: 6,101,913
SERIES E PREFERRED STOCKHOLDERS
INVESTOR NAME NUMBER OF SHARES
---------------------------------------------------------------------- ----------------
Applewood Associates, L.P. 84,001
Auber Investments Limited 132,622
Joseph Bae 2,000
Bayview Investors Ltd. 50,000
Peter Burnim 887
Chacallit Associates 5,846
David H. Chung 5,000
Clarex Limited 400,000
Comoros LDC 5,913
India Cutler 1,478
Direct Marketing Technology, Inc. 296,229
Essaness/Intellipost Partners 14,782
James H. Greene, Jr. 5,000
Henry R. Kravis 21,000
Labrador Ventures III, L.P. 42,568
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 38
Gene Bernstein 2,315
Jay Bernstein 2,315
Burleigh Coppice 4,631
Delta Holdings Corporation 4,631
Leo A. Guthart 6,945
James W. Harpel 2,315
Irwin Lieber 4,631
L. Charles Meythaler 3,472
Mark Silber 2,315
Marc Lipschultz 3,000
Michael W. Michelson 5,000
Howard L. Morgan 16,743
Alexander Navab 10,000
Marc Ostrofsky 4,651
Primedia Ventures 68,109
RenRel Limited Partnership 3,177
Rivercroft Limited 10,304
S-7 Associates, L.L.C. 160,447
TCV III (GP) 4,357
TCV III, L.P. 20,695
TCV III (Q), L.P. 550,040
TCV III Strategic Partners, L.P. 24,908
Michael T. Tokarz 5,000
Van Merkensteijn LLC 5,913
Lester Wunderman 4,986
David Zelman, PhD 1,774
TOTAL: 2,000,000
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 39
EXHIBIT B
COMMON STOCKHOLDERS
Stockholder's Name Number of Shares Currently Owned
-------------------------------------------------------- --------------------------------
Ascent Partners 32,911
Craig Muller 802,271
Craig Stevens 6,582
Charles Ritzke 23,818
TOTAL: 865,582
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT