EXHIBIT 10.20
SHAREHOLDER'S AGREEMENT
THIS SHAREHOLDER'S AGREEMENT (this "Agreement") is made and entered into
effective as of April 23, 1999 among Coaxicom, Inc., a Delaware corporation (the
"Company"), Xxxxx Communications Fund, L.P. ("Xxxxx"), those parties listed on
Schedule I to the (i) Series A Preferred Stock Purchase Agreement (the "Series A
Holders"), dated as of January 29, 1998, by and among the Company and the Series
A Holders, and (ii) the Series B Preferred Stock Purchase Agreement (the "Series
B Holders"), dated as of September 9, 1998, by and among the Company and the
Series B Holders (the Series A Holders and the Series B Holders are collectively
referred to herein as, the "Holders"), and each of the individuals listed on the
signature pages hereto under the heading "Founders" (collectively, the
"Founders"; the Founders, the Holders and Xxxxx and their respective Permitted
Transferees (as defined herein) are collectively referred to herein as, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, Xxxxx, the Holders and the Company have entered into a certain
Securities Purchase Agreement (the "Securities Purchase Agreement") which
provides for, among other things, (i) the purchase by Xxxxx of 4,478,481 shares
(the "Xxxxx Series C Preferred Shares") of 8% Series C Convertible Redeemable
Preferred Stock ("Series C Stock") of the Company for an aggregate purchase
price of Twenty Million Dollars ($20,000,000), (ii) the purchase by the Holders
of 1,791,392 shares of the Series C Stock (the "Holders' Series C Preferred
Shares"; the Holders' Series C Preferred Shares and the Xxxxx Series C Preferred
Shares are collectively referred to herein as, the "Series C Preferred Shares")
for an aggregate purchase price of Eight Million Dollars ($8,000,000) and (iii)
an option for Xxxxx (the "Xxxxx Option") and the Holders to purchase up to an
aggregate of 5,300,892 shares of 8% Series D Convertible Redeemable Preferred
Stock of the Company (the "Series D Preferred Shares"; the Series C Preferred
Shares and the Series D Preferred Shares are collectively referred to herein as,
the "Priority Preferred Shares), based on their pro rata ownership of the Series
C Preferred Shares, for an aggregate additional purchase price of Twenty Eight
Million Dollars ($28,000,000); and
WHEREAS, it is a condition precedent to the Closing of the Securities
Purchase Agreement that the parties enter into this Agreement which provides
for, among other things, certain voting rights and certain agreements with
respect to the transfer of the securities of the Company held by the parties to
this Agreement.
NOW THEREFORE, in order to induce Xxxxx to enter into the transactions
contemplated by the Securities Purchase Agreement, the parties hereto hereby
agree as follows:
1. Voting Rights. For so long as this Agreement is in effect, the
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Stockholders shall each vote all of their securities of the Company,
including any securities of the Company
acquired after the date of this Agreement, in favor of the size of the
Board of Directors of the Company (the "Board") and the election of each of
the other Stockholders' designees to the Board, or any committee thereof,
as provided below:
(a) Two designees to the Board who are selected by holders of at least a
majority in interest of the then outstanding Priority Preferred Shares
("Majority Priority Preferred Holders"), which shall be reconstituted
to provide for seven (7) members to accommodate such designation
initially consisting of the following persons: Xxxxx Xxxxxx, Xxxx
Xxxxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx X. Xxxxx, Xxxxxx Van der
Meer and Xxxxxx X. Xxxxx; provided, however, that the Board shall be
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reconstituted to provide for five (5) members no later than December
31, 1999, at which time, the members of the Board shall continue to
include at least two (2) designees selected by the Majority Priority
Preferred Holders, one of whom shall have relevant industry experience
and shall be approved by the Founders which approval shall not be
unreasonably withheld. The two designees selected by the Majority
Priority Preferred Holders shall have the right to serve on all of the
Board's committees;
(b) Two designees to the Board who are jointly selected by the Series A
Holders and the Series B Holders (initially Xxxxxx Van der Meer and
Xxxxx Xxxxxx), one of whom, following December 31, 1999, shall have
relevant industry experience and shall be approved by the Founders
which approval shall not be unreasonably withheld.
(c) Three (3) designees to the Board who are jointly selected by the
Founders (initially Xxxx Xxxxxxx, Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx)
until the Board is reconstituted at five (5) as set forth in
subsection 1 (a) above, at which time the Founders shall only be
entitled to designate one (1) director to the Board.
2. Restrictions.
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(a) The Company shall not take any of the following actions without the
prior written approval of at least seventy-five percent (75%) in
interest of the then outstanding shares held by the Series A Holders
and Series B Holders and the holders of the Priority Preferred Shares
(collectively, "All Preferred Holders"), voting together as a single
class:
(i) amend or modify the certificate of incorporation or by-laws of
the Company; or
(ii make any material purchase or acquisition of any stock,
obligations or securities of, or any interest in, or make a
material capital contribution to,
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any other Person, or make any material purchase or acquisition
of any property or assets not used in the usual and ordinary
course of business.
(b) The Company shall not take any of the following actions without the
prior written approval of at least a majority of the then outstanding
shares held by All Preferred Holders:
(i) enter into or permit to exist any transaction or series of
related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services)
with any Affiliate (each, an "Affiliate Transaction") or
extend, renew, waive or otherwise modify the terms of any
Affiliate Transaction, unless such transaction, series of
related transactions, extension, renewal, waiver or other
modification (i) is disclosed to all members of the Board, (ii)
either is approved by a majority of disinterested Directors or
has an aggregate value not exceeding $5,000 and (iii) is on an
arm's-length basis and on terms no less favorable to the
Company than could be obtained from non-related parties;
provided, however, that the foregoing shall not apply to the
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payment of any salary or or any increase or change in salary,
other compensation or fringe benefit approved by the Board in
the manner set forth in this Section 2(b)(i) or the
reimbursement of expenses in the ordinary course of business;
(ii) incur any debt or enter into any commitments to incur debt
(whether by issuance, guarantee or otherwise) including vendor
financing and capital leases, with the exception of debt
incurred by the Company under the current Nortel credit
facilities in an amount to be approved by the majority in
interest of All Preferred Holders as part of its approval of
the quarterly budget pursuant to Section 2(b)(vii) at or prior
to the beginning of each calendar quarter;
(iii) agree to the issuance or issue any capital stock or other
securities convertible into or exercisable for capital stock
other than stock or option issuances to Employees of the
Company that are Excluded Events within the meaning of
paragraph 5.3.10(iii) of Section (C) of Article Four of the
Company's Amended and Restated Certificate of Incorporation;
(iv) purchase, redeem or otherwise acquire or retire for value any
capital stock or other securities convertible into or
exercisable for capital stock of the Company;
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(v) enter into any agreement, indenture or other instrument which
contains any provisions restricting the Company's obligation to
pay dividends on or make redemptions of the Priority Preferred
Shares;
(vi) declare or pay any dividend or distribution on any securities
ranking junior to the Priority Preferred Shares;
(vii) approve the quarterly budget of the Company or make any
expenditures not provided for in such budget; or
(viii) sell or transfer assets in any transaction or series of related
transactions having a value in excess of or for a purchase
price in excess of Five Million Dollars ($5,000,000).
3. Right of First Offer. If any Stockholder who is or becomes a party to this
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Agreement proposes to sell (the "Selling Stockholder") any Common Stock of
the Company or any stock or security convertible into or exchangeable for
Common Stock of the Company, other than a sale to a Permitted Transferee,
the Selling Stockholder shall have the obligation to first offer such
securities to the other Stockholders (the "Non-Selling Stockholders") and
to the Company upon the following terms:
(a) The Selling Stockholder shall give the Non-Selling Stockholders and
the Company prompt written notice (the "Notice of Intent") of its
intent to sell such securities of the Company. The Company and the
Non-Selling Stockholders shall have the exclusive right for a period
of fifteen (15) business days from the date on which the Notice of
Intent was given (the "Exclusivity Period") to make a firm offer to
purchase such securities on terms satisfactory to the Selling
Stockholder. The Company shall have the first priority in respect of
any such purchase and if the Company does not make an offer acceptable
to the Selling Stockholder, each Non-Selling Stockholder who is
willing to purchase the securities on terms acceptable to the Selling
Stockholder shall have the right to participate in such purchase,
based upon their respective pro rata ownership of the Fully Diluted
Common Stock. If, upon the expiration of the Exclusivity Period, the
Selling Stockholder, the Company and the Non-Selling Stockholders are
unable to come to terms with respect to the purchase and sale of such
securities, the Selling Stockholder shall have the right to sell such
securities to a third party. The Selling Stockholder shall not enter
into discussions with any third party regarding the sale of such
securities during the Exclusivity Period; and
(b) If, after following the procedures set forth in Section 2(a), the
Selling Stockholder receives an offer from a third party for such
securities on terms and conditions that it deems acceptable (but on
terms no less favorable to the Selling Stockholder
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than the Company or the Non-Selling Stockholders shall have offered
pursuant to Section 3(a)), the Selling Stockholder may sell such
securities to such third party, provided that such sale takes place
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within ninety (90) days after the expiration of the Exclusivity
Period. If no such sale occurs during such ninety (90) day period, any
attempted sale of such securities shall be subject to the right of
first offer by the Non-Selling Stockholders set forth in this Section
3.
4. Tag Along Rights. After complying with the terms of Section 3 of this
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Agreement, if any Selling Stockholder proposes to sell or transfer, in one
transaction or in a series of related transactions (a "Tag Along Sale"),
any securities of the Company owned by such Selling Stockholder to any
third party, other than a sale or transfer to a Permitted Transferee or to
the Company or to Non-Selling Stockholders pursuant to Section 3 of this
Agreement, the Non-Selling Stockholders shall have the right to participate
in such Tag Along Sale on the following terms:
(a) The Selling Stockholder shall give the Non-Selling Stockholders not
less than thirty (30) days' written notice (a "Sale Notice") of its
intention, describing the price offered, all other material terms and
conditions of the Tag Along Sale and, if the consideration payable
pursuant to the Tag Along Sale consists in whole or in part of
consideration other than cash, such information relating to such other
consideration as investors may reasonably request and which is
available to the Selling Stockholder.
(b) In connection with any Tag Along Sale, the Non-Selling Stockholders
shall have the right, in their sole discretion, to sell, for the same
price per share being paid to, and otherwise on the same terms and
conditions as, the Selling Stockholder, its pro rata portion of the
aggregate amount of Fully Diluted Common Stock being sold in the Tag
Along Sale, determined by multiplying the number of securities being
sold in the Tag Along Sale by a fraction, the numerator of which is
the number of shares of Fully Diluted Common Stock held by such Non-
Selling Stockholder and the denominator of which is the number of
shares of Fully Diluted Common Stock.
(c) The Non-Selling Stockholders must exercise their "tag along" rights by
giving written notice to the Selling Stockholder within thirty (30)
days of the delivery of a Sale Notice, specifying the number of
securities that such Non-Selling Stockholder desires to include in the
Tag Along Sale. At the closing of the Tag Along Sale, against payment
of the purchase price for the securities to be sold by each Non-
Selling Stockholder, each Non-Selling Stockholder will deliver to the
third party the certificate or certificates representing such number
of securities, duly endorsed, together with all other documents which
are necessary in order to effect such Tag Along Sale. The Selling
Stockholder shall use its best efforts to
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obtain the agreement of the prospective transferee(s) to the
participation of the Non-Selling Stockholders in any contemplated Tag
Along Sale. No party to this Agreement shall transfer any of its
securities to any prospective transferee if such prospective
transferee declines to allow a Non-Selling Stockholder to participate
in a Tag Along Sale.
5. Source of Financing. If the Company determines to raise capital through
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the issuance of any Common Stock or any stock or security convertible into
or exchangeable for Common Stock (an "Equity Financing") in a transaction
or transactions not involving an issuance referred to in Section 6(a)(1),
(ii) or (iii), then All Preferred Holders shall have the right to first
offer to provide the Equity Financing to the Company on the following
terms:
(a) The Company shall give All Preferred Holders prompt written notice (a
"Financing Notice") of its determination, describing the material
terms and conditions of the Equity Financing. All Preferred Holders
shall have the exclusive right for a period of fifteen (15) business
days from the date on which the Financing Notice was given (the
"Financing Exclusivity Period") to make a firm offer to provide the
Equity Financing on terms satisfactory to the Company. If, upon the
expiration of the Financing Exclusivity Period, the best offer (the
"Best Offer") of either the Series A and Series B Holders, on the one
hand, or the holders of the Priority Preferred Shares, on the other
hand, is unacceptable to the Company with respect to the Equity
Financing, the Company shall have the right to approach other sources
to provide the Equity Financing. If the Company accepts the Best
Offer, all Stockholders shall have preemptive rights to participate in
such financing in the manner set forth in Section 6. The Company shall
not enter into discussions with any financing source other than All
Preferred Holders during the Financing Exclusivity Period.
(b) If, after following the procedures set forth in Section 5(a), the
Company receives a financing proposal from an alternative financing
source on terms and conditions that it deems acceptable (but on terms
more favorable to the Company than the Best Offer), the Company shall
be entitled to accept such alternative proposal and close within 120
days of the expiration of the Financing Exclusivity Period. Subject to
any confidentiality obligations to which the Company is then subject,
the Company shall notify All Preferred Holders and keep such holders
fully apprised of such alternative proposal, including the status of
negotiations with respect thereto. After such 120-day period, the
Company must comply with the right of first offer to All Preferred
Holders pursuant to the terms of this Section 5.
6. Preemptive Rights. In addition to the rights of All Preferred Holders
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provided in Section 5 hereof, all Stockholders shall be entitled to certain
preemptive rights as follows:
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(a) Except for the issuance of the Company's capital stock or other
securities (i) pertaining to options or rights to acquire shares of
capital stock existing on the date hereof, (ii) pursuant to a public
offering if the managing underwriter of such public offering advises
the Company in writing that in its opinion it is necessary for the
Stockholders to waive its preemptive rights granted hereunder in order
for the public offering to achieve its maximum benefit, or (iii)
comprising additional stock or option issuances to Employees of the
Company that are Excluded Events within the meaning of paragraph
5.3.10(iii) of Section (C) of Article Four of the Company's Amended
and Restated Certificate of Incorporation, if the Company at any time
after the date hereof authorizes the issuance or sale of any capital
stock of the Company or any securities of the Company containing
options or rights to acquire any shares of capital stock (other than
as a dividend on the outstanding capital stock), the Company shall
first offer to sell to the Stockholders a portion of such capital
stock or other securities equal to the percentage of Fully Diluted
Common Stock held by each Stockholder at the time of such issuance. In
the event any of the Stockholders elect not to exercise their
preemptive rights with respect to any issuance of capital stock or
other securities by the Company, the remaining Stockholders shall have
the right to purchase such unsubscribed portion on a pro rata basis,
based on the percentage of Fully Diluted Common Stock held by each
remaining Stockholder at the time of such issuance.
(b) In order to exercise their purchase rights hereunder, the Stockholders
must, within 10 business days after receipt of written notice from the
Company describing in reasonable detail the capital stock or
securities being offered, the purchase price thereof and the payment
terms, deliver a written notice to the Company describing its election
hereunder. The Company shall give the Stockholders no less than 15
business days notice of the closing of the sale and purchase of such
shares.
(c) Upon the expiration of the 10-day period described above, the Company
shall be entitled to sell such capital stock or securities which the
Stockholders have elected not to purchase during the 120 days
following such expiration on terms and conditions no more favorable to
the purchasers thereof than those offered to the Stockholders. Any
capital stock or securities offered or sold by the Company to any
Person after such 120-day period must be reoffered to the Stockholders
pursuant to the terms of this Section 6.
7. Year 2000 Covenant. The Company undertakes to promptly inform the Series A
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and Series B Holders and the holders of the Priority Preferred Shares of
any material deficiency or expected cost in complying with the Year 2000
Problem.
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8. Maintenance of Insurance. The Company shall maintain in full force and
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effect the present levels of insurance set forth on Schedule A to this
Agreement to the extent such insurance remains available on commercially
reasonable terms.
9. Registration Rights.
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9.1. Demand Registrations.
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(a) Requests for Registration. Subject to Section 9.1(b) below, the
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Majority Priority Preferred Holders may at any time after the first
to occur of (x) a Qualified Public Offering or (y) the fifth
anniversary of the issuance of the Series C Preferred Shares, and
the Series A and Series B Holders owning a majority in interest of
the Series A Preferred Stock and the Series B Preferred Stock of the
Company (the "Majority Series A/B Holders") may at any time after
the first to occur of (x) a Qualified Public Offering or (y) the
sixth anniversary of issuance of the Series C Preferred Shares,
request registration under the Securities Act of all or part of
their Registrable Securities on Form S-1, or any similar long-form
of registration, or, if available on Form S-2 or S-3 or any similar
short-form of registration. Each request for a Demand Registration
shall specify the number of Registrable Securities requested to be
registered and the proposed underwriter. Within 10 days after
receipt of any such request, the Company will give written notice of
such requested registration to all other holders (if any) of
Registrable Securities and, subject to Section 9.1(d) below, will
include in such registration all Registrable Securities with respect
to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
All registrations requested pursuant to this Section 9.1(a) are
referred to herein as "Demand Registrations."
(b) Registrations. The Majority Priority Preferred Holders and the
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Majority Series A/B Holders are each entitled to request (i) one (1)
Demand Registration to compel the Company to effect an initial
public offering and (ii) two (2) Demand Registrations after a
Qualifying EPO. In each such case, the Company will pay all
Registration Expenses (as defined in Section 9.5 hereto). A
registration will not count as one of such Demand Registrations
until it has become effective and, if such offering is an
underwritten offering, the holders of Registrable Securities have
sold all securities requested to be included thereunder (exclusive
of securities registered to cover underwriters' over-allotment
options).
(c) Priority in Demand Registration. If a Demand Registration is an
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underwritten offering and the managing underwriters advise the
Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested
to be included in such offering exceeds the number of
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Registrable Securities and other securities, if any, which can be
sold therein without adversely affecting the marketability of the
offering (the "Offering Quantity"), the Company will include in such
registration securities in the following priority:
(i) For a demand made by the Majority Priority Preferred Holders
prior to a Qualified Public Offering and the sixth
anniversary of issuance of the Series C Preferred Shares (a
"Priority Registration"), all Registrable Securities owned
by the Priority Preferred holders.
(ii) For any demand which is not a Priority Registration, first,
all Registrable Securities requested to be included by any
holders thereof, and if the number of such holders'
securities requested to be included exceeds the Offering
Quantity, then the Company shall include an equal number of
shares from (a) the Holders of the Series A Preferred Stock
and the Series B Preferred Stock of the Company and (b) the
holders of the Priority Preferred Shares, with such shares
to be allocated among the holders within each series of
preferred stock based on the amount of Registrable
Securities held by the particular holders in each class on
an as converted basis; and
(ii) second, to the extent (and only to the extent) that the
Offering Quantity exceeds the aggregate amount of securities
to be sold for the account of the holders of Registrable
Securities which are requested to be included in such
registration, the Company will include in such registration
any other securities requested to be included in such
offering, and if the number of such other holders'
securities requested to be included exceeds the Offering
Quantity, then the Company shall include only each such
requesting holder's pro rata share of the Offering Quantity,
based on the amount of securities held by such holder, on an
as converted basis.
(d) Restrictions on Demand Registrations. The Company will not be
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obligated to effect any Demand Registration within 120 days after
the effective date of a previous Demand Registration or other
registration of securities of the Company that is an underwritten
offering.
(e) Selection of Underwriters. In connection with a Demand Registration
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and any other registration of securities of the Company that is an
underwritten offering, the Board shall have the right to select the
lead book-running manager to administer the offering, such selection
to be subject to the approval of the Majority Priority Preferred
Holders and the Majority Series A/B Holders which approval shall not
be unreasonably withheld.
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(f) Other Registration Rights. Except as provided in this Agreement, the
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Company will not grant to any Persons the right to demand that the
Company register any equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities, without the prior written consent of the Majority Series
A/B Holders and the Majority Priority Preferred Holders.
(g) Demand Registrations Expenses. The Registration Expenses of the
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holders of Registrable Securities will be paid by the Company in all
Demand Registrations.
9.2. Piggyback Registrations.
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(a) Right to Piggyback. Whenever the Company proposes to register any of
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its securities under the Securities Act (other than pursuant to a
Demand Registration or a registration on Form S-4 or S-8 or any
successor or similar forms) and the registration form to be used may
be used for the registration of Registrable Securities, whether or
not for sale for its own account, the Company will give prompt
written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such
registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within
30 days after the receipt of the Company's notice (a "Piggyback
Registration").
(b) Piggyback Expenses. The Registration Expenses of the holders of
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Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
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underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing (with a copy to
each party hereto requesting registration of Registrable Securities)
that in their opinion the number of securities requested to be
included on a secondary basis in such registration exceeds the
number which can be sold in such offering without adversely
affecting the marketability of such primary or secondary offering
(the "Company Offering Quantity"), the Company will include in such
registration securities in the following priority:
(i) first, the Company will include the securities the Company
proposes to sell; and
(ii) second, the Company will include all Registrable Securities
and all other securities of the Company requested to be
included by any holders thereof, and if the number of such
holders' securities requested to be included exceeds the
Company Offering Quantity, then the Company shall include
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an equal number of shares of (a) the Holders of the Series A
Preferred Stock and the Series B Preferred Stock of the
Company and (b) the holders of the Priority Preferred
Shares, with such shares to be allocated among the holders
within each series of preferred stock on a pro rata basis,
based on the amount of securities held by the particular
holders in each class on an as converted basis.
(d) Other Registrations. If the Company has previously filed a
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registration statement with respect to Registrable Securities
pursuant to Section 9.1 or pursuant to this Section 9.2, and if such
previous registration has not been withdrawn or abandoned, the
Company will not file or cause to be effected any other registration
of any of its equity securities or securities convertible into or
exchangeable or exercisable for its equity securities under the
Securities Act (except on Form S-4 or S-8 or any successor or
similar form), whether on its own behalf or at the request of any
holder or holders of such securities, until a period of at least 120
days has elapsed from the date on which such previous registration
statement was declared effective by the Securities Exchange
Commission.
9.3. Holdback Agreements.
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(a) To the extent not inconsistent with applicable law, the holders of
Registrable Securities agree not to effect any public sale or
distribution (including sales pursuant to Rule 144 of the Securities
Act) of any securities of the Company, or any securities, options or
rights convertible into or exchangeable or exercisable for such
securities that the holders of Registrable Securities own prior to
the effective date of any registration statement and during the
seven days prior to and the 120-day period beginning on such
effective date, unless (in the case of an underwritten public
offering) the managing underwriters otherwise agree; provided that
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such restrictions shall not be more restrictive in duration or scope
than restrictions imposed on (i) any Person which has been granted
registration rights by the Company, (ii) any officer or director of
the Company or (iii) any 5% or greater holder of equity securities
of the Company; and provided further, that such restriction shall
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not apply to equity securities purchased in or after such
underwritten registration.
(b) The Company agrees (i) not to effect any public sale or distribution
of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven
days prior to and during the 120-day period beginning on the
effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-4
or S-8 or any successor or similar form), unless the underwriters
managing the public offering otherwise
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agree, and (ii) to cause each holder of its Common Stock, or any
securities convertible into or exchangeable or exercisable for
Common Stock, purchased from the Company at any time after the date
of this Agreement (other than in a public offering) to agree not to
effect any public sale or distribution (including sales pursuant to
Rule 144 of the Securities Act) of any such securities during such
period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the public
offering otherwise agree.
9.4. Registration Procedures. Whenever any Registrable Securities are
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required to be registered pursuant to this Agreement, the Company will use its
best efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
(a) prepare and within 60 days (or 45 days with respect to any short-
form Registration) after the end of the period within which requests
for registration may be given to the Company file with the
Securities and Exchange Commission a registration statement with
respect to such Registrable Securities and thereafter use its best
efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus
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or any amendments or supplements thereto, the Company will furnish
to the counsel selected by the holders of a majority of the
Registrable Securities initiating such registration statement copies
of all such documents proposed to be filed, which documents will be
subject to review of such counsel); provided, however, that the
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Company may postpone for not more than 90 calendar days the filing
or effectiveness of a registration statement requested under Section
9.1 hereof if the Company determines that such registration could
reasonably be expected to have a material adverse effect on any
proposal or plan by the Company to engage in any acquisition of
assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction then
under consideration; but in such event, the Majority Series A/B
Holders or the Majority Priority Preferred Holders, whichever has
made a demand for such registration, shall be entitled to withdraw
such request, and if such request is withdrawn such registration
will not count as a Demand Registration under Section 9.1 hereof;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for a period of either (i) not
less than 270 days (subject to extension pursuant to Section 9.7(b))
or, if such registration statement relates to an underwritten
offering, such longer period as in the opinion of counsel for the
underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or
dealer or (ii) such shorter
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period as will terminate when all of the securities covered by such
registration statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement (but in any event not before
the expiration of any longer period required under the Securities
Act), and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement until such time as all of such securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such
registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as
such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable
to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller
(provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event (a "Changing Event")
as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading in
the light of the circumstances under which they were made, and, at
the request of any such seller, the Company will as soon as possible
prepare and furnish to such seller (a "Correction Event") a
reasonable number of copies of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made;
13
(f) use best efforts to cause all such Registrable Securities to be
listed on each securities exchange on which similar securities
issued by the Company are then listed and, if not so listed, to be
listed on the NASD automated quotation system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities
(including, without limitation, effecting a stock split or a
combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers,
directors, Employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months beginning with the first day of the Company's first
full calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any securities included in such
registration statement for sale in any jurisdiction, the Company
will use its reasonable best efforts promptly to obtain the
withdrawal of such order;
(l) use its best efforts to obtain one or more comfort letters, dated
the effective date of such registration statement (and, if such
registration includes a public offering, dated the date of the
closing under the underwriting agreement), signed by the Company's
independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters as the
holders of a majority of the Registrable Securities being sold
reasonably request; and
14
(m) use its best efforts to provide a legal opinion of the Company's
outside counsel, dated the effective date of such registration
statement (and, if such registration includes a public offering,
dated the date of the closing under the underwriting agreement),
with respect to the registration statement, each amendment and
supplement thereto, the prospectus included therein (including the
preliminary prospectus) and such other documents relating thereto in
customary form and covering such matters of the type customarily
covered by legal opinions of such nature.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing. No filing under subparagraph 9.4(a) or
9.4(b) shall be deemed late, in default of the Company's obligations thereunder,
or otherwise defective, if it occurs after the times indicated in such
subparagraphs solely as a result of any delay by any seller of Registrable
Securities in furnishing the information called for pursuant to the preceding
sentence.
9.5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding
discounts and commissions, which will be paid by the sellers of
Registrable Securities) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"),
will be borne as provided in this Agreement, and the Company will,
in any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its Employees performing
legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on
each securities exchange on which similar securities issued by the
Company are then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration (including registration
pursuant to Section 9.10) and Piggyback Registration, the Company
will reimburse the holders of Registrable Securities for the
reasonable fees and disbursements of one counsel chosen by the
holders of a majority of the Registrable Securities who request
inclusion in such registration.
15
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of Registrable Securities and any other
holder of securities included in any registration hereunder will pay
those Registration Expenses allocable to the registration of such
holder's Registrable Securities or other securities, as the case may
be, so included, and any Registration Expenses not so allocable will
be borne by all sellers of Registrable Securities and any other
holders of securities included in such registration in proportion to
the aggregate selling price of the securities to be so registered.
9.6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless, to the extent
permitted by law, each holder of Registrable Securities and its
Representatives against any Losses, joint or several, to which such
holder of Registrable Securities or its Representatives may become
subject under the Securities Act or otherwise, insofar as such
Losses (or actions or proceedings, whether commenced or threatened,
in respect thereto arise out of or are based upon (i) any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
amendment or supplement thereto or (ii) any omission or alleged
omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will reimburse such holder of Registrable Securities and its
Representatives for any legal or any other expenses incurred by them
in connection with investigating or defending any such Loss, action
or proceeding, provided, however, that the Company shall not be
-------- -------
liable to any such holder in any such case to the extent that any
such Loss (or action or proceeding, whether commenced or threatened,
in respect thereof) arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged
omission, made in such registration statement, any such prospectus
or preliminary prospectus or any amendment or supplement thereto, in
reliance upon, and in conformity with, written information prepared
and furnished to the Company by such holder of Registrable
Securities or its Representatives expressly for use therein or by
failure of such holder of Registrable Securities to deliver a copy
of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder of
Registrable Securities with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will
indemnify such underwriters, their officers and directors and each
Person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to
the indemnification of the holders of Registrable Securities.
16
(b) In connection with any registration statement in which the holders of
Registrable Securities are participating, the holders of Registrable
Securities will furnish to the Company in writing such information and
affidavits as the Company reasonably requests for use in connection
with any such registration statement or prospectus and, to the extent
permitted by law, each such holder of Registrable Securities will
indemnify and hold harmless the Company, its directors and officers and
each other Person who controls the Company (within the meaning of the
Securities Act) against any Losses, joint or several, to which the
Company, its directors and officers and each other controlling Person
may become subject under the Securities Act or otherwise, insofar as
such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (i) the
purchase or sale of Registrable Securities during any period beginning
upon a Changing Event (as defined in Section 9.4(e)) and ending on a
Correction Event (as defined in Section 9.4(e)), provided such
--------
holder of Registrable Securities received proper written notice of such
Changing Event pursuant to Section 9.4(e), (ii) any untrue or alleged
untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment or
supplement thereto, or (iii) any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, but, with respect to clauses (ii)
and (iii) above, only to the extent that such untrue statement or
omission is made in such registration statement any such prospectus or
preliminary prospectus or any amendment or supplement thereto, in
reliance upon and in conformity with written information prepared and
furnished to the Company by such holder of Registrable Securities
expressly for use therein, and such holder of Registrable Securities
will reimburse the Company and each such director, officer and
controlling Person for any legal or any other expenses incurred by them
in connection with investigating or defending any such Loss, action or
proceeding; provided, however, that the obligation to indemnify will be
-------- -------
individual to each such holder of Registrable Securities and will be
limited to the net amount of proceeds received by such holder of
Registrable Securities from the sale of Registrable Securities pursuant
to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give
--------
prompt notice shall not impair any Person's right to indemnification
hereunder to the extent such failure has not materially prejudiced the
indemnifying party) and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Such indemnifying
party shall not,
17
however, enter into any settlement with a party without obtaining an
unconditional release of each indemnified party by such party with
respect to any and all claims against each indemnified party. If such
defense is assumed, the indemnifying party will not be subject to any
liability for any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the
transfer of securities. The Company also agrees to make such
provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event the Company's indemnification
is unavailable for any reason.
9.7 Participation in Underwritten Registrations.
-------------------------------------------
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve such
arrangements (including, without limitation, pursuant to the terms of
any over-allotment or "green shoe" option requested by the managing
underwriter(s), provided that each holder of Registrable Securities
--------
shall not be required to sell more than the number of Registrable
Securities that such holder has requested the Company to include in
any registration) and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements.
(b) Each Person that is participating in any registration hereunder agrees
that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 9.4(e) above, such Person
will forthwith discontinue the disposition of its Registrable
Securities pursuant to the registration statement until such Person's
receipt of the copies of a supplemented or amended prospectus as
contemplated by such Section 9.4(e). In the event the Company shall
give any such notice, the applicable time period mentioned in Section
9.4(b) during which a Registration Statement is to remain effective
shall be extended by the number of
18
days during the period from and including the date of the giving of
such notice pursuant to this paragraph to and including the date when
each seller of a Registrable Security covered by such registration
statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 9.4(e).
9.8 Current Public Information. At all times after the Company has filed
--------------------------
a registration statement with the Securities and Exchange Commission pursuant
to the requirements of either the Securities Act or the Securities Exchange Act,
the Company will file all reports required to be filed by it under the
Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will use
commercially reasonable best efforts to take such further action as the
Purchasers may reasonably request, all to the extent required to enable the
holders of Registrable Securities to sell Registrable Securities pursuant to
Rule 144 adopted by the Securities and Exchange Commission under the Securities
Act (as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission.
9.9 Adjustment Affecting Registrable Securities. Except as otherwise
-------------------------------------------
provided herein, the Company will not effect a stock split or dividend or a
combination of shares or take any similar action, or permit any similar change
to occur, with respect to its securities which would materially and adversely
affect the ability of the holders of Registrable Securities to include such
Registrable Securities in a registration undertaken pursuant to this Agreement
or which would adversely affect the marketability of such Registrable Securities
in any such registration (including, without limitation, effecting a stock split
or a combination of shares) in any material respect.
9.10 Form S-3 Registration. In case the Company shall receive from the
---------------------
Majority Series A/B Holders or the Majority Priority Preferred Holders, a
written request or requests that the Company effect a registration on Form S-3
under the Securities Act (or any similar successor form) and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned such holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other holders of
securities of the Company; and
(b) as soon as practicable, use its best efforts to 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 the Registrable Securities as are specified
in such request, together with all or such portion of the securities
of any other holder in the group of All Preferred Holders of
securities joining in such request as is specified in a written
request given within fifteen (15) days after receipt of such written
notice from the Company; provided, however,
-------- -------
19
that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section
9.10: (i) if the Company is not qualified as a registrant entitled to
use Form S-3 (or the applicable successor form); (ii) if the Holders
of Series A Preferred Stock and Series B Preferred Stock of the
Company and the holders of the Priority Preferred Shares, 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 at an aggregate price to the
public of less than One Million Dollars ($1,000,000); or (iii) if the
Company shall furnish to All Preferred Holders that requested to be
included in such registration, a certificate signed by the President
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 request
of the Majority Series A/B Holders or the Majority Priority Preferred
Holders, as the case may be, under this Section 9.10; provided,
--------
however, that the Company shall not utilize this right more than
-------
once in any twelve (12) month period.
Subject to the foregoing, the Company shall file and use its best
efforts to bring effective a registration statement covering the Registrable
Securities and other securities so requested to be registered as soon as
practicable after receipt of the request of either the Majority Series A/B
Holders or the Majority Priority Preferred Holders.
10. Financial Statements, Reports, Etc. The Company shall furnish to All
-----------------------------------
Preferred Holders:
(a) within forty-five (45) days following the Closing Date, the audited
consolidated balance sheet of the Company and its subsidiaries as of
December 31, 1998 and the audited consolidated statement of income
and retained earnings and the audited consolidated statement of cash
flows of the Company and its subsidiaries, each for the fiscal year
ended December 31, 1998;
(b) as soon as practicable, but in any event within forty-five (45) days
after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited balance sheet and income statement
as of the end of such fiscal quarter, in reasonable detail and
prepared in accordance with GAAP;
(c) as soon as available, and in any event within 90 days after the end
of each subsequent fiscal year of the Company, (i) an audited
consolidated financial statement of the Company and its subsidiaries
as of the end of such fiscal year, together with the related audited
consolidated statements of income, stockholders' equity and cash
flows for the fiscal year then ended, prepared in accordance with
20
GAAP and certified by a "Big 5" firm of independent public
accountants selected by the board of directors of the Company (the
"Board") (the "Annual Financial Statement"); and (ii) any related
management letters from such accounting firm. The Annual Financial
Statement shall be accompanied by comparative statements from the
prior fiscal year and the most recent 12-month budget delivered by
the Company pursuant to Section 10(d) hereof;
(d) as soon as available after the end of each month in each fiscal year
(other than the last month in each fiscal year) a monthly, unaudited
consolidated balance sheet of the Company and its subsidiaries and
the related unaudited consolidated statements of income,
stockholders' equity and cash flows (the "Monthly Balance Sheet").
The Company will furnish the Monthly Balance Sheet within 20 days
after the end of each such month. The Monthly Balance Sheet shall be
accompanied by a monthly management report describing the current
status of the Company and its operations and prospects. The Monthly
Balance Sheet should be prepared as of the end of such month with
statements of income, stockholders' equity and cash flows to be for
such month and for the period from the beginning of the fiscal year
to the end of such month, in each case with comparative statements
for the prior fiscal year and the most recent 12-month budget
delivered by the Company pursuant to Section 10(d) hereof, and which
shall specifically note and describe all expenditures (in any single
transaction or series of related transactions) in excess of $50,000
not included in the most recent 12-month budget delivered by the
Company pursuant to Section 10(d) hereof;
(e) as soon as available, and in any event no later than 15 days prior to
the start of each fiscal year, capital and operating expense budget,
cash flow projections and income and loss projections for the Company
in respect of such fiscal year, all itemized in reasonable detail and
prepared on a monthly basis, and, promptly after preparation, any
revisions to any of the foregoing;
(f) promptly, notice, and in any event within five days after notice has
been received by the Company, of any material adverse event, claim,
dispute or any other development which is material to operations,
assets or properties of the Company;
(g) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or
affairs of the Company that All Preferred Holders may reasonably
request; provided, that if such other information is not so provided,
--------
All Preferred Holders and their Representatives shall be entitled,
upon reasonable notice, and at their own expense, to make such
investigation of the properties, business and operations of the
Company and such examination of the books, records and financial
condition of the Company as they reasonably request and to make
extracts and copies of such books and records.
21
Any such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances without
material interference with the Company's normal business operations,
and the Company and its Representatives shall cooperate fully
therein.
11. Additional Covenants.
--------------------
(a) Subject to the execution of such confidentiality agreement as may be
reasonably required by the Company, Xxxxx, Xxxx & Xxxxx Venture
Partners shall have the right to attend meetings of the Board;
(b) The Company agrees that to the extent permitted by law, all Common
Stock issued to Employees subsequent to the date of this Agreement
shall be subject to a repurchase option which provides that upon
termination of the employment of such individual, with or without
cause, the Company has the option to repurchase at cost any unvested
shares held by the individual, which repurchase option shall lapse
over four (4) years with twenty-five percent (25%) to vest at the end
of the first year following the vesting commencement date, with the
remaining seventy-five percent (75%) to vest monthly over the three
(3) years thereafter, unless otherwise determined unanimously by the
Board; provided, however, that shares issued pursuant to a stock
-------- -------
option plan or arrangement shall have similarly applicable vesting
provisions such that unvested shares shall revert to the Company
under any applicable stock option plan or arrangement.
12. Termination of Rights and Obligations. The rights and obligations of the
-------------------------------------
holders of Priority Preferred Shares set forth in this Agreement, except
rights and obligations under Section 4, shall terminate in the event that
the holders of Priority Preferred Shares and/or their Permitted Transferees
do not own at least five percent (5%) of the Fully Diluted Common Stock.
The rights and obligations of the Series A Holders or the Series B Holders,
as the case may be, set forth in this Agreement, except rights and
obligations under Section 4, shall terminate in the event that the Series A
Holders and their Permitted Transferees or the Series B Holders and their
Permitted Transferees, as the case may be, do not own at least five percent
(5%) of the Fully Diluted Common Stock. The rights and obligations of the
Founders set forth in this Agreement, except rights and obligations under
Section 4, shall terminate in the event the Founders and their Permitted
Transferees cease to own in the aggregate at least five percent (5%) of the
Fully Diluted Common Stock. Any such termination of the rights and
obligations of any party shall not affect the rights and obligations of the
remaining parties. In addition, the preemptive rights provided in Section
6 shall terminate upon the consummation of a Qualifying IPO and the
covenants set forth in Section 11 shall terminate upon the earlier to occur
of (i) the effective date of a Qualifying IPO and (ii) the date on which
the Company first becomes
22
subject to the periodic reporting requirements of Section 12(g) or 15(d) of
the Securities Exchange Act of 1934.
13. Rights Regarding Issuance of Priority Preferred Shares. Except for the
------------------------------------------------------
purchase by the Series A Holders and Series B Holders of Series C Stock and
its right to purchase up to Eight Million Dollars ($8,000,000) of Series D
Stock in each case as provided in the Securities Purchase Agreement, the
Series A and Series B Holders hereby waive any other rights they may have
to purchase Priority Preferred Shares, including, without limitation, any
right of first offer or preemptive rights; provided, however, nothing
-------- -------
herein shall preclude the Series A Holders and the Series B Holders from
purchasing additional shares of Series D Stock in the event that Xxxxx does
not exercise the Xxxxx Option.
14. Grant of Proxy. Should Section 1 of this Agreement be construed to
--------------
constitute the granting of proxies with respect to the election of
directors, such proxies shall be deemed coupled with an interest and are
irrevocable for the term of this Agreement.
15. Specific Enforcement. It is agreed and understood that monetary damages
--------------------
would not adequately compensate an injured party for the breach of this
Agreement by any other party to this Agreement, that this Agreement shall
be specifically enforceable, and that any breach of this Agreement shall be
the proper subject of a temporary or permanent injunction or restraining
order. Each party hereto waives any claim or defense that there is an
adequate remedy at law for such breach or threatened breach.
16. Stock Splits, Stock Dividends, etc. In the event of any stock split, stock
-----------------------------------
dividend, recapitalization, reorganization or combination, any securities
issued to the parties shall be subject to this Agreement.
17. Merger. This Agreement supersedes, merges and renders void any and all
------
prior agreements and/or understandings among or between the parties, oral
or written, with respect to its subject matter including the Investor
Rights Agreement, dated as of January 29, 1998, by and among the Company
and each of the persons who purchased shares of Series A Preferred Stock of
the Company (the "Series A Purchasers"), as amended by Amendment No. 1
dated as of September 9, 1998; the Co-Sale and Right of First Refusal
Agreement, dated as of January 29, 1998 by and among the Company, the
Founders and each of the Series A Purchasers; and the Voting Agreement,
dated as of January 29, 1998, by and among the Company, the Founders and
each of the Series A Purchasers.
18. Manner of Voting. The voting of shares pursuant to this Agreement may be
----------------
effected in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
23
19. Term. This Agreement shall continue in full force and effect for a period
----
of ten (10) years commencing from the date of this Agreement.
20. Miscellaneous. Any reference in this Agreement to a requirement for a
-------------
request by a majority in interest or seventy-five percent (75%) of a class
of preferred stock of the Company shall be deemed to include any Common
Stock into which such series of preferred stock has been converted.
21. Certain Definitions. The following capitalized terms shall have the
-------------------
meanings ascribed to them below:
"Affiliate" means any Person that directly or indirectly controls, or
is under control with, or is controlled by such Person. As used in
this definition, "control" (including with its correlative meanings,
"controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person (whether
through ownership of securities or partnership or other ownership
interests, by contract or otherwise).
"Common Stock" means the common stock, $0.01 par value per share, of
the Company.
"Employees" means any current, former, or retired employee, office
consultant, advisor, independent contractor, agent, officer or
director of the Company.
"Fully Diluted Common Stock" means, at any given time, all shares of
Common Stock issued and outstanding at such time, plus all shares of
Common Stock then issuable upon exercise of any then outstanding
options and convertible securities of the Company, whether or not such
options or convertible securities are actually exercisable or
convertible at such time.
"Permitted Transferee" means in the case of each of the parties to
this Agreement, and upon the condition that such transferee becomes a
party to this Agreement, (i) a Person to whom securities of the
Company are transferred from such transferring party by will or the
laws of descent and distribution or by gift without consideration of
any kind; provided that such transferee is the issue, adopted issue,
--------
stepchild, parent or spouse of such transferring party, (ii) a trust
that is for the exclusive benefit of, or a partnership the partners of
which are exclusively, such transferring party or his or her Permitted
Transferees under (i) above, (iii) the transfer of securities to an
Affiliate, (iv) a Person to whom securities of the Company are
transferred pursuant to (a) a public offering registered under the
Securities Act of 1933, as amended, or (b) a merger, sale,
consolidation,
24
reorganization or recapitalization or other business combination with,
to, or into one or more third parties which (1) has been approved by
the Board of the Company and a majority of its outstanding shares in
accordance with New York law and (2) after such event the Company is
not the surviving entity or the shareholders of the Company do not own
a majority in interest of the resulting entity, or (v) a Person to
whom securities of the Company are transferred with the consent of the
other parties. A Permitted Transferee shall also include, upon the
condition that such transferee becomes a party to this Agreement, the
transfer of securities from (i) one Founder to another Founder, (ii)
one Series A Holder to another Series A Holder, (iii) one Series B
Holder to another Series B Holder, and (iv) one holder of Priority
Preferred Shares to an officer or principal of such holder.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated
organization, governmental body or other entity.
"Registrable Securities" means (i) any shares of Common Stock issued
or issuable upon conversion of the Priority Preferred Shares held by
Xxxxx or the Holders, (ii) any shares of Common Stock issued or
issuable upon conversion of the Series A Preferred Stock or the Series
B Preferred Stock of the Company held by the Holders, (iii) any other
shares of Common Stock held by the holders in clauses (i) and (ii),
and (iv) any shares of Common Stock issued or issuable directly or
indirectly with respect to the securities referred to in clauses (i)
through (iii) by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular shares constituting
Registrable Securities, such shares will cease to be Registrable
Securities when they have been (x) effectively registered under the
Securities Act and disposed of in accordance with a registration
statement covering them or (y) sold to the public pursuant to Rule 144
(or by similar provision under the Securities Act).
"Qualifying IPO" as defined in the Certificate of Designation,
Preferences and Rights of the Series C Stock.
"Year 2000 Problem" means (i) any material error relating to or
resulting from date data which represents or references more than one
century ("Century-Based Data"); (ii) any abnormal ending or provision
of materially invalid or incorrect results as a result of any Century-
Based Data; or (iii) any material error relating to century
recognition or calculations accommodating Century-Based Data, values
or formulae, and the implementation of such plan is expected in good
faith to be completed in a timely manner.
25
22. Severability. Whenever possible, each provision of this Agreement shall be
------------
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be held to be prohibited
by or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this
Agreement.
23. Counterparts. This Agreement may be executed in one or more counterparts
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
24. Notices. Any notice required or permitted by this Agreement shall be in
-------
writing and shall be deemed given when delivered personally, by telecopy or
mailed by certified mail, return receipt requested, to the parties at the
addresses opposite their signature or at such other address as a party may
specify by giving notice to the other parties pursuant to this Section 24.
25. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, without regard to the
conflicts of laws rules or provisions.
26. Consent to Jurisdiction.
-----------------------
(a) The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of any federal or state court located within the Borough
of Manhattan, State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated
hereby and each party hereby irrevocably agrees that all claims in
respect of such dispute or any suit, action or proceeding related
thereto may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law,
any objection which they may now or hereafter have to the laying of
venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Each of the
parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law.
(b) Each of the parties hereto hereby consents to process being served by
any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section
24 hereof.
27. Assignees and Transferees. This Agreement shall be binding upon and inure
-------------------------
to the benefit of the parties and their respective successors and permitted
assigns. The parties
26
hereby agree that any transfer or assignment of voting securities of the
Company to a Permitted Transferee is conditioned upon such Permitted
Transferee's execution and delivery of this Agreement prior to such
transfer or assignment for the purpose of becoming a party to this
Agreement. The Company hereby agrees that any transfer or assignment of its
voting securities is conditioned upon such transferee's or assignee's
execution and delivery of this Agreement prior to such transfer or
assignment for the purpose of becoming a party to this Agreement.
28. Captions. The captions, headings and arrangements used in this Agreement
--------
are for convenience only and do not in any way limit or amplify the terms
and provisions hereof.
27
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
COAXICOM, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------
Name: Xxxx Xxxxxxx
Title: President and CEO
XXXXX COMMUNICATIONS FUND, L.P.,
By: Xxxxx Capital Partners, LLC
Its General Partner
By: /s/ Xxxxxx Xxxxx
--------------------------------
Name: Xxxxxx Xxxxx
Title:Manager
COMMUNICATIONS VENTURES II, L.P.
By: /s/ Xxxxxx X. Van der Meer
--------------------------------
Name: Xxxxxx X. Van der Meer
Title:Managing Member
COMMUNICATIONS VENTURES II
AFFILIATES FUND, L.P.
By: /s/ Xxxxxx X. Van der Meer
--------------------------------
Name: Xxxxxx X. Van der Meer
Title:Managing Member
NEW ENTERPRISE ASSOCIATES VII, L.P.
By: NEA Partners VII, L.P.,
General Partner
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
Title:
Shareholder Agreement Signature Page
NEA PRESIDENTS FUND
By: /s/ Xxxxx Xxxxxx
---------------------------------
Name: Xxxxx Xxxxxx
Title:General Partner
NEA VENTURES 1998, L.P.
By: /s/ Xxxxx Xxxxxx
---------------------------------
Name: Xxxxx Xxxxxx
Title:Vice President
WPG ENTERPRISE FUND III, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
By: /s/ Xxxxx Xxxxxx
---------------------------------
Name: Xxxxx Xxxxxx
Title:Managing Member
XXXXX, XXXX & XXXXX VENTURE
ASSOCIATES IV, L.L.C.
By: WPG VC Fund Adviser, L.L.C.,
Fund Investment Advisory Member
By: /s/ Xxxxx Xxxxxx
---------------------------------
Name: Xxxxx Xxxxxx
Title:Managing Member
Shareholder Agreement Signature Page
WPG INFORMATION SCIENCES
ENTREPRENEUR FUND, L.P.
By: WPG VC Fund Adviser, L.L.C.,
General Partner
By: /s/ Xxxxx Xxxxxx
----------------------------------
Name: Xxxxx Xxxxxx
Title:Managing Member
Shareholder Agreement Signature Page
XXXXX, XXXX & XXXXX VENTURE
ASSOCIATES IV CAYMAN, L.P.
By: WPG Venture Advisers, Ltd.
Administrative General Partner
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
Title:Director
Shareholder Agreement Signature Page
/s/ Xxxx X. Xxxxxxx
------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxxxxxx X. Xxxxxxxx
------------------------------
Xxxxxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxx
------------------------------
Xxxxx X. Xxxxxx
Shareholder Agreement Signature Page
