THIRD AMENDED AND RESTATED
MODIFICATION AGREEMENT
THIS AGREEMENT is made as of the 23rd day of November, 1988, amended as of
February 16, 1990, and amended as of April 12, 1991, between Teksyn, Inc., an
Indiana corporation (the "Company"), the purchasers of shares of Series A
Preferred Stock of the Company (the "Series A Purchasers") pursuant to she
Series A Preferred Stock Purchase Agreement dated as of June 23, 1987 (the
"Series A Agreement"), the purchasers of shares of Series B Preferred Stock of
the Company (the "Series B Purchasers") pursuant to the Series B Preferred Stock
Purchase Agreement dated November 23, 1988 (the "Series B Agreement"), the
purchasers of shares of Series C Preferred Stock of the Company (the "Series C
Purchasers") pursuant to the Series C Preferred Stock Purchase Agreement dated
as of February 16, 1990 (the "Series C Agreement"), the Merger Agreement by and
between the Company and TS Capital Corporation (the "Merger Agreement"), or
pursuant to the Series C Preferred Stock Purchase Agreement No. 2 dated as of
April 12, 1991 (the "Series C Agreement the Company (the "Series D Purchasers")
pursuant to the Series D Preferred stock Purchase Agreement dated as of March
12, 1993 (the "Series D Agreement").
RECITALS
A. Pursuant to the Series A Agreement, the Series A Purchasers were
granted certain rights (i) with respect to the registration of the company's
securities under the Securities Act of 1933, as amended (the "Securities Act"),
as set forth in Section 8 of the Series A Agreement; and (ii) of first refusal
to purchase new securities of the Company, as set forth in Section 9 of the
Series A Agreement.
B. The Company issued 255,331 shares of its Series B Preferred Stock (the
"Series B Preferred") pursuant to the Series B Agreement and the Merger
Agreement.
C. On November 23, 1988, the Company, the Series A Purchasers and the
Series B Purchasers entered into a Modification Agreement (the "Initial
Modification Agreement").
D. The Company issued 312,500 shares of its Series C Preferred Stock (the
"Series C Preferred") pursuant to the Series C Agreement.
E. On February 16, 1990, the Company, the Series A Purchasers, the Series
B Purchasers, and the Series C Purchasers entered into an Amended and Restated
Modification Agreement (the "Amended and Restated Modification Agreement").
F. The Company issued 251,080 shares of its Series C Preferred Stock
pursuant to the Series C Agreement No. 2.
G. On April 12, 1991, the Company, the Series A Purchasers, the Series B
Purchasers, and the Series C Purchasers entered into a Second Amended and
Restated Modification Agreement (the "Second Amended and Restated Modification
Agreement").
H. The Company proposes to issue 400,000 shares of its Series D Preferred
Stock pursuant to the Series D Agreement.
I. The Company has requested, and the Series A Purchasers have agreed,
that the registration rights set forth in Section 8 of the Series A Agreement be
of no further force and effect, that the Series A Purchasers waive their right
of first refusal set forth in Section 9 of the Series A Agreement with respect
to the purchase of the Series B Preferred issued pursuant to the Series B
Agreement and the Merger Agreement, that the covenants set forth in Sections 7.6
and 7.7 of the Series A Agreement be of no further force and effect and that the
rights granted to Series A Purchasers herein supersede the rights granted in the
Series A Agreement.
J. Pursuant to Section 10.4 of the Series A Agreement, the holders of not
less than 75% of the shares of the Company's Series A Preferred Stock ("Series A
Preferred") and the Common Stock issuable upon conversion of the Series A
Preferred may amend the provisions of the Series A Agreement on behalf of all
Series A Purchasers.
K. The Company has further agreed to grant the Series A Purchasers, the
Series B Purchasers, the Series C Purchasers and the Series D Purchasers the
right to purchase certain future issuances of the Company's securities, and the
Series A Purchasers, Series B Purchasers, Series C Purchasers and the Series D
Purchasers have agreed to grant the Company the right of first refusal with
respect to certain future sales or transfers of their Series A Preferred, Series
B Preferred, Series C Preferred and Series D Preferred and Common Stock issuable
upon conversion thereof on the terms and conditions set forth herein.
L. This Third Amended and Restated Modification Agreement completely
amends and supersedes the Initial Modification Agreement, the Amended and
Restated Modification Agreement and the Second Amended and Restated Modification
Agreement.
NOW THEREFORE, the parties agree as follows:
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
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"COMMISSION" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"CONVERSION STOCK" shall mean the Common Stock issued or issuable upon
conversion of the Preferred Stock.
"PREFERRED STOCK" shall mean Series A Preferred, Series B Preferred, Series
C Preferred or Series D Preferred.
"PURCHASER" shall mean any Series A Purchaser, Series B Purchaser, Series C
Purchaser and Series D Purchaser.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"RESTRICTED SECURITIES" shall mean the securities of the Company required
to bear the legend set forth in Section 1.3 hereof.
"REGISTRABLE SECURITIES" means (i) shares of the Company's Common Stock
issued or issuable pursuant to the conversion of the Preferred Stock; and (ii)
any Common Stock of the Company issued or issuable in respect of the shares of
the Company's Common Stock or other securities issued or issuable pursuant to
the conversion of the Preferred Stock upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issued or
issuable with respect to the Preferred Stock, provided, however, that shares of
Common Stock or other securities shall only be treated as Registrable Securities
if and so long as they have not been (A) sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, or
(B) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions and restrictive legends with respect thereto are removed
upon the consummation of such sale.
The terms "REGISTER" "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Sections 1.5 and 1.6 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, including fees and
disbursements of such counsel in representing the Holders, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).
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"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for any Holders other than
Holders who are represented by counsel for the Company.
"HOLDER" shall mean any Purchaser holding Registrable Securities and any
person holding Registrable Securities to whom the rights under this Section 1
have been transferred in accordance with Section 1.14 hereof.
"INITIATING HOLDERS" shall mean any Purchasers or transferees of Purchasers
under Section 1.14 hereof who in the aggregate are Holders of not less than 75%
of the Registrable Securities.
1.2 RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock and the
Conversion Stock shall not be sold, assigned, transferred or pledged except upon
the conditions specified in this Section l, which conditions are intended to
ensure compliance with the provisions of the Securities Act. Each Purchaser and
any transferee of such Purchaser will cause any proposed purchaser, assignee,
transferee, or pledgee of the Preferred Stock or such Common Stock held by a
Purchaser to agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Section 1.
1.3 RESTRICTIVE LEGEND. Each certificate representing (i) the Preferred
Stock, (ii) shares of the Company's Common Stock issued upon conversion of the
Preferred Stock and (iii) any other securities issued in respect of the
Preferred Stock or Common Stock issued upon conversion of the Preferred Stock
upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of Section
1.4 below) be stamped or otherwise imprinted with legends in the following form
(in addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME EXCEPT UPON
DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION AND/OR THE SUBMISSION TO THE CORPORATION OF SUCH OTHER EVIDENCE
AS MAY BE SATISFACTORY TO THE CORPORATION THAT ANY SUCH TRANSFER SHALL NOT
BE IN VIOLATION OF THE SECURITIES LAWS, OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS UPON AND OBLIGATIONS WITH RESPECT TO
TRANSFER PURSUANT TO AN AGREEMENT WITH THE CORPORATION, A COPY OF WHICH MAY
BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY
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OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
INFORMATION REGARDING THE RELATIVE RIGHTS, PREFERENCES, AND LIMITATIONS
APPLICABLE TO THE CLASS (AND SERIES, IF ANY) OF WHICH THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE A PART, WILL BE FURNISHED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON REQUEST SUBMITTED IN WRITING TO THE SECRETARY OF
THE CORPORATION.
Certificates issued pursuant to the Merger Agreement may also bear the
following legend:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Each Purchaser and Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Preferred Stock or
the Common Stock in order to implement the restrictions on transfer established
in this Section 1.
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 1.4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership or (ii) in transactions
involving the distribution without consideration of Restricted Securities by any
of the Purchasers to any of their partners, or retired partners, or to the
estate of any of its partners or retired partners), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the holder thereof shall give written notice to the Company of any such holder's
intention to effect such transfer, sale, assignment or pledge. Each such notice
shall describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail, and shall be accompanied, at such
holder's expense by either (i) an unqualified written opinion of legal counsel
who shall, and whose legal opinion shall be, reasonably satisfactory to the
Company addressed to the Company, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 1.3 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and the Company
such legend is
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not required in order to establish compliance with any provisions of the
Securities Act or any state securities law.
1.5 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall receive from
Initiating Holders, at any time following the earlier of June 30, 1990 -or six
months following the effective date of the initial public offering of Common
Stock of the Company, a written request that the Company effect any
registration, qualification or compliance with respect to Registrable Securities
the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect the
registration, qualification or compliance (including, without limitation, to
execute an undertaking to file post-effective amendments, to make appropriate
qualification under applicable blue sky or other state securities laws and to
make appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) of at
least 20% of the Registrable Securities of each Holder who made such request,
together with at least 20% of the Registrable Securities of any Holder or
Holders joining in such request as specified in a written request received by
the Company within 20 days after receipt of such written notice from 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 1.5:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(B) Prior to the expiration of 180 days after 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);
(C) 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 six (6) months
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 and that the Company's
estimate of the date of filing such registration statement is made in good
faith;
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(D) After the Company has effected two such registrations pursuant to
this subparagraph 1.5(a) and such registrations have been declared or ordered
effective;
(E) If the Company shall furnish to such Holders a certificate signed
by the President 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
shareholders for a registration statement to be filed in the near future, then
the Company's obligation to use its best efforts to register, qualify or comply
under this Section 1.5 shall be deferred for a period not to exceed 120 days
during which period the Company may not file a registration statement for its
own account (other than a registration of securities in a Rule 145 transaction
or with respect to an employee benefit plan).
Subject to the foregoing clauses (A) through (E), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, after receipt of the request or requests of
the Initiating Holders.
(b) UNDERWRITING. The right of any Holder to registration pursuant
to Section 1.5 shall be conditioned upon such Holder's participating in the
underwriting arrangements required by this Section 1.5 and the inclusion of such
Holder's Registrable Securities to the extent requested in the underwriting to
the extent provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders. Notwithstanding any other
provision of this Section 1.5, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Initiating Holders shall so advise
all holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such Holders at the
time of filing the registration statement. No Registrable Securities excluded
from the underwriting by reason of the underwriter's marketing limitation shall
be included in such registration.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw theref rom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 90 days after the effective date
of such registration; provided, however, that, if by the withdrawal of such
Registrable Securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 1.5(b).
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1.6 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Securities and Exchange Commission Rule 145 transaction,
the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 120 days after receipt of such written notice from the
Company, by any Holder.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a) (i). In such event the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 1.6, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration. The Company shall so advise all
Holders and the number of shares of Registrable Securities that may be included
in the registration and underwriting shall be allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. If any Holder disapproves of the terms of any such underwriting, he
may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to ninety days after the effective
date of the registration statement relating thereto.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
1.7 REGISTRATION ON FORM 5-3.
(a) If any Holder or Holders representing not less than 20% of the
Registrable Securities request that the Company file a registration statement on
Form 5-3 (or any successor form
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to Form 5-3) for a public offering of shares of the Registrable Securities
the reasonably anticipated aggregate price to the public of which would
exceed $1,000,000, and the Company is a registrant entitled to use Form 5-3
to register the Registrable Securities for such an offering, the Company
shall use its best efforts to cause such Registrable Securities to be
registered for the offering on such form; provided, however, that the Company
shall riot be required to effect more than one registration pursuant to this
Section 1.7 in any six (6) month period. The substantive provisions of
Section l.5.,(a)(i), the first paragraph of (a) (ii) and (b) shall be
applicable to each registration initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 1.7: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act; (ii) if the Company, within
ten (10) days of the receipt of the request of the Holder or Holders, gives
notice of its bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of receipt of such request
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities); (iii) 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 six (6) months 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 and that the Company's estimate of
the date of filing such registration statement is made in good faith; (iv) if
the Company shall furnish to such Holder a certificate signed by the President
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 shareholders for
registration statements to be filed in the near future, then the Company s
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed 120 days from the receipt of the request to
file such registration by such Holder during which period the Company may not
file a registration statement for its own account (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan); or (v) after the Company has effected three such registrations pursuant
to this subparagraph 1.7 and such registrations have been declared or ordered
effective. In no event shall the Company be required to keep any such
registration statement effective for a period of more than six months.
1.8 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS:
TERMINATION OF REGISTRATION RIGHTS.
(a) LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS From and after the
date of this Agreement, the Company shall not enter into any agreement granting
any holder or prospective holder of any securities of the Company registration
rights with respect to such securities unless (i)
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such new registration rights are on a shared pro rata basis with rights of
the Holders hereunder; or (ii) such new registration rights are subordinate
to the registration rights granted Holders hereunder.
(b) TERMINATION OF REGISTRATION RIGHTS. Notwithstanding any other
provision in this Section 1, registration rights granted pursuant to Section 1
hereof shall terminate: (i) with respect to Holders other than affiliates (as
defined in Rule 405 under the Securities Act) of the Company, if granted under
Section 1.6, five (5) years after the effective date of the Company's initial
public offering having a minimum aggregate gross offering price of $5,000,000
and a minimum price per share of $5.56 adjusted for stock splits, stock
dividends and recapitalizations, and if granted under Section 1.7 on December
31, 1998; and (ii) as to any Holder, at the later of five (5) years after the
effective date of the Company's initial public offering having a minimum gross
offering price of $5,000,000 and a minimum price per share of $5.56 adjusted for
stock splits, stock dividends and recapitalizations or the date such Holder can
sell all Registrable Securities held by such Holder within a single three month
period pursuant to Rule 144 under the Securities Act.
1.9 EXPENSES OF REGISTRATION.
(a) All Registration Expenses incurred in connection with (i) the two
registrations pursuant to Section 1.5 and (ii) all registrations pursuant to
Section 1.6 shall be borne by the Company. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders shall be
borne by the Holders of such securities pro rata on the basis of the number of
shares so registered.
(b) All Registration Expenses and Selling Expenses incurred in
connection with a registration pursuant to Section 1.7 shall be borne pro rata
by the Holder or Holders requesting the registration on Form 5-3 according to
the number of Registrable Securities included in such registration.
1.10 REGISTRATION PROCEDURES. In the case of registration, qualification
or compliance effected by the Company pursuant to this Section l, the Company
will keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof. At
its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the Registration
Statement has been completed.
(b) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
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1.11 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of the Securities Act, with respect to which registration, qualification
or compliance has been effected pursuant to this Section 1, and each
underwriter, if any, and each person who controls any underwriter within the
meaning of the Securities Act, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation or proceedings, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse each
such Holder, each of its officers and directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided, that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability, action
or expense arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission, made in reliance upon and in conformity
with written information furnished to the Company by an instrument duly executed
by such Holder, officer, director or partner, controlling person or underwriter
and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act, and each other such
Holder, each of its officers and directors and partners and each person
controlling such Holder within the meaning of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, partners, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information
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furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically fur use therein.
(c) Each party entitled to indemnification under this Section 1.11
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party) promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any claim or
any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Section I unless the
failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
(d) In the event of a conflict between the terms of any underwriting
agreement entered into by the Company and this Section 1.11, the terms of such
underwriting agreement shall govern.
1.12 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable securities held by
them and the distribution proposed by such Holder or Holders as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 1.
1.13 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements);
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(c) So long as a Purchaser owns any Restricted Securities to furnish
to the Purchaser forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public), and of
the Securities Act and the Securities Exchange Act of 1934 (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as a Purchaser may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Purchaser to sell
any such securities without registration.
1.14 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted Purchasers under Sections 1.5, 1.6 and 1.7 may be
assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by a Purchaser (together with any
affiliate) provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws, (ii) that the Purchaser obtains the
Company's prior written consent to effect such transfer, which consent shall not
be unreasonably withheld and (iii) that such assignee or transferee acquire at
least 20% of a purchaser's shares of Preferred Stock and Conversion Stock.
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned to any constituent partner or shareholder of a
Purchaser or affiliate of a corporate Purchaser, without compliance with items
(ii) and (iii) above provided written notice thereof is promptly given to the
Company.
1.15 STANDOFF AGREEMENT. Each Holder agrees in connection with the
Company's initial public offering of the Company's securities that, upon request
of the Company or the underwriters managing any underwritten offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not to exceed one hundred twenty (120) days) from the effective date of
such registration; provided that the officers and directors of the Company who
own stock of the Company also agree to such restrictions.
SECTION 2
PURCHASERS' AND COMPANY RIGHTS OF FIRST REFUSAL
2.1 RIGHT OF FIRST OFFER ON NEW SECURITIES. The Company hereby grants to
each Purchaser the right of first offer to purchase, pro rata, all or any part
of New Securities (as defined in this Section 2.1) which the Company may, from
time to time, propose to sell and issue. A pro rata share, for purposes of this
right of first offer, is the ratio that the sum of the number of shares of
preferred Stock and Conversion Stock held by each purchaser bear to the total
number of shares of preferred Stock and Conversion Stock held by all purchasers
with such right of first refusal.
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(a) Except as set forth below, "New Securities" shall mean any shares
of capital stock of the Company including common stock and preferred stock,
whether now authorized or not, and rights, options or warrants to purchase said
shares of common stock or preferred stock, and securities of any type whatsoever
that are, or may become, convertible into said shares of common stock or
preferred stock. Notwithstanding the foregoing, "New Securities" does not
include (i) Preferred Stock issued pursuant to the Series A Agreement, the
Series B Agreement, the Merger Agreement, the Series C Agreement, the Series C
Agreement No. 2, and the Series D Agreement, including Common Stock issuable
upon conversion of the Preferred Stock, (ii) Preferred Stock issued pursuant to
a warrant to purchase 14,063 shares of Series C Preferred Stock including Common
Stock issuable upon conversion thereof, (iii) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or other reorganization whereby the Company or
its shareholders own not less than fifty-one percent (51%) of the voting power
of such corporation, (iv) up to 250,000 shares of the Company's Common Stock
(net of repurchases), or related options convertible into such Common Stock,
issued to (a) employees, officers and directors of, and consultants to, the
Company, pursuant to any arrangement approved by the Board of Directors of the
Company, or (b) to vendors, licensors or licensees, guarantors of debt or
equipment leases or pursuant to joint venture arrangements, (v) any security if
Purchasers holding at least 75% of the outstanding Preferred Stock (or the
Common stock issued in respect thereof, or any combination of such Preferred
Stock and such Common Stock) consent in writing that the right of first refusal
shall not apply to such securities, (vi) stock issued pursuant to the exercise
of any rights or agreements to acquire Common Stock including without limitation
convertible securities, options and warrants, provided that the rights of first
refusal established by this Section 2.1 apply with respect to the initial sale
or grant by the Company of such rights or agreements and (vii) stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each purchaser written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. Each Purchaser shall have twenty-one (21)
days from the date of receipt of any such notice to agree to purchase up to the
Purchaser's pro rata share of such New Securities for the price and upon the
terms specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased.
(c) In the event a Purchaser fails to exercise the right of first
refusal within said twenty-one (21) day period, the Company shall have ninety
(90) days thereafter to sell or enter into an agreement (pursuant to which the
sale of New securities covered thereby shall be closed, if at all, within sixty
(60) days from the date of such agreement) to sell the New Securities not
elected to be purchased by Purchasers at the price and upon the terms no more
favorable to the purchasers of such securities than specified in the Company's
notice. In the event the Company has not sold the New securities or entered
into an agreement to sell the New Securities within said ninety (90) day period
(or sold and issued New Securities in accordance with the foregoing within sixty
(60) days from the
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date of said agreement), the Company shall not thereafter issue or sell any
New Securities, without first offering such securities to the purchasers in
the manner provided above.
(d) The right of first offer granted under this Agreement shall
expire upon the first to occur of the following: (i) the closing of the first
public offering of the Common Stock of the Company to the general public which
is effected pursuant to a registration statement filed with, arid declared
effective by, the Commission under the Securities Act at a minimum aggregate
gross offering price of $5,000,000 and minimum price per share of $5.56 (subject
to adjustment for stock splits, stock dividends or recapitalization); (ii) as to
a Purchaser if a Purchaser (when aggregated with any of such Purchaser's
wholly-owned subsidiaries or constituent partners or shareholders) no longer
holds 50% of the Preferred Stock issued to Purchaser or 50% of the Common Stock
issued upon conversion of the Preferred Stock or 50% of any combination of said
Preferred Stock and Common Stock issued to the Purchaser, all as adjusted for
stock splits, stock dividends, and recapitalizations.
(e) The right of first offer hereunder is not assignable except by
each of such Purchasers to any wholly-owned subsidiary or constituent partner
(including limited partners) or shareholders.
2.2 RIGHT OF FIRST REFUSAL. Before any shares of Preferred Stock and/or
Conversion Stock registered in the name of Purchaser may be sold or transferred
(including transfer by operation of law), such shares shall first be offered to
the Company (or its assignees) and to the shareholders of the Company as
follows:
(a) The purchaser shall deliver a notice ("Notice") to the Company
stating (i) such Purchaser's bona fide intention to sell or transfer such
shares, (ii) the number of such shares to be sold or transferred, (iii) the
price for which the Purchaser proposes to sell or transfer such shares, and (iv)
the name of the proposed purchaser or transferee.
(b) Within fifteen (15) days after receipt of the Notice, the Company
(or its assignee or assignees designated by the board of directors with the
written consent of holders, other than the Purchaser who delivered the Notice,
of not less than 75% of the outstanding shares of Preferred stock and/or
Conversion Stock of the Company) may elect to purchase any or all shares to
which the Notice refers, at the price per share specified in the Notice.
(c) In the event the Company (together with its permitted assignees)
elects under (b) above to purchase less than all of the shares to which the
Notice refers, the Company shall promptly (and in all events within the fifteen
day period specified in (b) above) give written notice to all holders of
outstanding shares of Preferred Stock and/or Conversion Stock setting forth the
terms of the notice and the number of shares to which the Notice refers which
are available for purchase. For a period of fifteen (15) days following
receipt of notice from the Company, each holder of Preferred stock and/or
Conversion Stock, subject to qualification under or other compliance with
applicable federal and state blue sky/securities laws, as reasonably determined
by counsel for the Company, shall have the right to purchase a pro rata portion
of any or all of such available shares as
-15-
specified in the Notice. Each holder's pro rata portion shall be based on
the ratio of the number of shares of Corporation Preferred Stock and/or
Conversion Stock owned by such holder to the total number of shares of
Preferred Stock and Conversion Stock of all holders other than the Purchaser
giving the Notice. Each holder electing to purchase shares shall specify the
maximum number of shares such holder is willing to purchase, including shares
available for purchase by reason of another holder's election not to purchase
or ineligibility to purchase by virtue of Federal and/or state blue
sky/securities laws.
(d) If all of the shares to which the Notice refers are not elected
to be purchased, as provided in subparagraph (b) above, the Purchaser may sell
the remaining shares to any person named in the Notice at the price specified in
the Notice or at a higher price, provided that such sale or transfer is
consummated within 60 days of the date of said Notice to the Company, and
provided, further, that any such sale is in accordance with all the terms and
conditions hereof and such purchaser or transferee agrees to be bound by all the
restrictions and provisions hereof.
The provisions of this Section 2.2 shall terminate on the closing date of a
registration statement filed by the Company under the Securities Act of 1933
with respect to an underwritten public offering of Common Stock of the Company
for a minimum aggregate gross offering price of $5,000,000 and a minimum price
per share of $5.56. The provisions of subparagraphs (a), (b) and (c) shall not
apply to a transfer of any shares of Preferred Stock and/or Conversion Stock by
a purchaser as a result of the dissolution of Purchaser, a reorganization or
acquisition of Purchaser in connection with which the shareholders or partners
or other equity owners of purchaser own, after consummation of such
reorganization or acquisition, at least 51% of the voting power of the
reorganized, acquiring or surviving entity, or as a distribution to a
constituent partner or shareholder of the Purchaser; provided, in each such case
a transferee shall receive and hold such shares subject to the provisions and
restrictions on transfer of this Agreement and there shall be no further
transfer of such shares except in accordance herewith.
SECTION 3
WAIVER OF RIGHTS
In consideration of the rights granted herein, (i) the registration rights
granted to the Series A Purchasers pursuant to Section 8 of the Series A
Agreement are amended in full to read as set forth in this Agreement, and such
registration rights as set forth in Section 8 of the Series A Agreement are null
and void and of no further force and effect, (ii) the Series A Purchasers waive
their right of first refusal as set forth in Section 9 of the Series A
Agreement, and such right of first refusal as set forth in Section 9 of the
Series A Agreement is null and void and of no further force and effect and is
amended in its entirety to read as set forth in this Agreement, (iii) the Series
A Purchasers waive compliance with the covenants set forth in Sections 7.6 and
7.7 of the Series A Agreement relating to Section 351 transfers, which covenants
are null and void and of no further force and effect, and (iv) the Series A
Purchasers, Series B Purchasers and Series C Purchasers waive their right of
first refusal as set forth in Section 2 of the Second Amended And Restated
Modification Agreement.
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SECTION 4
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the St-ate of Indiana.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the parties to
this Agreement.
4.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Series A Agreement,
the Series B Agreement, the Merger Agreement, the Series C Agreement, the Series
C Agreement No. 2, and the Series D Agreement constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged, or terminated other than (i) with respect to Section l of this
Agreement, by a written instrument signed by the Company and the holders of not
less than 75% of the Registrable Securities, and (ii) with respect to Section 2,
3 and 4 of this Agreement, by a written instrument signed by the Company and the
holders of not less than 75% of the Preferred Stock and Conversion Stock then
outstanding.
4.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a)
if to a Holder, to the address of such Holder as set forth on the records of the
Company, or to such address as such Holder shall have furnished to the Company
in writing, or, until any such Holder so furnishes an address to the Company,
then to the address of the last holder of such Registrable Securities who has so
furnished an address to the Company, or (b) if to the Company, one copy should
be sent to ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
addressed to the attention of the President, or at such other address as the
Company shall have furnished to the Purchasers.
4.5 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power, or remedy occurring to any Holder, upon
any breach or default of the Company under this Agreement, shall impair any such
right, power, or remedy of such Holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, as of or in any
similar breach or default therein occurring, nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any Holder of any breach or default under this
Agreement, or any waiver on the party of the Holder 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 or by law or otherwise afforded to any Holder, shall be
cumulative and not alternative.
-17-
4.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
4.7 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
4.8 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
TEKSYN, INC.
an Indiana corporation
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇ Venture Partners
By:
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Title:
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Hamco Capital Corporation
By:
---------------------------------
Title:
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H & Q London Ventures
By:
---------------------------------
Title:
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H&Q Taiwan Ventures C.V.
By:
---------------------------------
Title:
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The Independent Investment Company PLC
By:
---------------------------------
Title:
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▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
By:
---------------------------------
Title:
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H & Q Group
By:
---------------------------------
Title:
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The ▇▇▇▇▇▇▇▇▇ Revocable 1980 Trust
By:
---------------------------------
Title:
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