EXHIBIT 4.3
LANTRONIX, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is made as of December 29,
2000 (the "Effective Date") by and among Lantronix, Inc., a Delaware corporation
(the "Company"), Xxxxxx Xxxxxxx and Xxxxx Xxxxxxx (the "Stockholders") and In
trust, Dunstan Charitable Remainder Unitrust, UAD, December 22, 2000 (the
"Trust").
WHEREAS, the Company and the Stockholders have entered into that certain
Agreement and Plan of Reorganization, dated December 16, 2000 (the "Merger
Agreement");
WHEREAS, the Company desires to grant to the Stockholders certain
registration rights;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. Certain Definitions. All capitalized terms used and not otherwise
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defined herein shall have the meanings given to them in the Merger Agreement. As
used in this Agreement, the following terms shall have the following respective
meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar or successor federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Holder" shall mean (i) any of the Stockholders holding Registrable
Securities, and (ii) any person holding Registrable Securities to whom the
rights under this Agreement have been transferred.
"Registrable Securities" means the Common Stock and any Common Stock of
the Company issued or issuable in respect of the Common Stock upon any stock
split, stock dividend, recapitalization or similar event, or any Common Stock
otherwise issuable with respect to the Conversion Stock. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (i) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (ii) they
shall have been distributed to the public pursuant to Rule 144, or any successor
provision, under the Securities Act, (iii) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force, (iv) they shall have
ceased to be outstanding, (v) in the written opinion of counsel to the Company,
they may be freely transferred without registration or qualification under the
Securities Act or any similar state law then in force (provided, however, that
in such event, at the Holder's request, the Company shall remove the restrictive
legend upon presentation of the stock certificates for such purpose) or (vi)
otherwise sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction.
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, except as stated in
Section 4.4 hereof, incurred by the Company in complying with Sections 4.1, 4.2
and 4.3 hereof, including, without limitation, all registration, qualification
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, disbursements of one counsel to the Holders (such disbursements to
Holders' counsel shall not exceed $12,500 per registration), 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); provided that
Registration Expenses shall in no event include Selling Expenses.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 10.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar or successor federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and, except as set forth in the definition of Registration Expenses,
all reasonable fees and disbursements of counsel, accountants or other
professional service providers to any Holder and any other expenses attributable
to the Holders.
2. Restrictions on Transferability. The Common Stock and any other
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securities issued in respect thereof upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall not be sold,
assigned, transferred or pledged except upon the conditions specified in this
Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Stockholder will cause any proposed
purchaser, assignee, transferee or pledgee of any such shares held by the
Stockholder to agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Agreement.
3. Notice of Proposed Transfers. The holder of each certificate
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representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 3. 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 a
Holder to any of its partners or members, or retired partners or members, or to
the estate of any of its partners or members or retired partners or members),
unless there is in effect a registration statement under the
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Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such sale,
transfer, assignment or pledge. Each such notice shall describe the manner and
circumstances of the proposed sale, transfer, 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 be, 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. It is agreed that the Company will not request an
opinion of counsel or "no action" letter for the holder for transactions made in
reliance on Rule 144 under the Securities Act except in unusual circumstances,
the existence of which shall be determined in good faith by the Board of
Directors of 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
10, 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 not
required in order to establish compliance with any provision of the Securities
Act.
4. Registration.
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4.1 Company Registration.
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(a) Notice of Registration. If at any time or from time to time
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after the initial Company-initiated registered public offering of its stock the
Company shall determine to register any of its equity securities under the
Securities Act for sale for cash, whether for its own account or the account of
any of its security holders or both, other than (i) a registration relating
solely to employee benefit plans, (ii) a registration relating solely to a Rule
145 transaction, (iii) a registration in which the only equity security being
registered is Common Stock issuable upon conversion of convertible debt
securities which are also being registered, (iv) on a Form S-4, Form S-8 (or
Form S-3, if such registration covers an offering of the type contemplated by
Form S-8) or any successor or similar forms or any registration form that does
not permit secondary sales or (iv) a registration pursuant to an agreement
which, by its terms, would prohibit the inclusion of Registrable Securities,
unless such prohibition is waived, the Company will:
(i) give to each Holder written notice thereof; and
(ii) subject to the terms of this Agreement, use its
reasonable efforts to 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 ten (10) business days after receipt of such written
notice from the Company, by any Holder; provided that the provisions of this
Section 4.1(a) are subject in all respect to the provisions of Section 4.1(b)
regarding underwritten offerings.
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Notwithstanding anything to the contrary contained herein, the Company
shall have no obligation to include Registrable Securities in any registration
pursuant to this Section 4.1 unless so requested by a Holder after delivery of a
notice as provided in Section 4.1(a).
(b) Underwriting. If the registration of which the Company gives
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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 4.1(a)(i). In such event the right of any Holder to
registration pursuant to this Section 4.1 shall be conditioned upon such
Holder's participation in such underwriting, and the inclusion of Registrable
Securities in the underwriting shall be limited 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 4.1, if the
managing underwriter of such underwritten offering advises the Company that
marketing factors require a limitation of the number of shares to be
underwritten, the Company may exclude some or all of the Registrable Securities
from such registration and underwriting. The Company shall so advise all
Holders distributing their securities through such registration and underwriting
of the number of shares that may be included in the registration, if any, and
the underwriting shall be allocated first to the Company and, if additional
shares may be sold, subject to any agreement which by its terms would give any
other person priority over, or rights similar to those held by, the Holders
relating to the inclusion of shares in such registration, such additional shares
shall be allocated among all Holders in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities initially sought to be
registered by such Holders in connection with such registration.
If any Holder disapproves of the terms of the underwriting, such Holder may
elect as its sole remedy to withdraw therefrom by written notice, given not less
than thirty (30) days prior to the expected effective date of the registration
statement filed in connection with such offering, to the Company and the
managing underwriter. If any Holder does not agree to the terms of any such
underwriting, such Holder shall be excluded therefrom by written notice from the
Company or the managing underwriter. No Registrable Securities excluded from
the underwriting by reason of the managing underwriter's marketing limitation or
otherwise withdrawn from the underwriting shall be included in such
registration. Any securities excluded or withdrawn from an underwriting shall be
withdrawn from such registration, and shall continue to be subject to the terms
of this Agreement including Section 5 hereof. To facilitate the allocation of
shares in accordance with the above provisions, the Company or the underwriters
may round the number of shares allocated to any Holder to the nearest 100
shares. The rights of the Company under this Section 4.1(b) shall not be deemed
to limit the Company's rights not to include Registrable Securities in any such
registration or to delay or terminate registration pursuant to the other
provisions of this Section 4.1.
(c) Right to Terminate or Delay Registration. The Company shall
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have the right to terminate or withdraw any registration initiated by it under
this Section 4.1 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. If, at any
time after delivery of a notice of registration pursuant to Section 4.1(a) and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason to delay
registration of its securities, the Company may in
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its sole discretion delay such registration upon notice of such determination to
each Holder, and the Company shall be permitted to delay registering any
Registrable Securities for any period it deems necessary in its reasonable
discretion.
4.2 Expenses of Registration. All Registration Expenses incurred in
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connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company. All Selling Expenses, and any other
expenses in connection with a registration to be borne by the Holders of such
securities, shall be borne by the Holders whose shares are included in the
registration pro rata on the basis of the number of their shares so registered;
provided, however, that the Company shall not be required to pay any
Registration Expenses if, as a result of the withdrawal of any Holders from a
registration, the registration statement does not become effective. If the
Company is not required to pay any Registration Expenses, then the Holders
requesting registration shall bear such Registration Expenses pro rata on the
basis of the number of their shares so included in the registration request.
4.3 Indemnification.
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(a) The Company will indemnify each Holder, each of such Holder's
officers and directors, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any such underwriter
within the meaning of Section 15 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,
commenced or threatened, to which they or any of them may become subject under
the Securities Act, the Exchange Act, state securities law or any rule or
regulation promulgated under such laws applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of such Holder's officers and directors, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any reasonable legal and any other expenses
reasonably incurred by them in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action insofar as any such
claim, loss, damage, liability or action arises out of or is based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement, or any post-effective amendment thereof, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, if used before the effective date of such registration
statement, or contained in the prospectus as amended or supplemented if the
Company files any amendment thereof or supplement thereto with the Commission,
if used within the period during which the Company is required to keep the
registration statement to which such prospectus relates current pursuant to the
terms hereof, or the omission or alleged omission to state therein a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based on any untrue statement or alleged untrue statement or
omission or alleged omission, made in such registration statement, or any post-
effective amendment thereof, or any such preliminary prospectus, final
prospectus or summary prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information
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furnished to the Company through an instrument executed by such Holder,
director, officer, controlling person or underwriter and stated to be for use
therein; provided, further, that the foregoing indemnity agreement is subject to
the condition that, insofar as it relates to any such untrue statement, alleged
untrue statement, omission or alleged omission made in a preliminary prospectus
on file with the Commission at the time the registration statement becomes
effective or the amended prospectus is filed with the Commission pursuant to
Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall not inure
to the benefit of any person who participates as an underwriter in the offering
or sale of Registrable Securities or to any other person, if any, who controls
such underwriter within the meaning of Section 15 of the Securities Act, or to
any Holder or director, officer or controlling person thereof, if there is no
underwriter, if a copy of the Final Prospectus was not furnished to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act, and if such statement or omission was
corrected in such final prospectus.
(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 (in the same manner and to the same
extent as provided in Section 4.3(a), without giving effect to the provisos
contained therein) 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 Section 15 of the Securities Act, and each other such Holder, each of
such Holder's officers and directors and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) with respect to
any statement or alleged statement in or omission or alleged omission from such
registration statement, or any post-effective amendment thereof, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or any such underwriter through an
instrument executed by such Holder stating that it is for use in the preparation
of such registration statement, or any post-effective amendment thereof,
preliminary prospectus, final prospectus or summary prospectus, or any amendment
or supplement thereto; provided that such Holder shall not be liable to any
person who participates as an underwriter in the offering or sale of Registrable
Securities or to any other person, if any, who controls such underwriter within
the meaning of Section 15 of the Securities Act, in any such case to the extent
that any such loss, claim, damage, liability (or investigation, action or
proceeding in respect thereof) or expense arises out of such person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the time such
action is required by the Securities Act if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of the Company,
each underwriter, each other Holder, any controlling persons thereof and each
director or officer thereof, and shall survive the transfer of such securities
by such Holder.
(c) Each party entitled to indemnification under this Section 4.3 (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; provided
that the failure of any Indemnified Party to give notice
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as provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement unless and to the extent the failure to give such notice is
prejudicial to an Indemnifying Party's ability to defend such action. In case
any such action is brought against an Indemnified Party, unless and except to
the extent that in the reasonable judgment of the Indemnified Party and the
Indemnifying Party, based on advice of their respective counsel, a conflict of
interest between such Indemnified and Indemnifying Parties exists in respect of
such claim, the Indemnifying Party shall be entitled to participate in and to
assume the defense thereof, jointly with any other Indemnifying Party similarly
notified, to the extent that the Indemnifying Party may wish, with counsel
reasonably satisfactory to such Indemnified Party and, after notice from the
Indemnifying Party to such Indemnified Party of its election so to assume the
defense thereof, the Indemnifying Party shall not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of investigation
made at the request of the Indemnifying Party; provided, however, that if such
Indemnified Party has a reasonable basis to believe, and does believe, that its
interests in such action conflict with those of the Indemnifying Party, the
Indemnified Party may so notify such Indemnifying Party and the Indemnifying
Party will remain liable to such Indemnified Party for all reasonable fees,
costs and expenses incurred by such Indemnified Party in retaining one separate
counsel to participate in the defense of such action. No Indemnified Party shall
consent to entry of any judgment or enter into any settlement of any such action
without the consent of such Indemnifying Party, which consent shall not be
unreasonably withheld. 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) If the indemnification provided for in this Section 4.3 is held
by a court of competent jurisdiction to be unavailable to the Indemnified
Parties, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the aggregate amount paid or payable by
such Indemnified Party as a result of such losses, claims, damages, liabilities
or expenses in such proportions as are appropriate to reflect the relative fault
of the Indemnifying Party on the one hand and the Indemnified Party on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party on the
one hand and the Indemnified Party on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 4.3(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any expenses reasonably incurred by such Indemnified Party in connection
with investigating any such action or claim. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against
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another party or parties under this Section 4.3, notify such party or parties
from whom contribution may be sought, and such notice shall be a condition
precedent to the other party's or parties' liability under this Section 4.3 or
otherwise.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
4.4 Information by Holder. The Holder or Holders of Registrable
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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
request from time to time in connection with any registration, qualification or
compliance referred to in this Agreement.
4.5 Delay of Registration by a Holder. No Holder shall have any right to
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take any action to restrain, enjoin or otherwise delay any registration as a
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 4.
4.6 Allocation of Registration Opportunities. In any circumstance in
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which all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issued or issuable upon conversion of
shares of any currently issued or unissued series of Preferred Stock of the
Company) with registration rights (the "Other Shares") requested to be included
in a registration on behalf of the Holders or other selling stockholders cannot
be so included as a result of limitations on the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, subject to any
preferential rights to register any such Other Shares, the number of shares of
Registrable Securities and Other Shares that may be so included shall be
allocated among the Holders and other selling stockholders requesting inclusion
of shares pro rata on the basis of the number of shares of Registrable
Securities and Other Shares that would be held by such Holders and other selling
stockholders, assuming conversion; provided, however, that such allocation shall
not operate to reduce the aggregate number of Registrable Securities and Other
Shares to be included in such registration, if any Holder or other selling
stockholder does not request inclusion of the maximum number of shares of
Registrable Securities and Other Shares allocated to such Holder or other
selling stockholder pursuant to the above-described procedure, in which case the
remaining portion of such Holder's or other selling stockholder's allocation
shall be reallocated among those requesting Holders and other selling
stockholders whose allocations did not satisfy their requests pro rata on the
basis of the number of shares of Registrable Securities and Other Shares which
would be held by such Holders and other selling stockholders, assuming
conversion, and this procedure shall be repeated until all of the shares of
Registrable Securities and Other Shares which may be included in the
registration on behalf of the Holders and other selling stockholders have been
so allocated.
4.7 Termination of Registration Rights. The rights granted pursuant to
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Section 4 of this Agreement to the Holders shall terminate at the earlier of (i)
five (5) years after the date of this Agreement; (ii) with respect to a Holder,
at such time as the Holder is able to sell all shares of Registrable Securities
held or entitled to be held upon conversion by such Holder pursuant to Rule 144
promulgated under the Securities Act, during any three (3) month period,
provided that the
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Company is subject to the reporting requirements of the Exchange Act; or (iii)
with respect to a Holder, such time as such Holder ceases to own any Common
Stock.
5. Standoff Agreement. In connection with any public offering of the
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Company's securities, each Stockholder agrees, upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
not to offer, sell, contract to sell, pledge or otherwise dispose of (or enter
into any transaction which is designed to, or might reasonably be expected to,
result in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the undersigned or any
affiliate of the undersigned or any person in privity with the undersigned or
any affiliate of the undersigned) directly or indirectly, or file (or
participate in the filing of) a registration statement with the Securities and
Exchange Commission in respect of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the meaning
of Section 16 of the Exchange Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder with respect to, any
shares of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for such capital stock (other than those included in
the registration), or publicly announce an intention to effect any such
transaction, 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 eighty (180) days) from the effective date of such registration as may
be requested by the underwriters, provided that the officers and directors of
the Company also agree to such restrictions. The Stockholders agree that the
Company may instruct its transfer agent to place stop-transfer notations in its
records to enforce the provisions of this Section 5.
6. Amendment. Neither this Agreement nor any provision hereof may be
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amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination may be sought. Notwithstanding the foregoing, any
provision of this Agreement may be amended, waived, discharged or terminated on
behalf of all Stockholders (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the holders of not less than a majority of the Registrable
Securities then outstanding, provided that if an amendment by its terms affects
the rights of a subset, series or class of securities differently than other
securities, such amendment must be approved by written consent of not less than
a majority of the holders of that subset, class or series of securities. Any
amendment or waiver effected in accordance with the preceding sentence shall be
binding upon each Stockholder and each Holder of Registrable Securities at the
time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
7. Governing Law / Mediation and Arbitration. The parties shall attempt
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to resolve any dispute as to the interpretation or enforcement of any part of
this Agreement first, if reasonably possible, by mediation. The parties shall
make all reasonable efforts to select a mutually agreeable mediator. If the
parties are unable to agree upon a mediator, then, utilizing the services of
American Arbitration Association ("AAA") or Arbitration Service of Portland,
Inc. ("ASPI"), collectively "Arbitration Service," the Arbitration Service
selected by Parent ("Selected Arbitration Service") shall select a mediator. No
arbitration shall proceed to resolve a dispute until after the mediator
determines that the parites have reached an impasse and that further mediation
would not likely result in success. Each party shall pay its attorneys' fees and
costs for the mediation and one-half of the mediator's fees and costs.
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If the mediation reaches such an impasse, said dispute shall be determined
by binding arbitration in accordance with the Selected Arbitration Service. The
mediator shall not be the arbitrator, unless the parties so mutually stipulate.
If the parties are not able to agree upon a single arbitrator within ten (10)
days following demand therefor, then the arbitrator shall be appointed by the
Selected Arbitration Service. Any mediator or arbitrator must be independent,
and shall have no prior business or personal relationship with any of the
parties, or their affiliates and no prior business or personal relationship with
the attorneys, accountants or other professional advisors of any the parties or
their affiliates of such nature to cause actual bias or a reasonable appearance
of bias.
Each party shall pay one-half of the arbitrator's fees and costs, unless
one party is ruled the prevailing party by the arbitrator, in which case the
arbitrator, subsequent to the arbitration itself, may award the prevailing
party's attorneys fees and costs. Any mediation or arbitration shall be brought
in the City of Portland, Oregon unless the parties mutually agree on a location
outside of Portland, Oregon. The parties agree that the law of the State of
California will apply to all proceedings arising out of or relating to this
Agreement
8. Entire Agreement; Assignment. This Agreement, together with all
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Exhibits hereto, constitutes the full and entire understanding and agreement
between the parties regarding the matters set forth herein. Any such waiver,
modification, amendment, discharge or termination shall be binding on all
Stockholders. Except as otherwise expressly provided herein, this Agreement
shall inure to the benefit of and be binding upon the successors, assigns,
heirs, executors and administrators of the parties hereto; provided that no
Stockholder may transfer or assign its rights hereunder to any person unless
such person agrees in writing to be bound by and to perform all of the terms and
conditions of this Agreement. Any attempted transfer or assignment in violation
of any provision of this Agreement shall be null and void and of no force or
effect and the Company shall not be required to recognize any assignee as a
Stockholder under this Agreement.
9. Notices. All notices, demands and other communications required or
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permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery to the party to be notified or three (3) days after
deposit with the United States mail, by registered or certified mail, postage
prepaid, return receipt requested, addressed (a) if to a Stockholder, at such
Stockholder's address as set forth on the Schedule of Stockholders attached
hereto, or at such other address as such Stockholder shall have furnished to the
Company in writing in accordance with this Section 9, (b) if to any other holder
of Common Stock, at such address as such holder shall have furnished the Company
in writing in accordance with this Section 9, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder thereof who has so furnished an address to the Company, and (c) if to the
Company, at its principal office, with a copy to Xxxx X. Xxxxxxxx, Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000. Any
party may designate a different address to which notices, demands or other
communications shall thereafter be directed and such designation shall be made
by written notice given in the manner hereinabove required.
10. Legended Certificates.
---------------------
10.1 Each certificate representing the Common Stock and any other
securities issued in respect of the Common Stock upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of
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Section 3 above) be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS COVERING
THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
10.2 Each Holder consents to the Company's making a notation on its
records and giving instructions to any transfer agent for the Common Stock in
order to implement the restrictions on transfer established in this Agreement.
11. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12. Titles and Subtitles. The titles of the paragraphs and subparagraphs
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing or interpreting this Agreement
13. Rights; Separability. Unless otherwise expressly provided herein, a
--------------------
Stockholder's rights hereunder are several rights, not rights jointly held with
any of the other Stockholders. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
14. Information Confidential. Each Stockholder acknowledges that the
------------------------
information received by them pursuant hereto may be confidential and for its use
only, and it will not use any such confidential information in violation of the
Securities Act, the Exchange Act or reproduce, disclose or disseminate such
information to any other person (other than its employees or agents having a
need to know the contents of such information, and its attorneys), except in
connection with the exercise of rights under this Agreement, unless the Company
has made such information available to the public generally or such Stockholder
is required to disclose such information by a governmental body.
(The remainder of this page is left intentionally blank.)
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IN WITNESS WHEREOF, the foregoing agreement is hereby executed as of the
date first above written.
"COMPANY"
LANTRONIX, INC.
By: /s/ XXXXXX X. XXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
"STOCKHOLDERS"
/s/ XXXXXX XXXXXXX
--------------------------------------
Xxxxxx Xxxxxxx
/s/ XXXXX XXXXXXX
--------------------------------------
Xxxxx Xxxxxxx
"TRUST"
In trust, Dunstan Charitable Remainder
Unitrust, UAD, December 22, 2000
By: /s/ XXXXXXXX XXXXX
-----------------------------------
Xxxxxxxx Xxxxx, Trustee
(Signature page to Investor Rights Agreement)
