EXECUTION COPY
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EXHIBIT 4.2
TURBOLINUX, INC.
SECOND AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
September 1, 2000
&
October 10, 2000
Table Of Contents
Page
Section 1. GENERAL............................................................1
1.1 Definitions......................................................1
Section 2. REGISTRATION; RESTRICTIONS ON TRANSFER.............................3
2.1 Restrictions on Transfer.........................................3
2.2 Demand Registration..............................................4
2.3 Piggyback Registrations..........................................5
2.4 Form S-3 Registration............................................6
2.5 Expenses of Registration.........................................8
2.6 Obligations of the Company.......................................8
2.7 Termination of Registration Rights...............................9
2.8 Delay of Registration; Furnishing Information....................10
2.9 Indemnification..................................................10
2.10 Assignment of Registration Rights................................12
2.11 Amendment of Registration Rights.................................12
2.12 Limitation on Subsequent Registration Rights.....................12
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information...13
2.14 Rule 144 Reporting...............................................13
Section 3. COVENANTS OF THE COMPANY...........................................14
3.1 Basic Financial Information and Reporting........................14
3.2 Inspection Rights................................................15
3.3 Reservation of Common Stock......................................15
3.4 Stock Vesting....................................................15
3.5 Key Man Insurance................................................15
3.6 Proprietary Information and Inventions Agreement.................15
3.7 Assignment of Right of First Refusal.............................15
3.8 Antidilution.....................................................16
3.9 Indemnification..................................................16
3.10 Termination of Covenants.........................................16
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Table of Contents
(Continued)
Page
Section 4. RIGHTS OF FIRST REFUSAL............................................16
4.1 Subsequent Offerings.............................................16
4.2 Exercise of Rights...............................................16
4.3 Issuance of Equity Securities to Other Persons...................17
4.4 Termination and Waiver of Rights of First Refusal................17
4.5 Transfer of Rights of First Refusal..............................17
4.6 Excluded Securities..............................................17
Section 5. VOTING.............................................................18
5.1 Voting for Certain Directors.....................................18
Section 6. MISCELLANEOUS......................................................19
6.1 Governing Law....................................................19
6.2 Survival.........................................................19
6.3 Successors and Assigns...........................................19
6.4 Entire Agreement.................................................19
6.5 Severability.....................................................19
6.6 Amendment and Waiver.............................................19
6.7 Delays or Omissions..............................................20
6.8 Notices..........................................................20
6.9 Attorneys' Fees..................................................20
6.10 Titles and Subtitles.............................................20
6.11 Additional Investors.............................................20
6.12 Counterparts.....................................................21
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TurboLinux, Inc.
SECOND AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This Second Amended and Restated Investor Rights Agreement (the
"Agreement" is entered into as of the 1st day of September, 2000, by and among
TurboLinux, Inc., a Delaware corporation (the "Company"), and the holders of the
Company's Series A Preferred Stock (the "Series A Preferred") and Series B
Preferred Stock (the "Series B Preferred") as set forth on Exhibit A hereto.
The holders of the Series A Preferred and Series B Preferred shall be referred
to hereinafter as the "Investors" and each individually as an "Investor."
Recitals
Whereas, the Company proposes to sell and issue up to thirteen million
(13,000,000) additional shares of its Series B Preferred pursuant to that
certain Series B Preferred Stock Purchase Agreement even date herewith (the
"Purchase Agreement");
Whereas, certain of the Investors possess certain registration rights,
information rights and other rights pursuant to that certain Amended and
Restated Investor Rights Agreement dated as of December 17, 1999 (the "Prior
Agreement"), by and among the Company and such Investors;
Whereas, the Investors and the Company desire to amend and restate the
Prior Agreement in its entirety and to accept the rights and obligations created
pursuant to this Agreement in lieu of the rights and obligations granted to each
of them under the Prior Agreement; and
Whereas, in order to induce the Company and certain Investors to consummate
the transactions contemplated by the Purchase Agreement, the Investors and the
Company hereby agree that this Agreement shall govern the rights of the
Investors to cause the Company to register shares of Common Stock issuable to
the Investors and certain other matters as set forth herein, and the Investors
and the Company hereby agree that the Prior Agreement is hereby amended and
restated in its entirety by this Agreement.
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 Definitions . As used in this Agreement the following terms shall have
the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (b) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities, or (c) any Common Stock of the Company otherwise acquired by an
Investor. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed twenty-five thousand dollars ($25,000) of a single special counsel for
the Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the Company's Series A Preferred and Series B
Preferred issued and held by the Investors listed on Exhibit A hereto and their
permitted assigns.
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Section 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement, (B) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act; provided that conditions in clauses (A) and (B) and the
requirement of an opinion of counsel under this subparagraph 2.1(a)(ii) shall
not apply to (x) transactions made pursuant to Rule 144, and (y) any transaction
in which such holder distributes Restricted Securities to its constituent
partners, or to a majority-owned or majority-controlled subsidiary of the
ultimate parent of any Holder or such parent of any Holder; provided that each
transferee agrees in writing to be subject to the terms of this Agreement.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a limited liability
company to its members or former members in accordance with their interest in
the limited liability company, (C) to the Holder's family member or trust for
the benefit of an individual Holder, or (D) any majority-owned or majority-
controlled subsidiary of Holder's ultimate parent, of at least comparable size
and sophistication to Holder; provided that in each case the transferee will be
subject to the terms of this Agreement to the same extent as if such transferee
were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
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(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if (i) such Shares or
Registrable Securities are registered under the Securities Act and a prospectus
meeting the requirements of Section 10 of the Securities Act is available, (ii)
such legend may be properly removed under the terms of Rule 144 promulgated
under the Securities Act, or (iii) the holder shall have obtained an opinion of
counsel (which counsel may be counsel to the Company) reasonably acceptable to
the Company to the effect that the securities proposed to be disposed of may
lawfully be so disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority or opinion of counsel authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of at least 25% of the
Registrable Securities then outstanding (the "Initiating Holders") that the
Company file a registration statement under the Securities Act covering the
registration of at least twenty percent (20%) of the Registrable Securities then
outstanding having an anticipated aggregate offering price of at least
$5,000,000 (a "Qualified Public Offering"), then the Company shall, within
thirty (30) days of the receipt thereof, give written notice of such request to
all Holders, and subject to the limitations of this Section 2.2, use its best
efforts to file and have declared effective, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter or underwriters advise the Company that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company shall so advise
all Holders of Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting shall be allocated to the Holders of such Registrable Securities on
a pro rata basis based on the number of Registrable Securities held by all such
Holders (including the Initiating Holders). Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from the registration.
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(c) The Company shall not be required to file a registration
pursuant to this Section 2.2:
(i) prior to the earlier of (A) December 19, 2003 or (B) one
hundred eighty (180) days following the effective date of the registration
statement pertaining to the Initial Offering;
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective;
(iii) during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective date of
the registration statement pertaining to the Initial Offering; provided that the
Company makes reasonable good faith efforts to cause such registration statement
to become effective;
(iv) if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to
the Holders of the Company's intention to make its Initial Offering within
ninety (90) days;
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board of Directors of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be effected at such time, in which event the Company shall have the right to
defer such filing for a period of not more than ninety (90) days after receipt
of the request of the Initiating Holders; provided that such right to delay a
request pursuant to this Section or Section 2.4(b)(iv) shall be exercised by the
Company not more than once in any twelve (12) month period; or
(vi) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 2.4 below.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or
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registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(a) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any stockholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting.
In no event will shares of any other selling stockholder be included in such
registration which would reduce the number of shares which may be included by
Holders without the written consent of Holders of a majority of the Registrable
Securities proposed to be sold in the offering. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter or underwriters, delivered at
least ten (10) business days prior to the effective date of the registration
statement. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners,
shareholders and majority-owned or majority-controlled subsidiaries of the
ultimate parent of any Holder or such parent of any Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing person shall be deemed to be a single "Holder",
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(b) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 Form S-3 Registration . In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
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(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than one million dollars ($1,000,000), or
(iii) if within thirty (30) days of receipt of a written
request from any Holder or Holders pursuant to this Section 2.4, the Company
gives notice to such Holder or Holders of the Company's intention to make a
public offering within ninety (90) days, provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period; or
(iv) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4; provided, that such right to delay a
request pursuant to this Section or Section 2.2(c)(v) shall be exercised by the
Company not more than once in any twelve (12) month period, or
(v) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or
(vi) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
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2.5 Expenses of Registration. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders). If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 2.2 or Section
2.4 to a demand registration.
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to forty-five (45) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto. The Company shall not be required to file, cause to become effective or
maintain the effectiveness of any registration statement that contemplates a
distribution of securities on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
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(e) Use its reasonable best efforts to list the securities covered
by such registration statement on each national securities exchange or the
Nasdaq National Market.
(f) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(g) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(h) Use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
(i) Use its best efforts to have the Company become eligible to use
Form S-3.
2.7 Termination of Registration Rights .
(a) All registration rights granted under this Section 2 shall
terminate and be of no further force and effect seven (7) years after the date
of the Company's Initial Offering for all Investors (together with their
affiliates) holding at least one million five hundred thousand (1,500,000)
shares of Registrable Securities (subject to adjustment for stock splits,
reverse splits, stock dividends, recapitalizations and the like); and
(b) All registration rights granted to Investors holding less than
one million five hundred thousand (1,500,000) shares of Registrable Securities
shall terminate and be of no further force and effect four (4) years after the
date of this Company's Initial Offering.
(c) A Holder's registration rights shall expire if (i) the Company
has completed its Initial Offering and is subject to the provisions of the
Exchange Act, (ii) such Holder (together with its affiliates, partners and
former partners) holds less than one percent (1%) of the Company's outstanding
Common Stock (treating all shares of convertible Preferred Stock on an as
converted basis) and (iii) all Registrable Securities held by and issuable to
such Holder (and its affiliates, partners, former partners, members and former
members) may be sold under Rule 144 during any ninety (90) day period.
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2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, members, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written
10
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
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(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (a) is a
general partner, limited partner or retired partner of a Holder which is a
partnership, (b) is a Holder's family member or trust for the benefit of an
individual Holder, (c) acquires at least five percent (5%) of the outstanding
shares of Registrable Securities (as adjusted for stock splits and
combinations), or (d) is a majority-owned or majority-controlled subsidiary of
the ultimate parent of any Holder or such parent of any Holder; provided,
however, (i) the transferor shall, within ten (10) days after such transfer,
furnish to the Company written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights
are being assigned and (ii) such transferee shall agree to be subject to all
restrictions set forth in this Agreement.
2.11 Amendment of Registration Rights. Any provision of this Section
2 may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding, enter into
any agreement with any holder or
12
prospective holder of any securities of the Company that would grant such holder
registration rights pari passu or senior to those granted to the Holders
hereunder; provided, that, with respect to the Series B Preferred, the Company
shall not, without the prior written consent of the Holders of a majority of the
Series B Preferred then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company that would grant such holder
registration rights pari passu or senior to those granted to the Holders of the
Series B Preferred.
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information.
Each Holder hereby agrees that such Holder shall not sell, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following (in the discretion of the
representative of the underwriters) the effective date of a registration
statement of the Company for the Initial Offering or the date of the
underwriting agreement in connection with the Initial Offering, provided that
all executive officers and directors of the Company and current holders of at
least one percent (1%) of the Company's voting securities enter into similar
agreements.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.13 shall
not apply to a registration relating solely to employee benefit plans on Form S-
1 or Form S-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose stop-
transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.14 Rule 144 Reporting. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request: a written statement by the Company as to
its compliance with
13
the reporting requirements of said Rule 144 of the Securities Act, and of the
Exchange Act (at any time after it has become subject to such reporting
requirements); a copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder may reasonably request
in availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.
Section 3. COVENANTS OF THE COMPANY
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) So long as an Investor (with its affiliates) shall own not
less than one million five hundred thousand (1,500,000) shares of Registrable
Securities (as adjusted for stock splits, combinations, reclassifications,
reorganizations and the like) (a "Major Investor"), as soon as practicable after
the end of each fiscal year of the Company, and in any event within ninety (90)
days thereafter, the Company will furnish each Major Investor a balance sheet of
the Company, as at the end of such fiscal year, and a statement of income and a
statement of cash flows of the Company, for such year, all prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements shall be
accompanied by a report and opinion thereon by independent public accountants of
national standing selected by the Company's Board of Directors.
(c) So long as an Investor (with its affiliates) shall own not less
than one million five hundred thousand (1,500,000) shares of Registrable
Securities (as adjusted for stock splits, combinations, reclassifications,
reorganizations and the like), the Company will furnish each Major Investor, as
soon as practicable after the end of each quarterly accounting period in each
fiscal year of the Company, and in any event within thirty (30) days thereafter,
a balance sheet of the Company as of the end of each such quarterly period, and
a statement of income and a statement of cash flows of the Company for such
period and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles, with the exception that no notes need
be attached to such statements and year-end audit adjustments may not have been
made.
(d) So long as an Investor (with its affiliates) shall own not less
than one million five hundred thousand (1,500,000) shares of Registrable
Securities (as adjusted for stock splits, combinations, reclassifications,
reorganizations and the like), the Company will furnish each such Major Investor
(i) prior to the beginning of each fiscal year an annual budget and operating
plans for such fiscal year (and as soon as available, any subsequent revisions
thereto); and (ii) as soon as practicable after the end of each quarter, and in
any event within twenty (20) days thereafter, a balance sheet of the Company as
of the end of each such quarter, and a statement of income and a statement of
cash flows of the Company for such quarter and for the
14
current fiscal year to date, including a comparison to plan figures for such
period, prepared in accordance with generally accepted accounting principles
consistently applied, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
3.2 Inspection Rights. Each Major Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 3.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Reservation of Common Stock. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.4 Stock Vesting. Unless otherwise approved by the Board of Directors,
all stock options and other stock equivalents issued after the date of this
Agreement to employees, directors, consultants and other service providers shall
be subject to vesting as follows: (a) twenty-five percent (25%) of such stock
shall vest at the end of the first year following the earlier of the date of
issuance or such person's services commencement date with the company, and (b)
seventy-five percent (75%) of such stock shall vest over the remaining three (3)
years. With respect to any shares of stock purchased by any such person, the
Company's repurchase option shall provide that upon such person's termination of
employment or service with the Company, with or without cause, the Company or
its assignee (to the extent permissible under applicable securities laws and
other laws) shall have the option to purchase at cost any unvested shares of
stock held by such person.
3.5 Key Man Insurance. Subject to the approval of the Board of
Directors, the Company will use its best efforts to obtain and maintain in full
force and effect term life insurance in the amount of one million ($1,000,000)
dollars on the lives of each of ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ naming the Company
as beneficiary.
3.6 Proprietary Information and Inventions Agreement. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement.
3.7 Assignment of Right of First Refusal. In the event the Company
elects not to exercise any right of first refusal or right of first offer the
Company may have on a proposed transfer of any of the Company's outstanding
capital stock pursuant to the Company's charter documents, by contract or
otherwise, the Company shall, to the extent it may do so, assign such right of
first refusal or right of first offer to each Major Investor. In the event of
such assignment, each Major Investor shall have a right to purchase its pro rata
portion (as defined in Section 4.1) of the capital stock proposed to be
transferred. Notwithstanding anything herein to the contrary, the provisions of
this Section 3.7 shall not apply to the transfer of an aggregate of
15
ten thousand (10,000) shares of Common Stock to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇, as Trustees of the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Trust and the ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Torvald Trust.
3.8 Antidilution. At such time, from time to time, as the Company may
grant antidilutive protective provisions to subsequent investors in any series
of the Company's preferred stock, the Company shall grant comparable
antidilutive protective provisions to the Investors hereunder, provided that no
subsequent change in the protective provisions of the Investors shall reduce the
antidilutive protective provisions currently held by such Investors.
3.9 Indemnification. The Company will indemnify members of the Board of
Directors to the broadest extent permitted by applicable law and will indemnify
each Investor for any claims brought against the Investors by any third party
(including any other stockholder of the Company) as a result of this financing.
3.10 Termination of Covenants. All covenants of the Company contained
in Section 3 of this Agreement shall expire and terminate as to each Investor
three (3) years after the effective date of the registration statement
pertaining to the Initial Offering or upon (a) the sale, lease or other
disposition of all or substantially all of the assets of the Company or (b) an
acquisition of the Company by another corporation or entity by consolidation,
merger or other reorganization in which the holders of the Company's voting
stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the corporation or other entity surviving such transaction, provided
such Investor receives cash or a class of securities registered under the
Exchange Act in such transaction (a "Change in Control"). This Section 3.11
shall not apply to a merger effected exclusively for the purpose of changing the
domicile of the Company.
SECTION 4. RIGHTS OF FIRST REFUSAL
4.1 Subsequent Offerings. Each Major Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.6 hereof. Each Investor's pro rata share is equal to the
ratio of (a) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) which
such Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice ("Notice") of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the
16
same. Each Major Investor shall have fifteen (15) days from the giving of such
notice to agree to purchase its pro rata share of the Equity Securities for the
price and upon the terms and conditions specified in the notice by giving
written notice to the Company and stating therein the quantity of Equity
Securities to be purchased, provided that, such written notice shall not be
binding upon such Major Investor unless and until the Company obtains binding
commitments to purchase all of the securities described in such Notice.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Major Investor who would cause the Company to
be in violation of applicable federal securities laws by virtue of such offer or
sale.
4.3 Issuance of Equity Securities to Other Persons . If not all of the
Major Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Major Investors who do so
elect and shall offer such Major Investors the right to acquire such
unsubscribed shares. The Major Investors shall have ten (10) days after the
receipt of such notice to notify the Company of its election to purchase all or
a portion thereof of the unsubscribed shares. If the Major Investors fail to
exercise in full the rights of first refusal, the Company shall have ninety (90)
days thereafter to sell the Equity Securities in respect of which the Major
Investor's rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to the Major Investors pursuant to Section 4.2 hereof.
If the Company has not sold such Equity Securities within ninety (90) days of
the notice provided pursuant to Section 4.2, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Major Investors in the manner provided above.
4.4 Termination and Waiver of Rights of First Refusal . The rights of
first refusal established by this Section 4 shall not apply to, and shall
terminate upon the earlier of (i) the closing of the Company's Initial Offering
or (ii) a Change in Control, provided that each Major Investor receives cash or
a class of securities registered under the Exchange Act in such transaction. The
rights of first refusal established by this Section 4 may be amended, or any
provision waived with the written consent of Major Investors holding a majority
of the Registrable Securities held by all Major Investors, or as permitted by
Section 5.6.
4.5 Transfer of Rights of First Refusal. The rights of first refusal of
each Major Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.
4.6 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) up to seventeen million (17,000,000) shares of Common Stock
(and/or options, warrants or other Common Stock purchase rights issued pursuant
to such options, warrants or other rights) (as adjusted for stock splits,
reclassifications, reorganizations, and the like) issued or to be issued to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors, including the
representatives designated by the holders of the Shares;
17
(b) stock issued pursuant to any rights or agreements outstanding
as of the date of this Agreement, options and warrants outstanding as of the
date of this Agreement; provided that the rights of first refusal established by
this Section 4 applied with respect to the initial sale or grant by the Company
of such rights or agreements;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
approved by the Board of Directors including the representatives designated by
the holder of the Shares;
(d) nine hundred fifty thousand six hundred eight (950,608) shares
of Common Stock reserved for issuance in connection with the exercise of
warrants outstanding as of the date hereof;
(e) Equity Securities issued in connection with the services of
talent search placement firms retained to help the Company find key personnel if
such issuances are approved by the Board of Directors including the
representatives designated by the holders of the Shares;
(f) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(g) shares of Common Stock issued upon conversion of the Shares;
(h) any Equity Securities issued pursuant to any equipment leasing
or loan arrangement, or debt financing from a bank or similar financial or
lending institution approved by the Board of Directors including the
representatives designated by the holders of the Shares, provided that Equity
Securities issued pursuant to this paragraph 4.6(h) shall not exceed five
percent (5%) of the Company's outstanding stock at any given time;
(i) any Equity Securities that are issued by the Company pursuant
to a registration statement filed under the Securities Act; and
(j) shares of the Company's Common Stock or Preferred Stock issued
in connection with (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that the transaction in question, and the issuance of shares therein, has been
approved by the Company's Board of Directors, including the representatives
designated by the holders of the Shares.
SECTION 5. VOTING.
5.1 Voting for Certain Directors. Notwithstanding any other voting
arrangement to which an Investor is a party, each Investor who is not a party to
that certain Voting Agreement, dated as of September 3, 1999, by and among the
Company and certain Investors, agrees to vote, at each meeting or in each action
by written consent where Additional Directors (as such term is defined in the
Company's Restated Certificate of Incorporation) are to be elected, all Shares
registered in such Investor's name or beneficially owned by such Investor for up
to three Additional Directors that the Company's Board of Directors unanimously
nominates, and to fill any vacancy caused by the resignation, death or removal
of such Additional Directors with individuals that are unanimously nominated by
the Board of Directors.
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SECTION 6. MISCELLANEOUS
6.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
6.2 Survival. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
6.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, the Purchase Agreement and the other documents delivered pursuant
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
6.5 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
6.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the
holders of a majority of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least fifty percent (50%) of the
Registrable Securities.
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(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
6.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
6.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) business day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the party to be notified at the address as set forth on the signature pages
hereof or Exhibit A hereto or at such other address as such party may designate
by ten (10) days advance written notice to the other parties hereto.
6.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.10 Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.11 Additional Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Preferred
Stock pursuant to the Purchase Agreement, any purchaser of such shares of
Preferred Stock may become a party to this Agreement by executing and delivering
an additional counterpart signature page to this Agreement and shall be deemed
an "Investor" hereunder.
20
6.12 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
21
SIGNATURE PAGE FOR TURBOLINUX, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
In Witness Whereof, the parties hereto have executed this Second Amended
And Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
COMPANY:
TurboLinux, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Chief Financial Officer
22
In Witness Whereof, the parties hereto have executed this Second Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
August Capital II, L.P., for itself and as
nominee for August Capital Strategic
Partners II, L.P.
By: August Capital Management II, L.L.C.,
general partner of both partnerships
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Title: Member
--------------------------------
Intel Corporation
By:___________________________________
Print Name:___________________________
Title:________________________________
23
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
Asia Pacific Growth Fund III L.P.
----------------------------------------
NAME OF ENTITY
By: /s/ Ta-▇▇▇ ▇▇▇
-------------------------------------
Name: Ta-▇▇▇ ▇▇▇
-----------------------------------
Title: Chairman
----------------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
24
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTORS(S):
BT INVESTMENT PARTNERS, INC.
------------------------------
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
Title: Director
------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
24
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
Dell Ventures L.P.
-----------------------------------
NAME OF ENTITY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Title: Managing Director
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
24
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
FUJITSU LIMITED
------------------------------
NAME OF ENTITY
By: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------
Title: General Manager
------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SEDOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
24
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
ManTech International II Venture Capital
Corporation
----------------------------------------
NAME OF ENTITY
By: /s/ ▇▇▇▇▇-▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇-▇▇▇ ▇▇▇▇▇
-----------------------------------
Title: President
----------------------------------
Suite 2301, 32P,
International Trade Building
▇▇. ▇▇▇, ▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇,
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ROC
SIGNATURE PAGE FOR TURBOLINUX, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
24
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
H&Q/GAI INCUBATION FUND, L.P.
GENERAL PARTNER
GLOBAL ALLIANCE INC.
------------------------------
NAME OF ENTITY
By: /s/ MASAHARU SHINYA
---------------------------
Name: Masaharu Shinya
-------------------------
Title: Chairman & CEO
------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
24
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
INTERNATIONAL BUSINESS MACHINES
CORPORATION
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Title: Vice President, Corporate
Development and Real Estate
---------------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
24
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
Mobile Internet I Limited Liability Fund
-------------------------------------------------------------
NAME OF ENTITY
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------------
Title: President & CEO of Mobile Internet Capital, Inc.
(General Partner of Mobile Internet I Limited Liability Fund)
-------------------------------------------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
24
IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth iyn the first
paragraph hereof.
INVESTOR(S):
SGI, Inc.
---------------------------------------
NAME OF ENTITY
By: /s/ (not legible)
---------------------------------------
Name: Jan (not legible)
---------------------------------
Title: V.P. (not legible)
SIGNATURE PAGE FOR TURBOLINUX, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
24
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B PREFERRED
STOCK PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
INVESTOR(S):
AUGUST CAPIRAL II. L.P. for itself and
as nominee for August Capital Strategic
Partners II. L.P.
By: August Capital Management II. L.L.C.
general partner of both partnerships
By:
-------------------------------------
Print Name:
-----------------------------
Title: Member
----------------------------------
INTEL CORPORATION
By: /S/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Print Name: ▇▇▇▇ ▇▇▇▇▇
-----------------------------
Title: Assistant Treasurer
----------------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
21
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
Hitachi, Ltd.
------------------------------------
Name of Entity
By: /s/ Minoru (not legible)
--------------------------------
Print Name: Minoru (not legible)
Title: Executive General Manager
Software Development Division
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
INTEC, Inc.
------------------------------------
Name of Entity
By: /s/ Koju Takizawa
--------------------------------
Print Name: Koju Takizawa
Title: Director
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
ITOCHU Corporation
----------------------------------------
Name of Entity
By: /s/ (not legible) KOBAYASHI
------------------------------------
Print Name: (not legible) Kobayashi,
Chief Operating Officer
Title: Information Technology &
Telecommunication Division
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
ITOCHU International Inc.
------------------------------------
Name of Entity
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Print Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President and
General Manager
-----------------------------
Aerospace & Electronic Division
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
ITOCHU Techno-Science Corporation
------------------------------------
Name of Entity
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Print Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
ITX CORPORATION
------------------------------------
Name of Entity
By: /s/ HISAAKI IN
--------------------------------
Print Name: Hisaaki In
Title: Executive Director
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
Nichimen Electronic Components Corp.
------------------------------------
Name of Entity
By: /s/ Shinichi Komeda
--------------------------------
Print Name: Shinichi Komeda
Title: President & C.E.O.
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
OBIC BUSINESS CONSULTANTS CO., LTD
------------------------------------
Name of Entity
By: /s/ Tomohisa Takahashi
--------------------------------
Print Name: TOMOHISA TAKAHASHI
Title: Senior Manager
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
SOFTBANK E-COMMERCE CORP.
------------------------------------
Name of Entity
By: /s/ Katsura Sato
--------------------------------
Print Name: Katsura Sato
Title: Senior Vice President &
Chief Financial Officer
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this SERIES B
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
INVESTOR(S):
TOYO INFORMATION SYSTEMS CO., LTD.
------------------------------------
Name of Entity
By: /s/ Ryosuke Ariga
--------------------------------
Name: Ryosuke Ariga
Title: Senior Managing Director
-----------------------------
SIGNATURE PAGE FOR TURBOLINUX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
