EXHIBIT 4.1
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (this "Agreement") is
made and entered into as of __________ __, 2000, by and between xXxxxxxxxxx.xxx,
Inc., a Nevada corporation (the "Company") and the persons listed in Exhibit A
attached hereto (collectively the "Investors" and each individually an
"Investor").
R E C I T A L S:
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A. WHEREAS, certain of the Investors hold shares of the Company's Series B
Preferred Stock (the "Series B Shares") and warrants (the "Series B Warrants")
to purchase shares of Common Stock issued pursuant to certain Subscription
Agreements for Series B Shares (the "Series B Subscription Agreements") and
possess registration rights and other rights pursuant to an Investors' Rights
Agreement dated as of July 15, 1999 between the Company and such Investors (the
"1999 Agreement");
B. WHEREAS, the Investors who hold Series B Shares and/or Series B
Warrants desire to terminate the 1999 Agreement and to accept the rights created
pursuant hereto in lieu of the rights granted to them under the 1999 Agreement;
C. WHEREAS, certain of the Investors have agreed to purchase shares of the
Company's Series C Preferred Stock, $.001 par value per share (the "Series C
Shares"), pursuant to the terms of certain Subscription Agreements entered into
by and between the Company and such Investors (each, a "Series C Subscription
Agreement" and collectively, the "Series C Subscription Agreements");
D. WHEREAS, pursuant to the terms of the Series C Subscription Agreements,
the Company has agreed to issue to the Investors warrants (the "Warrants") to
purchase the number of shares of the Company's Common Stock, $.001 par value per
share ("Common Stock"), equal to ten percent (10%) of the aggregate number of
Shares purchased by such Investors ;
E. WHEREAS, pursuant to the terms of the Series C Subscription Agreements
and the 1999 Agreement, the Company has agreed to grant the Investors certain
rights relating to the shares of Common Stock issuable upon conversion of the
Series C Shares, the shares of Common Stock issuable in conversion of the Series
B Shares and the shares of Common Stock issuable on exercise of certain warrants
issues to the Investors; and
F. WHEREAS, the Company and the Investors wish to set forth the terms of
such rights in this Agreement as the sole agreement between the Company and the
Investors with respect thereto.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions
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As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Commission" shall mean the Securities and Exchange Commission or any
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other U.S. federal agency at the time administering the Securities Act.
1.2 "Common Stock" shall mean shares of the Company's Common Stock, $.001
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par value per share.
1.3 "Conversion Shares" shall mean the shares of Common Stock issued or
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issuable upon conversion of the Series B and Series C Shares.
1.4 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended.
1.5 "Holder or Holders" shall mean each of the Investors listed on Exhibit
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A attached hereto (and their transferees as permitted by Section 2.10) holding
Registrable Securities.
1.6 "Initiating Holders" shall mean Holders who in the aggregate hold
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greater than fifty percent (50%) of the Registrable Securities.
1.7 "Minimum Registration" shall mean a registration having an aggregate
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offering price (prior to underwriters' discounts and expenses) of not less than
$5,000,000.
1.8 "Other Holders" shall mean holders of Company securities, other than
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the Holders, proposing to distribute their securities pursuant to a registration
under Section 2 of this Agreement.
1.9 "Registrable Securities" shall mean (i) the Conversion Shares, (ii)
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the Warrant Shares, and (iii) any Common Stock 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, the Conversion Chares and the Warrant Shares, excluding in all
cases, however, any Registrable Securities that have been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction or which have been sold in a private transaction in which the
transferor's rights under this Agreement are not assigned.
1.10 The terms "register," "registered" and "registration" refer to a
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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.
1.11 "Registration Expenses" shall mean all expenses, except as otherwise
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stated below, incurred by the Company in complying with Sections 2.1, 2.2 and
2.3 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, accounting fees, blue sky fees 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 and excluding the fees and expenses of any counsel for any
Holder.).
1.12 "Securities" shall mean Common Stock, Series B Shares or the Series C
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Shares.
1.13 "Securities Act" shall mean the Securities Act of 1933, as amended,
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or any similar United States federal statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
1.14 "Selling Expenses" shall mean all underwriting discounts, selling
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commissions and stock transfer taxes applicable to the Registrable Securities
registered by the Holders.
1.15 "Series B Shares" shall mean the Company's Series B Preferred Stock,
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$.001 par value per share.
1.16 "Series B Warrants" shall mean the Warrants issues in respect of the
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offering of the Series B Shares.
1.17 "Series C Shares" shall mean the Company's Series C Preferred Stock,
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$.001 par value per share.
1.18 "Series C Warrants" shall mean the Warrants issues in respect of the
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offering of the Series C Shares.
1.19 "Shares" shall mean the Series B Shares and the Series C Shares.
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1.20 "Subscription Agreements" shall mean the Series B Subscription
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Agreements and the Series C Subscription Agreements entered into between the
Company and the Investors in connection with the purchase of the Shares.
1.21 "Warrants" shall mean the warrants to purchase shares of Common Stock
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issued to the Investors pursuant to the terms of the Subscription Agreements.
1.22 "Warrant Shares" shall mean the shares of Common Stock issued or
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issuable upon exercise of the Warrants.
2. Registration Rights.
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2.1 Automatic Registration.
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(a) Filing Registration Statement. As soon as practicable following
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the final closing of the offering of any series of Shares, the Company
shall prepare and file with the Commission a registration statement
registering for resale to the public the Registrable Securities.
Notwithstanding the foregoing, in the event the Company fails to file such
registration statement with respect to any registrable Securities relating
to the Series C Shares and the offering of such Series C Shares on or
before December 31, 2000, the Company shall issue to each holder of
Registrable Securities with respect to any registrable Securities relating
to the Series C Shares and the offering of such Series C Shares, without
additional consideration, additional Series C Shares and Series C Warrants
equal to 5% of the Shares and Warrants held by such holder.
(b) Best Efforts. The Company agrees to use its best efforts to
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effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution the Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities.
2.2 Company Registration.
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(a) Notice of Registration. If at any time or from time to time the
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Company shall determine to register any of its securities for its own
account other than (i) a registration relating solely to employee benefit
plans or (ii) a registration relating solely to a Commission Rule 145
transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests made within twenty (20) days after receipt of such written notice from
the Company by any Holder.
Notwithstanding the foregoing, the Company shall be obligated to effect in the
aggregate only three (3) such registrations pursuant to this Section 2.2 and no
more than only one (1) such registration in any twelve month period.
(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 2.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 2.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall, together with the
Company and the Other Holders, if any, 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 2.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
number of shares of Registrable Securities to be included in such registration
without requiring any limitation in the number of shares to be registered on
behalf of the Company. The Company shall so advise all Holders and Other Holders
and the number of shares that may be included in the registration and
underwriting by all Holders and Other Holders shall be allocated among them, as
nearly as practicable, first, to the Company, second, among the
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Holders of Registrable Securities in proportion to the respective amounts
of Registrable Securities held by such Holders at the time of filing of the
registration statement, and, third, among the Other Holders in proportion
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to the number of shares proposed to be included in such registration by such
Other Holders. To facilitate the allocation of shares in accordance with the
above provisions, the Company may round the number of shares allocated to any
Holder or Other Holder to the nearest one hundred (100) shares. If any Holder or
Other Holder disapproves of the terms of any such underwriting, such holder may
elect to withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
(c) Right to Terminate Registration. The Company shall have the
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right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include Registrable Securities in such registration.
2.3 Registration on Form S-3.
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(a) Request for Registration. If at any time after the expiration of
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one (1) year following the closing of the initial underwritten public offering
of the Company any Holder or Holders
request in writing that the Company file a registration statement on Form S-3
under the Securities Act (or any successor form to Form S-3) for a public
offering of shares of the Registrable Securities the reasonably anticipated
aggregate price to the public of which would exceed $1,000,000, and the Company
is a registrant entitled to use Form S-3, the Company shall use its best efforts
to cause such Registrable Securities to be registered for the offering on such
form and to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder or Holders may reasonably request. The substantive
provisions of Section 2.2(b) shall be applicable to each registration initiated
under this Section 2.3.
(b) Limitations. Notwithstanding the foregoing, the Company shall
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not be obligated to take any action pursuant to this Section 2.3: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act; (ii)
during the period starting with the date sixty (60) days prior to the Company's
estimated date of filing of, and ending on the date six (6) months immediately
following, the effective date of any registration statement pertaining to
securities of the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or (iii) if the Company shall
furnish to such Holder a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company or the Investors as a whole for
registration statements to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed ninety (90) days from the receipt of the
request to file such registration by such Holder, provided, however, that the
Company shall not utilize this right more than once in any twelve (12) month
period.
2.4 Expenses of Registration.
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(a) Registration Expenses. The Company shall bear all Registration
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Expenses incurred in connection with all registrations pursuant to Section 2.1
and Section 2.2. The Holders of the Registrable Securities shall bear all
Registration Expenses in connection with all registrations pursuant to Section
2.3.
(b) Selling Expenses. Unless otherwise stated in Section 2.4(a), all
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Selling Expenses and Registration Expenses relating to securities registered on
behalf of the Holders shall be borne by the Holders pro rata on the basis of the
number of shares so registered.
2.5 Registration Procedures. In the case of each registration effected by
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the Company pursuant to this Agreement, the Company will:
(a) keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof;
(b) as soon as practicable, prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective until the
earlier of (i) one hundred twenty (120) days or (ii) the distribution described
in the Registration Statement has been completed; provided, however, that (i)
such 120-day period shall be extended for a period of time equal to the period
the Holder refrains from selling any securities included in such registration at
the request of the managing underwriter; (ii) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and, provided further, that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement; and (iii)
in the case of an automatic registration under section 2.1, the Company shall
keep such registration statement effective until the earlier of all the
Registrable Securities have been sold thereunder or all Registrable Securities
thereunder are available for sale pursuant to Rule 144(k) or any successor rule;
(c) furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(d) prepare and file with the Commission 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;
(e) in the event of an underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 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 material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements made therein not misleading in the light of the circumstances then
existing; and
(g) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
2.6 Indemnification.
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(a) By Company. The Company will indemnify each Holder, each of its
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officers and directors and partners, 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
underwriter within the meaning of Section 15 of the Securities Act and each
Investor and its officers, directors and partners and each person controlling
such Investor within the meaning of Section 15 of the Securities Act, against
all
expenses, claims, losses, damages or liabilities, joint or several, (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act, the
Exchange Act or any state or federal securities law, or any rule or regulation
promulgated under such Acts or law applicable to the Company in connection with
any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, each Investor, each of its officers, directors
and partners and each person controlling such Investor, for any legal and any
other expenses reasonably incurred in connection with investigating, preparing
or defending any such claim, loss, damage, liability or action, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information regarding a Holder
furnished to the Company by an instrument duly executed by such Holder,
controlling person, underwriter or Investor and stated to be specifically for
use therein. If the Holders and Investors are represented by counsel other than
counsel for the Company, the Company will not be obligated under this Section
2.6(a) to reimburse legal fees and expenses of more than one separate counsel
for all Holders and Investors.
(b) By Holders. Each Holder will, if Registrable Securities held by
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such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, each of its 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 its 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) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
regarding a Holder furnished to the Company by an instrument duly executed by
such Holder and stated to be specifically for use therein. Notwithstanding the
foregoing, the liability of each Holder under this subsection (b) shall be
limited in an amount equal to the public offering price of the shares sold by
such Holder, unless such liability arises out of or is based on willful
misconduct by such Holder.
(c) Procedures. Each party entitled to indemnification under this
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Section 2.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. 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) Contribution. If the indemnification provided for in this
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Section 2.6 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense 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 statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined 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.
(e) Controlling Agreement. Notwithstanding the foregoing, to the
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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 of this Section 2.6, the
provisions in the underwriting agreement shall control.
2.7 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 them as the Company may request in writing
and only as shall be necessary to enable the Company to comply with the
provisions hereof in connection with any registration, qualification or
compliance referred to in this Agreement.
2.8 Rule 144 Reporting. With a view to making available the benefits of
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certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements);
(c) Furnish to any Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934 (at
any time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as such Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such Holder
to sell any such securities without registration.
2.9 Transfer of Registration Rights. The rights to cause the Company to
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register securities granted Holders under Sections 2.1, 2.2 and 2.3 may be
assigned in connection with any transfer or assignment by a Holder of
Registrable Securities provided that: (i) such transfer may otherwise be
effected in accordance with applicable securities laws, (ii) such transfer is
effected in compliance with the restrictions on transfer contained in this
Agreement and in any other agreement between the Company and the Holder, and
(iii) such assignee or transferee is a constituent partner of an Investor or
purchases (I) at least 10,000 shares of Registrable Securities or (II) all
shares of Registrable Securities held by an Investor if transferred to a single
entity. No transfer or assignment will divest a Holder or any subsequent owner
of such rights and powers unless all Registrable Securities are transferred or
assigned.
2.10 Termination. The rights granted pursuant to this Section 2 shall
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terminate as to any Holder at the later of (i) three (3) years after the
Company's initial public offering or (ii) after the effective date of the
Company's first registered public offering of its stock, at such time as such
Holder may sell under Rule 144, or a successor rule, in a three month period all
Registrable Securities then held by such Holder.
2.11 Lockup Agreement. Provided that each officer and director of the
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Company who owns stock or options to purchase stock of the Company also agrees
to such restrictions, each Holder agrees that, if, in connection with the
Company's initial public offering of the Company's securities, the Company or
the underwriters managing the offering so request, the Holder shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time not to exceed 180 days
from the effective date of such registration. This Section 2.11 shall be binding
on all transferees or assignees of Registrable Securities, whether or not such
persons are entitled to registration rights pursuant to Section 2.11.
2.12 Material Information. In the event the Company issues to any holder
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a notice under Section 2.5(f) hereof, each such holder agrees not to sell or
otherwise distribute any Registrable Securities covered by the prospectus in
question until such time as the Company shall have delivered a notice stating
that such prospectus no longer includes an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements made therein not misleading in the light of the
circumstances then existing or the Company delivers to such holder an amended
prospectus that does not include an untrue statement of material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements made therein not misleading in the light of the
circumstances then existing, provided, that such notice or amended prospectus
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shall be delivered within 15 days of the date the notice under Section 2.5(f) is
received.
3. Information Rights.
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3.1 Financial Information. The Company will provide each Investor the
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following reports:
(a) As soon as practicable after the end of each fiscal year, and in
any event within one hundred twenty (120) days thereafter, consolidated balance
sheets of the Company and its subsidiaries (if any) as of the end of such fiscal
year, and consolidated statements of income, stockholders' equity and cash flows
of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles, applied on a
consistent basis, and setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail and audited by
independent auditors of national standing selected by the Company.
(b) As soon as practicable after the end of each fiscal quarter, and
in any event within forty-five (45) days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as of the end of each such
period, consolidated statements of income, consolidated statements of changes in
financial condition, a consolidated statement of cash flow of the Company and
its subsidiaries and a statement of stockholders' equity for such period and for
the current fiscal year to date, and setting forth in each case in comparative
form the figures for corresponding periods in the previous fiscal year, and
setting forth in comparative form the budgeted figures, prepared in accordance
with generally accepted accounting principles (other than for accompanying
notes), applied on a consistent basis, subject to changes resulting from normal
year-end audit adjustments, all in reasonable detail and signed by the principal
financial or accounting officer of the Company.
(c) Such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated to provide information which it deems in good
faith to be confidential proprietary information of the Company.
3.2 Inspection Rights. The Company shall permit each Investor holding not
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less than 10,000 shares of Registrable Securities, at such Investor's expense,
to visit and inspect the Company's properties, to examine its books of account
and records and to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by such Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 4.2 to provide access to any information which it reasonably considers
to be a trade secret or similar confidential information.
3.3 Assignment of Rights. The rights granted pursuant to Section 4.1 and
--------------------
4.2 may be assigned or otherwise conveyed by an Investor to a constituent
partner of an Investor or to a transferee. Notwithstanding the foregoing, the
rights granted pursuant to Section 4.1 and 4.2 may not be assigned or otherwise
conveyed to a competitor of the Company, as reasonably determined by the Board
of Directors of the Company excluding any director with an interest in such
transferee. The transferor shall provide the Company with written notice of any
assignment or conveyance of the rights granted pursuant to Section 4.1 and 4.2.
3.4 Termination. The provisions of this Section 4 shall terminate upon
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the closing of a firmly underwritten public offering for any securities of the
Company.
4. Legends
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4.1 Legends. Each Investor understands that the share certificates
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evidencing any Registrable Securities shall be endorsed with the following
legends (in addition to any legends required under applicable state securities
laws):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."
(b) "THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER OR HIS PREDECESSOR IN INTEREST. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY."
5. Miscellaneous.
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5.1 Governing Law. This Agreement shall be governed in all respects by
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the laws of the State of California as applied to contracts made and to be fully
performed entirely within that state between residents of that state. All
disputes arising out of this Agreement shall be subject to the exclusive
jurisdiction and venue of the California state courts of Orange County,
California, (or, if there is exclusive federal jurisdiction, the United States
District Court for the Central District of California) and the parties consent
to the personal and exclusive jurisdiction and venue of these courts.
5.2 Entire Agreement; Amendment. This Agreement constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. This Agreement or any term hereof may be amended,
waived, discharged or terminated by a written instrument signed by the Company
and the Investors or transferees of such Investors holding more than fifty
percent (50%) of the Registrable Securities then outstanding.
5.3 Aggregation. For the purposes of determining the number of shares of
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Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that, all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single attorney-
in-fact for the purpose of exercising any rights, receiving notices or taking
any action under Sections 2, 3 and 4 of this Agreement.
5.4 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be deemed given if in writing and mailed by registered
or certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to an Investor, at such Investor's address as set
forth on the signature pages attached to this Agreement, or at such other
address as such Investor shall have furnished to the Company in writing, or (b)
if to any other holder of any Registrable Securities, at such
address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such Registrable Securities who has so furnished
an address to the Company, or (c) if to the Company, at the address of its
principal offices and addressed to the attention of the Corporate Secretary and
with a copy to Xxxxxx & Xxxxx LLP, 000 Xxxxxxx Xxxx, 00xx Xxxxx, Xxxxxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxx, Esq. or at such other address as
the Company shall have furnished to the Investors.
5.5 Severability. In the event that any provision of this Agreement
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becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
5.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the undersigned has executed this Investors' Rights
Agreement as of the date set forth above.
"COMPANY" XXXXXXXXXXX.XXX, INC.,
a Nevada corporation
----------------------------
Xxx Xxxxxxxx
President
***INVESTORS' RIGHTS AGREEMENT***
SIGNATURE OF INDIVIDUAL PURCHASERS:
_____________________ _________________________________
Signature Signature (if jointly held)
_____________________ _________________________________
Print Name Print Name
Executed at:
___________________________ Date: ______________________
City, State
SIGNATURE OF PURCHASERS WHO ARE CORPORATIONS, TRUSTS OR PARTNERSHIPS:
____________________________________________________________
Name of entity (please print or type)
____________________________________________________________
Signature(s) of authorized agent, trustee or general partner(s)
____________________________________________________________
Title of authorized agent, trustee or general partner
Executed at:_________________________ Date: __________________
City, State
***INVESTORS' RIGHTS AGREEMENT***
***INVESTORS' RIGHTS AGREEMENT***
