EXHIBIT 4.11
INVESTOR'S RIGHTS AGREEMENT
MARCH 14, 2000
TABLE OF CONTENTS
PAGE
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1. REGISTRATION RIGHTS..................................................1
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1.1 Definitions.................................................1
1.2 Demand Registration.........................................2
1.3 Company Registration........................................4
1.4 Form S-3 Registration.......................................5
1.5 Obligations of the Company..................................6
1.6 Information from Holder.....................................7
1.7 Expenses of Registration....................................8
1.8 Delay of Registration.......................................8
1.9 Indemnification.............................................8
1.10 Reports Under Securities Exchange Act of 1934..............10
1.11 Assignment of Registration Rights..........................11
1.12 Limitations on Subsequent Registration Rights..............11
1.13 "Market Stand-Off"Agreement................................12
1.14 Termination of Registration Rights.........................12
2. COVENANTS...........................................................12
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2.1 Delivery of Financial Statements...........................12
2.2 Inspection.................................................13
2.3 Termination of Information and Inspection Covenants........13
2.4 Right of First Offer.......................................14
2.5 Key-Man Insurance..........................................15
2.6 Certain Corporate Transactions.............................16
2.7 Insurance..................................................16
2.8 Tax Compliance.............................................16
2.9 HSR Filing.................................................16
2.10 Termination of Certain Covenants...........................17
2.11 Right to Participate in Initial Public Offering............17
2.12 Company Required Repurchase................................17
2.13 Board of Directors.........................................18
3. MISCELLANEOUS.......................................................19
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3.1 Successors and Assigns.....................................19
3.2 Governing Law..............................................19
3.3 Counterparts...............................................19
3.4 Titles and Subtitles.......................................19
3.5 Notices....................................................20
3.6 Expenses...................................................20
3.7 Entire Agreement Amendments and Waivers....................20
3.8 Severability...............................................20
3.9 Aggregation of Stock.......................................20
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INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT is made as of the 14th day of March 14,
2000 by and among ▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the "Company"),
and GE Capital Equity Investments, Inc., a Delaware corporation (the
"Investor").
RECITALS
WHEREAS, the Company and the Investor are party to that certain Series D
Preferred Stock and Warrant Purchase Agreement of even date herewith (the
"Series D Agreement"), which provides that as a condition to the closing of the
sale of the Series D Preferred Stock (the "Series D Preferred Stock") and
Warrants, this Agreement must be executed and delivered by such Investor and the
Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto further agree as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC that permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.11 hereof.
(d) The term "Initial Public Offering" means the Company's first firm
commitment underwritten public offering of its Common Stock under the Act.
(e) The term "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(f) The term "Person" shall mean an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated organization, a limited
liability company, and any other entity or organization, governmental or
otherwise.
(g) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(h) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series D Preferred Stock, (ii) the
Common Stock issuable upon exercise of the Warrants and (iii) any Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of, the
shares referenced in clauses (i) and (ii) above, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his rights under this Section 1 are not assigned.
(i) The term "Qualified IPO" means the Company's closing of a sale of
its Common Stock in a firm commitment underwritten public offering pursuant to a
registration statement on Form S-1 or Form SB-2 (or any successor form) under
the Securities Act of 1933, as amended, the public offering price of which was
not less than $5.38 per share (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other recapitalizations) and
$35,000,000 in the aggregate, or any other public offering in which all
outstanding shares of the Company's Preferred Stock convert into shares of the
Company's Common Stock.
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(j) The number of shares of "Registrable Securities" outstanding shall
be determined by the number of shares of Common Stock outstanding that are, and
the number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities that are, Registrable Securities.
(k) The term "SEC" shall mean the Securities and Exchange Commission.
(l) The term "Warrants" shall mean the warrants to purchase Common
Stock issued to the Investor pursuant to the Series D Agreement.
1.2 DEMAND REGISTRATION.
(a) If the Company shall receive at any time upon the earlier of (i)
six (6) months after the effective date of the first registration statement for
an Initial Public Offering, or (ii) two (2) years after the date hereof, a
written request from the Investor, or its Permitted Transferees, that the
Company file a registration statement under the Securities Act covering the
registration of at least that number of Registrable Securities anticipated to
yield gross proceeds of $10,000,000 in the case of an IPO and $3,000,000
otherwise, then the Company shall use its best efforts to file, as soon as
practicable and in any event within sixty (60) days of the receipt of such
request, a registration statement with the SEC under the Act covering all
Registrable Securities which the Investor or its Permitted Transferees requested
to be registered, subject to the limitations of Section 1.2(b), and thereafter
to use its best efforts to cause the registration statement to be declared
effective as soon as practicable.
(b) If the Holders initiating the registration request hereunder (the
"Initiating Holders") intend to distribute the Registrable Securities by means
of an underwriting, they shall so advise the Company as a part of their request
made pursuant to Section 1.2(a). The managing underwriter will be selected by
the Company and shall be reasonably acceptable to a majority in interest of the
Initiating Holders. In such event, the right of the Investor to include its
Registrable Securities in such registration shall be conditioned upon such
Investor's participation in such underwriting and the inclusion of such
Investor's Registrable Securities in the underwriting to the extent provided
herein. The Investor proposing to distribute its securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting. Notwithstanding
any other provision of this Section 1.2, if the underwriter advises the
Initiating Holders that marketing factors require a limitation of the number of
shares to be underwritten, then the number of shares of Registrable Securities
that may be included in the underwriting shall be reduced to a number deemed
satisfactory by such managing underwriter, provided that the shares to be
excluded shall be determined in the following sequence: (i) first, securities
held by any other Persons (other than the Investor) having a contractual,
incidental "piggy back" right to include such securities in the registration
statement, (ii) second, shares sought to be registered by the Company, (iii)
third, Registrable Securities of Holders other than the Investor, and (iv)
fourth, Registrable Securities held by the Investor, it being understood that no
shares shall be registered for the account of the Company or any stockholder
other than the Investor unless all Registrable Securities for which Investor
have requested registration have been registered. Any reduction of the number of
Registrable Securities pursuant to clauses (ii), (iii) or (iv) shall be
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made on a PRO RATA basis (based upon the aggregate number of shares of Common
Stock or Registrable Securities held by the holders).
(c) Notwithstanding the foregoing, if the Company shall furnish to the
Initiating Holders a certificate signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of the
Company it would be materially detrimental to the Company and its stockholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer taking action with respect to such filing for a period of not
more than one hundred and twenty (120) days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve (12) month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations pursuant to
this Section 1.2 and such registration has been declared or ordered effective;
(ii) During the period starting with the date thirty (30) days prior
to the Company's good faith estimate of the date of filing of, and ending on a
date ninety (90) days after the effective date of, a registration subject to
Section 1.3 hereof; provided that the Company is actively employing in good
faith its best efforts to cause such registration statement to become effective;
or
(iii) 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 1.4 below.
1.3 COMPANY REGISTRATION.
(a) If (but without any obligation to do so) the Company, subsequent
to the earlier of (i) six (6) months after the effective date of the first
registration for an Initial Public Offering or (ii) two (2) years from the date
hereof, proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities (other than a registration relating solely to the sale of securities
to participants in a Company stock plan, a registration relating to a corporate
reorganization or other transaction under Rule 145 of the Act, a registration on
any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities, or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities that are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the
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provisions of Section 1.3(c), use all reasonable efforts to cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 1.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The expenses of such
withdrawn registration shall be borne by the Company in accordance with Section
1.7 hereof.
(c) UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under this Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters) and enter into an
underwriting agreement in customary form with an underwriter or underwriters
selected by the Company, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
that the underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned PRO RATA
among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders).
For purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder that is a Holder of Registrable Securities and that is a
partnership or corporation, the partners, retired partners and stockholders and
affiliates of such 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 persons shall be deemed to be a single "selling Holder," and any PRO
RATA reduction with respect to such "selling Holder" shall be based upon the
aggregate amount of Registrable Securities owned by all such related entities
and individuals.
1.4 FORM S-3 REGISTRATION. In case the Company shall receive from a
Holder a written request or requests that the Company effect a registration on
Form S-3 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
shall:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) use all reasonable efforts to effect, as soon as practicable, 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 Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
other 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,
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however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.4:
(i) if Form S-3 is not available for such offering by the Holders;
(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 (net of any underwriters' discounts or commissions) of less than
$3,000,000;
(iii) if the Company shall furnish to the Holders a certificate signed
by the Chief Executive Officer 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 one hundred twenty (120) days after receipt of the request of the Holder or
Holders under this Section 1.4; provided, however, that the Company shall not
utilize this right more than once in any twelve (12)-month period;
(iv) 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.
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(c) Subject to the foregoing, the Company shall file a 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. Notwithstanding anything to the contrary set forth above, the
Company shall not be obligated to file more than two (2) registration statements
under this Section 1.4 in any calendar year.
1.5 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1 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 a period of up to one hundred twenty
(120) days or, if earlier, until the distribution contemplated in the
Registration Statement has been completed;
(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
Act with respect to the disposition of all securities covered by such
registration statement;
(c) furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;
(d) use all reasonable 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;
(e) 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 of such offering;
(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 Act or 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;
(g) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and
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(h) 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.
1.6 INFORMATION FROM HOLDER. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
1.7 EXPENSES OF REGISTRATION. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Sections 1.2, 1.3 and 1.4, including (without
limitation) all registration, filing and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company. Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.4 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses PRO
RATA based upon the number of Registrable Securities that were to be requested
in the withdrawn registration), provided, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request and have withdrawn the request with reasonable
promptness following disclosure by the Company of such material adverse change,
then the Holders shall not be required to pay any of such expenses and shall
retain their rights pursuant to Section 1.4.
1.8 DELAY OF REGISTRATION. 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 1.
1.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners or officers, directors and stockholders
of each Holder, legal counsel and accountants for each Holder, any underwriter
(as defined in the Act) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the Act or the 1934 Act,
against any losses, claims, damages or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or any state securities
laws, 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"): (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
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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 Act, the 1934 Act, any state securities laws or any rule
or regulation promulgated under the Act, the 1934 Act or any state securities
laws; and the Company will reimburse each such Holder, underwriter or
controlling person for any legal or other expenses reasonably incurred by them,
as incurred, in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection 1.9(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 that occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person;
provided further, however, that the foregoing indemnity agreement with respect
to any preliminary prospectus shall not inure to the benefit of any Holder or
underwriter, or any person controlling such Holder or underwriter, from whom the
person asserting any such losses, claims, damages or liabilities purchased
shares in the offering, if a copy of the prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Holder or underwriter to
such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the shares to such person, and if the
prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, legal counsel and accountants for the
Company, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or any state securities laws, 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 expressly for use in connection with such
registration; and each such Holder will reimburse any person intended to be
indemnified pursuant to this subsection 1.9(b), for any legal or other expenses
reasonably incurred by such person, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
1.9(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 that
in no event shall any indemnity under this subsection 1.9(b) or contribution by
a Holder under subsection 1.9(d) exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.9 of notice of the commencement of any action (including any governmental
action),
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such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.9, 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 (together with all other indemnified parties
that may be represented without conflict by one counsel) shall have the right to
retain one separate 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 prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.9, to the extent it has been so prejudiced, 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 1.9.
(d) If the indemnification provided for in this Section 1.9 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 herein,
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;
provided that such contribution shall not exceed the net proceeds from the
offering received by such Holder. 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) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section 1.9
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.10 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to:
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(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the Initial Public Offering;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such form.
1.11 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities (a "Permitted Transferee") that (i) is a subsidiary,
affiliate or parent of a Holder or (ii) after such assignment or transfer, holds
at least 300,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided: (a) the Company is, within a reasonable time after
such transfer, furnished with 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; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.13 below;
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.
1.12 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and 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, enter into any
agreement with any holder or prospective holder of any securities of the Company
that would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 1.3 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not reduce the amount of the Registrable Securities of the
Holders that are included or (b) to demand registration of their securities.
1.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that it
will not, without the prior written consent of the managing underwriter, during
the period commencing on the date of the final prospectus relating to the
Company's Initial Public Offering and ending on the date specified by the
Company and the managing underwriter (such period not to exceed one hundred
eighty (180) days) (i) lend, offer, pledge, sell, contract to sell, sell any
11
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (whether such shares or any
such securities are then owned by the Holder or are thereafter acquired), or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing provisions of this Section 1.13 shall apply only to the
Company's Initial Public Offering of equity securities, shall not apply to the
sale of any shares to an underwriter pursuant to an underwriting agreement, and
shall only be applicable to the Holders if all officers and directors and
greater than two percent (2%) stockholders of the Company enter into similar
agreements. Notwithstanding the foregoing, the Holder may make a transfer to an
affiliate, provided that such transferee shall agree in writing to be bound by
the restrictions set forth herein. The underwriters in connection with the
Company's Initial Public Offering are intended third party beneficiaries of this
Section 1.13 and shall have the right, power and authority to enforce the
provisions hereof as though they were a party hereto. The agreement contained in
this Section 1.13 shall be subject to other customary terms to be agreed upon by
the Holder and the managing underwriter.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
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1.14 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be entitled
to exercise any right provided for in this Section 1 at such time at which all
Registrable Securities held by such Holder (and any affiliate of the Holder with
whom such Holder must aggregate its sales under Rule 144) can be sold in any
three (3)-month period without registration in compliance with Rule 144 of the
Act.
2. COVENANTS.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to the
Investor:
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and audited
and certified by independent public accountants of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five (45)
days after the end of each of the first three (3) quarters of each fiscal year
of the Company, an unaudited income statement, statement of cash flows for such
fiscal quarter and an unaudited balance sheet as of the end of such fiscal
quarter.
(c) within thirty (30) days of the end of each month, an unaudited
income statement and statement of cash flows and balance sheet for and as of the
end of such month, in reasonable detail;
(d) as soon as practicable, but in any event at least thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including balance sheets, income
statements and statements of cash flows for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in subsections
(b) and (c) of this Section 2.1, an instrument executed by the Chief Financial
Officer or President of the Company certifying that such financials were
prepared in accordance with GAAP consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by GAAP)
and fairly present the financial condition of the Company and its results of
operation for the period specified, subject to year-end audit adjustment; and
(f) 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 reasonably request, provided,
however, that the Company shall not be obligated under this subsection (f) or
any other subsection of Section 2.1 to provide information that it deems in good
faith to be a trade secret or similar confidential information.
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2.2 INSPECTION. The Company shall permit the Investor, 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 and upon reasonable
notice, as may be requested by the Investor, provided, however, that the Company
shall not be obligated pursuant to this Section 2.2 to provide access to any
information that it reasonably considers to be a trade secret or similar
confidential information.
2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS. The covenants
set forth in Sections 2.1 and 2.2 shall terminate and shall be of no further
force or effect when the sale of securities pursuant to a registration statement
filed by the Company under the Act when (i) the Initial Public Offering is
consummated or (ii) the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 2.4, the Company hereby grants to the Investor a right
of first offer with respect to future sales by the Company of its Shares (as
hereinafter defined). Each time the Company proposes to offer any shares of, or
securities convertible into or exchangeable or exercisable for any shares of,
any class of its capital stock ("Shares"), the Company shall first make an
offering of such Shares to the Investor in accordance with the following
provisions:
(a) The Company shall deliver a notice in accordance with Section 3.6
("Notice") to the Investor stating (i) its BONA FIDE intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the price and
terms upon which it proposes to offer such Shares.
(b) By written notification received by the Company, within twenty
(20) calendar days after receipt of the Notice, the Investor may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to
that portion of such Shares that equals the proportion that the number of shares
of Common Stock issued and held, or issuable upon conversion of the Series D
Preferred Stock and upon exercise of the then-exercisable Warrants, then held by
such Investor, bears to the total number of shares of Common Stock of the
Company then outstanding (assuming full conversion and exercise of all
convertible and exercisable securities).
(c) If all Shares that the Investor is entitled to obtain pursuant to
subsection 2.4(b) are not elected to be obtained as provided in subsection
2.4(b) hereof, the Company may, during the ninety (90) day period following the
expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within ninety (90) days of the execution thereof, the right provided hereunder
shall be deemed to be revived and such Shares shall not be offered unless first
reoffered to the Investor in accordance herewith.
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(d) The right of first offer in this Section 2.4 shall not be
applicable to (i) the issuance or sale of shares of Common Stock (or options
therefor) to employees, officers, directors and consultants for the primary
purpose of soliciting or retaining their services; (ii) the issuance of
securities pursuant to an Initial Public Offering, (iii) the issuance of
securities pursuant to the conversion or exercise of convertible or exercisable
securities, (iv) the issuance of securities in connection with a BONA FIDE
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise or (v) the issuance of
stock, warrants or other securities or rights to persons or entities with which
the Company has business relationships provided such issuances are for other
than primarily equity financing purposes.
If the issuance referred to in the foregoing clause (iv) or (v) is to
an affiliate of the Company, then the issuance shall be subject to the right of
first offer in this Section 2.4 unless the issuance is approved by a majority of
the Board of Directors excluding, for such determination, any director that is
an affiliate of the person or entity to receive the issuance. An "affiliate" of,
or a person "affiliated" with, a specified person shall mean a person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
15
2.5 KEY-MAN INSURANCE. The Company shall maintain in full force and
effect term life insurance in the amount of not less than $1,000,000 on the life
of ▇▇▇▇ ▇▇▇▇▇▇, with proceeds payable to the Company, and shall, by no later
than the earlier of the consummation of a Qualified IPO or June 1, 2000, obtain
and maintain in full force and effect term life insurance in the amount of not
less than $1,000,000 on the life of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, with proceeds payable to the
Company.
2.6 CERTAIN CORPORATE TRANSACTIONS. The Company shall not without
first obtaining the approval of the holders of at least a majority of the then
outstanding shares of Series D Preferred Stock: (i) sell, convey, or otherwise
dispose of all or substantially all of its property or business to an affiliate
of the Company, (ii) merge into or consolidate with any other corporation or
other entity that is an affiliate of the Company, (iii) effect any transaction
or series of related transactions with an affiliate of the Company after which
such affiliate owns more than fifty percent (50%) of the voting power of the
Company, (iv) make any acquisition or investment outside the ordinary course of
its business in excess of $5,000,000 or, (v) sell, convey or otherwise dispose
of any assets outside the ordinary course of its business in excess of
$5,000,000. An "affiliate" of, or a person "affiliated" with, a specified person
shall mean a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person specified.
2.7 INSURANCE. The Company shall and shall cause each subsidiary of
the Company to maintain insurance covering, without limitation, fire, theft,
burglary, public liability, property damage, product liability, workers'
compensation, directors' and officers' insurance and insurance on all property
and assets material to the operation of the business, all in amounts customary
for the industry. The Company shall, and shall cause each of its subsidiaries
to, pay all insurance premiums payable by them.
2.8 TAX COMPLIANCE. The Company shall pay all transfer, excise or
similar taxes (not including income or franchise taxes) in connection with the
issuance, sale, delivery or transfer by the Company to the Investor of the
Series D Preferred Stock and the Common Stock issuable upon conversion thereof,
and shall indemnify and save the Investor harmless without limitation as to time
against any and all liabilities with respect to such taxes. The Company shall
not be responsible for any taxes in connection with the transfer of the Series D
Preferred Stock or such Common Stock by the holder thereof. The obligations of
the Company under this Section 2.8 shall survive the conversion or redemption of
the Series D Preferred Stock and the termination of this Agreement.
2.9 HSR FILING. Each of the Investor and the Company shall use all
reasonable efforts to file the notifications and all other information required
to be filed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and any rules and regulations promulgated thereunder, with respect to
the transactions contemplated thereby.
2.10 TERMINATION OF CERTAIN COVENANTS. The covenants set forth in
Sections 2.4, 2.5 and 2.6 shall terminate and be of no further force or effect
upon the consummation of a Qualified IPO.
16
2.11 RIGHT TO PARTICIPATE IN INITIAL PUBLIC OFFERING. The Company
hereby agrees that in connection with the Company's Initial Public Offering, it
shall require the managing underwriter or underwriters of such Initial Public
Offering to offer to the Investor the right to purchase shares of the Company's
Common Stock in an amount equal to the greater of (i) 300,000 shares or (ii) 3%
of the aggregate amount of Common Stock sold by the Company in the Initial
Public Offering, on the same terms and at the same price as the Common Stock is
offered to the public in the Initial Public Offering. All actions taken pursuant
to this Section 2.8 shall be made in accordance with all federal and state
securities laws, including Rule 134 under the Act or any successor provisions.
In the event that, for any reason, the Investor is not offered the right to
participate in the Company's Initial Public Offering, the Company shall offer to
the Investor, pursuant to a sale exempt from the registration requirements of
the Act, the right to purchase an equivalent amount of Common Stock at a price
per share equal to the price at which the Common Stock is offered to the public,
less the underwriter's discount. Such shares shall be deemed Registrable
Securities hereunder.
2.12 COMPANY REQUIRED REPURCHASE. The Company shall be required to
repurchase the Series D Preferred Stock, or the Common Stock issued upon
conversion thereof, at a price per share equal to 125% of the purchase price per
share paid for each such share by the Investor pursuant to the Series D
Agreement (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), as follows:
(a) in the event that prior to the first anniversary of the Launch
Date Aggregate Revenues are less than $599,999, the Company shall be required to
repurchase 1,859,275 shares; and
(b) in the event that prior to the first anniversary of the Launch
Date Aggregate Revenues are greater than $599,999, but less than $4,200,000, the
Company shall be required to repurchase such shares as set forth below:
Y = (1 - (AR - 600,000)) x 1,394,456
------------
3,600,000
Y = Number of shares to be repurchased
AR = Aggregate Revenues
For purposes of this Section 2.12, "Aggregate Revenues" shall mean the
aggregate of the following (capitalized terms shall have the meanings ascribed
to them in the Strategic Alliance Agreement between the Company and General
Electric Capital Corporation of even date herewith): (i) Revenues collected by
Company during the specified period; (ii) Listing Fees collected during the
specified period by Company from Qualifying Registrants, except for such Listing
Fees with respect to machine tools and electrical equipment posted on the
TradeOut Site or a Promotional Site; and (iii) commissions collected during the
specified period by Company in respect of (a) any Asset bought by a Qualifying
Registrant using either the TradeOut Site or a Promotional Site, except with
respect to machine tools or electrical equipment purchased from a seller other
than GEC, a GEC Affiliate, or another Qualifying Customer, and (b) any Asset,
except for machine tools and electrical equipment, that a Qualified Registrant
has
17
posted on the TradeOut Site or a Promotional Site and sold using either the
TradeOut Site, a Promotional Site or a TradeOut-authorized liquidation service;
provided, however, that categories (ii) and (iii) shall not include any Listing
Fees or commissions from Qualifying Registrants who prior to the first
anniversary of the Launch Date are designated Qualifying Customers by GEC.
18
(c) The Company shall deliver a notice to the Investor within 60
days of the first anniversary of the Launch Date stating the number of shares to
be repurchased and the manner of calculation thereof. The purchase of such
shares shall be completed within 30 days of the delivery of such notice.
(d) For purposes hereof, "Launch Date" and "Revenues" shall have
the meaning ascribed to such terms in the Strategic Alliance Agreement (as
defined in the Series D Agreement).
(e) The Investor shall not sell, assign, transfer, pledge,
hypothecate, mortgage, encumber or dispose of all or any of the Series D
Preferred Stock without the Company's prior written consent until the
termination of the period set forth in Section 2.9(c) above, unless any such
transferee shall agree in writing with the Company, as a condition precedent to
such transfer, to be bound by Section 2.9 of this Agreement to the same extent
as such transferee were the Investor.
2.13 BOARD OF DIRECTORS.
(a) The Board of Directors of the Company shall consist of up to
nine (9) members. Subject to applicable laws, rules and regulations, upon
termination or expiration of all waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976 applicable to the transactions contemplated
by the Series D Agreement, so long as the Investor owns at least fifty percent
(50%) of the Series D Preferred Stock issued to it pursuant to the Series D
Agreement (or common stock issued on conversion thereof), the Investor shall be
entitled to designate one director, whom shall be reasonably acceptable to the
Company and who initially shall be ▇▇▇▇▇ ▇▇▇▇▇▇. The Company shall reimburse
each director designated by the holders of the Series D Preferred Stock (or
common stock issued on conversion thereof) for any reasonable expenses incurred
in connection with meetings of the Board of Directors and committees thereof.
(b) Subject to applicable laws, rules and regulations, so long as
the Investor owns at least fifty percent (50%) of the Series D Preferred Stock
issued to it pursuant to the Series D Agreement (or common stock issued on
conversion thereof), the Investor shall be entitled to designate one individual,
whom shall be acceptable to the Company, to attend the Company's meetings of the
Board of Directors, PROVIDED that such designee shall enter into a
confidentiality agreement, in form and substance reasonably acceptable to the
Company, as a condition precedent to such attendance.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities); PROVIDED, HOWEVER, that,
except as otherwise set forth in Section 1.11 above, and except for a transfer
by the Investor to a transferee holding at least fifteen percent (15%) of the
Series D Preferred Stock (or common stock upon conversion thereof), the rights
and obligations of the Investor hereunder may not be assigned without the prior
written consent of
19
the Company, which consent shall not be unreasonably withheld. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York. Each party
hereby irrevocably submits to the jurisdiction of the courts of the State of New
York and the Federal courts of the United States of America located in the
State, City and County of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and hereby waives any objection based on improper venue or
FORUM NON CONVENIENS to the conduct of proceedings in any such court. Each party
hereby waives trial by jury in any judicial proceeding arising out of, related
to or brought in connection with this Agreement and the documents referred to in
this Agreement.
3.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted by this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission, nationally recognized overnight
courier service, or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
3.6 EXPENSES. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
3.7 ENTIRE AGREEMENT AMENDMENTS AND WAIVERS. This Agreement (including
the Exhibits hereto, if any) constitutes the full and entire understanding and
agreement among the parties with regard to the subjects hereof and thereof. Any
term of this Agreement may be amended and the observance of any term of this
Agreement 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 at least a majority of the Registrable Securities. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Securities each future holder of all such
Registrable Securities, and the Company.
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3.8 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 AGGREGATION OF STOCK. All shares of Registrable Securities held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
COMPANY:
▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------
Title: President and Chief Executive Officer
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------
Title: SVP
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