NEXX SYSTEMS, INC. THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT October 27, 2009
EXHIBIT
4.2
NEXX
SYSTEMS, INC.
THIRD
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
October
27, 2009
This
Third Amended and Restated Investor Rights Agreement (this “Agreement”)
is made and entered into as of the date set forth above (the “Effective
Date”) by and among Nexx Systems, Inc., a Delaware corporation (the
“Company”),
and the holders of the Company’s Series A Convertible Preferred Stock (the
“Series A
Preferred Stock”),
the Company’s Series B Convertible Preferred Stock (the “Series B
Preferred Stock”), the Company’s Series C Convertible Preferred Stock
(the “Series C
Preferred Stock”) and the Company’s Series D Convertible Preferred Stock
(the “Series D
Preferred Stock” and, collectively with the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, the “Securities”)
listed on Exhibit
A hereto, as may be updated from time to time. The holders of
the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock shall be referred to
hereinafter as the “Investors”
and each individually as an “Investor.”
RECITALS
WHEREAS,
the holders of the Series A Preferred Stock were granted rights and privileges
set forth in that certain Amended and Restated Securityholders’ Agreement dated
as of March 26, 2003 (the “Original Rights
Agreement”);
WHEREAS,
the Original Rights Agreement was amended, restated and replaced by holders of
the Series A Preferred Stock and holders of the Series B Preferred Stock were
granted rights and privileges set forth in that certain Investor Rights
Agreement dated as of May 7, 2004 (the “Investor Rights
Agreement”);
WHEREAS,
the Investor Rights Agreement was amended, restated and replaced by holders of
the Series A Preferred Stock and the Series B Preferred Stock and holders of the
Series C Preferred Stock were granted rights and privileges set forth in that
certain Amended and Restated Investor Rigths Agreement dated as of September 20,
2005 (the “Restated Investor
Rights Agreement”);
WHEREAS,
the Investor Rights Agreement was amended, restated and replaced by holders of
the Series A Preferred Stock, the Series B Preferred Stock,and the holders of
the Series C Preferred Stock such that holders of the Series D Preferred
Stock and warrants to acquire shares of Series D Preferred Stock were
granted rights and privileges set forth in that certain Amended and Restated
Investor Rigths Agreement dated as of June 26, 2008 (the “Second Restated
Investor Rights Agreement”);
WHEREAS,
certain of the Investors are purchasing Units, each unit consisting of a share
of Series D Preferred Stock and a warrant to purchase an additional share of
Series D Preferred Stock, from the Company pursuant to that certain Series D
Preferred Stock and Warrant Purchase Agreement of even date herewith (the “Purchase
Agreement”) and as a condition to such purchase, such Investors have
requested that the Company extend to them registration rights, information
rights and other rights as set forth below;
WHEREAS,
the Company and the Investors desire to enter into this Agreement to amend,
restate and replace the rights provided for under the Restated Investor Rights
Agreement with the rights set forth in this Agreement;
WHEREAS,
Section 2.2 of the Second Restated Investor Rights Agreement provides that
any provision of the Restated Investor Rights Agreement may be amended and the
observance thereof may be waived with the written consent of the Company and
certain of the securityholders’ named therein; and
WHEREAS,
the undersigned parties to this Agreement, and their respective assignees, hold
the required amount of such securities.
NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
AGREEMENT
1.1
Definitions. For
purposes of this Section 1:
(a) Registration. The
terms “register,”
“registered,”
and “registration”
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended (the “Securities
Act”), and the declaration or ordering of effectiveness of such
registration statement.
(b) Registrable
Securities. The term “Registrable Securities”
means: (i) any and all shares of the Company’s common stock (“Common
Stock”) issued or issuable upon the conversion of the Securities,
(ii) any shares of Common Stock acquired by Sigma Partners 6, L.P., Sigma
Associates 6, L.P., and Sigma Investors 6, L.P (collectively, “Sigma”)
pursuant to the Stock Transfer Agreement between Sigma, and each of Newport
Corporation, ▇▇▇▇▇▇▇ ▇. Post, JFI II, L.P. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, u/t/a dated April 11, 2002 dated as of the date hereof (the “Sigma Purchase
Agreement”), (iii) any shares of Common Stock issuable upon exercise of
any warrants to purchase shares of Series D Preferred Stock; and (iv) any shares
of 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, in exchange for or in replacement of, all such
shares of Common Stock described in clauses (i), (ii) and (iii) of this
subsection. The term “Registrable
Securities” shall exclude in all cases, however, any shares described by
(i), (ii), (iii) or (iv) of this subsection (b) sold by a person in a
transaction in which rights under this Section 1 are not assigned in accordance with this
Agreement or any shares described by (i), (ii), (iii) or (iv) of this subsection
(b) sold to the public or sold pursuant to Rule 144 promulgated under the
Securities Act.
(c) Registrable Securities Then
Outstanding. The term “Registrable
Securities Then Outstanding” shall mean those shares of Common Stock
which are Registrable Securities and (1) are then issued and outstanding or
(2) are then issuable pursuant to the exercise or conversion of
then-outstanding and then-exercisable options, warrants or convertible
securities.
(d) Holder. For
purposes of this Section 1 and Section 2 hereof, the term “Holder” or
“Holders”
means any person or persons owning Registrable Securities.
(e) Form S-3. The
term “Form S-3”
means such form under the Securities Act as is in effect on the date hereof or
any successor registration form under the Securities Act subsequently adopted by
the SEC (as defined below) which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
(f) SEC. The
term “SEC” means
the United States Securities and Exchange Commission.
(g) Series B
Holder. The term “Series B
Holder” means an owner of shares of Series B Preferred
Stock.
(h) Series C
Holder. The term “Series C
Holder” means an owner of shares of Series C Preferred
Stock.
(i) Series D
Holder. The term “Series D
Holder” means an owner of shares of Series D Preferred Stock and warrants
to acquire shares of Series D Preferred Stock.
(j) Transfer. The
term “Transfer”
means any sale, assignment, encumbrance, hypothecation, pledge, conveyance in
trust, gift, or other transfer or disposition of any kind, including but not
limited to transfers to receivers, levying creditors, trustees or receivers in
bankruptcy proceedings or general assignees for the benefit of creditors,
whether voluntary or by operation of law, directly or indirectly, of shares of
the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, or the Series D Preferred Stock (or the Common Stock
issued or
2
issuable
upon the conversion of such shares), except (i) any bona fide pledge made
pursuant to a bona fide loan transaction that creates a mere security interest,
(ii) if such shares are held by a partnership, corporation or trust, to
partners, officers, employees, and affiliates of such partnership, corporation
or trust or any partner, officer or employee of such affiliates (collectively,
“Affiliates”),
or to its general or limited partners, shareholders or beneficiaries, or to an
entity owned by or organized for the benefit of the general or limited partners,
shareholders, officers, directors, employees, Affiliates or beneficiaries of
such holder, as applicable, (iii) pursuant to (A) a merger or consolidation of
the Company with or into another corporation or corporations; (B) the winding up
and dissolution of the Company; or (C) a transaction in which capital stock of
the Company having more than 50% of the voting power of all the then outstanding
capital stock of the Company is transferred or (iv) in connection with a sale to
the public pursuant to a registration statement filed by the Company with the
SEC under the Securities Act; provided, that in
each of cases (i) and (ii), each pledgee, transferee or distributee (a) shall,
as a condition precedent to such pledge or transfer, execute either, in the
Company’s sole discretion, a counterpart copy of this Agreement or a written
acknowledgment that it takes such shares subject to the restrictions and
provisions of this Agreement and (b) is not a competitor of the Company as
determined in good faith by the Board of Directors. For purposes of
this Section 1.1(i), any subsidiary of a Holder in which such Holder owns at
least ninety-five percent (95%) of the voting securities shall not be deemed to
be a competitor of the Company.
1.2
Demand
Registration.
(a) Request by
Holders. If the Company shall receive a written request from
the Holders of at least twenty-five percent (25%) of the Registrable Securities
Then Outstanding not earlier than the earlier of (i) October ___, 2011 or
(ii) six months after the effective date of the first registration
statement filed by the Company covering an underwritten offering of any of its
securities to the general public, that the Company file a registration statement
under the Securities Act covering the registration of at least twenty-five
percent (25%) of the Registrable Securities (or a lesser amount if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed Ten Million Dollars ($10,000,000)) pursuant to this
Section 1.2, then the Company shall, within ten (10) business days of the
receipt of such written request, give written notice of such request (“Request Notice”)
to all Holders, and effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities which Holders request to be
registered and included in such registration by written notice given by such
Holders to the Company within twenty (20) days after receipt of the Request
Notice, subject to the limitations of this Section 1.2.
(b) Underwriting. If
the Holders initiating the registration request under this Section 1.2
(“Initiating
Holders”) intend to distribute the Registrable Securities covered by
their request by means of an underwriting, then they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the
Company shall include such information in the Request Notice. In such
event, the right of any Holder to include Registrable Securities in such
registration shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities in the
underwriting (unless otherwise mutually agreed by such Holder and Initiating
Holders holding a majority in interest of the Registrable Securities to be
included in such registration) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the managing
underwriter or underwriters selected for such underwriting by the Company and
the holders of a majority of the Registrable Securities proposed to be
registered. Notwithstanding any other provision of this
Section 1.2, if the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten, then the Company shall so advise all Holders of Registrable
Securities that would otherwise be registered and underwritten pursuant hereto,
and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities on a pro rata basis according to the
number of Registrable Securities held by each Holder requesting registration
(including the Initiating Holders); provided, however, that the
number of shares of Registrable Securities to be included in such underwriting
and registration shall not be reduced unless all other securities of the Company
are first entirely excluded from the underwriting and
registration. Any Registrable Securities excluded and withdrawn from
such underwriting shall be withdrawn from the registration.
(c) Maximum Number of Demand
Registrations. The Company is obligated to effect only two (2)
such registrations pursuant to this Section 1.2 and shall not be obligated
to effect such a registration during the six (6) month period after the
effective date of the Company’s initial public offering of its securities
pursuant to a registration statement filed under the Securities
Act.
3
(d) Deferral. Notwithstanding
the foregoing, if the Company shall furnish to Holders requesting the filing of
a registration statement pursuant to this Section 1.2 within thirty (30)
days of receipt of the request from Initiating Holders a certificate signed by
the President or Chief Executive Officer of the Company stating that, in the
good faith judgment of the Board of Directors of the Company (the “Board of
Directors”), it would be seriously 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, then the Company
shall have the right to defer such filing for a period of not more than ninety
(90) days after receipt of the request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve (12) month
period. Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting the filing of a registration statement pursuant to this
Section 1.2 within thirty (30) days of receipt of the request from
Initiating Holders a certificate signed by the President or Chief Executive
Officer of the Company stating that the Company intends to file a registration
statement for an initial public offering of its securities, then the Company
shall have the right to defer such filing for a period of not more than ninety
(90) days after receipt of the request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once.
(e) Expenses. All
registration and qualification fees, printers’ and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one (1) counsel for all of the selling Holder or Holders (the
“Registration
Expenses”) shall be borne by the Company. Each Holder
participating in a registration pursuant to this Section 1.2 shall bear
such Holder’s proportionate share (based on the total number of shares sold in
such registration other than for the account of the Company) of all discounts or
commissions payable to underwriters or brokers in connection with such offering
(the “Selling
Expenses”). Notwithstanding the foregoing, the Company shall
not be required to pay for any expenses of any registration proceeding begun
pursuant to this Section 1.2 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered; provided, further, however, that if at
the time of such withdrawal, (i) the Holders have learned of a material adverse
change in the condition, business or prospects of the Company not known to the
Holders at the time of their request for such registration and have withdrawn
their request for registration with reasonable promptness after learning of such
material adverse change, (ii) the withdrawal relates to the Company exercising
its right to defer the registration pursuant to Section 1.2(d) or (iii) the
withdrawal is the result of the reduction by the underwriters of greater than
fifty percent (50%) of the Registrable Securities sought to be registered by the
Holders, then the Holders shall not be required to pay any of such expenses,
such expenses shall be borne by the Company and the Holders shall retain their
rights pursuant to this Section 1.2.
1.3 Piggyback Registrations. The
Company shall notify all Holders of Registrable Securities in writing at least
thirty (30) days prior to filing any registration statement under the Securities
Act for purposes of effecting a public offering of securities of the Company
(including, but not limited to, registration statements relating to secondary
offerings of securities of the Company, but excluding
registration statements relating to any employee benefit plan or a corporate
reorganization) and will afford each such Holder an opportunity to include in
such registration statement all or any part of the Registrable Securities then
held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by
such Holder shall, within twenty (20) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities such Holder
wishes to include in such registration statement. If a Holder decides
not to include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(a) Underwriting. If
a registration statement under which the Company gives notice under this
Section 1.3 is for an underwritten offering, then the Company shall so
advise the Holders of Registrable Securities. In such event, the
right of any such Holder to include Registrable Securities in a registration
pursuant to this Section 1.3 shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the managing underwriter or underwriter(s) selected for
such underwriting. Notwithstanding any other provision of this
Agreement, if the managing underwriter(s) determine(s) in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares (including
Registrable Securities) from the registration and the underwriting, and the
number of shares that may be included in the registration and the underwriting
shall be
4
allocated,
first, to the
Company, and second, to each of
the Holders requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the total number of
Registrable Securities then held by each such Holder; provided, however, that if such
registration is also a demand registration pursuant to Section 1.2, the
provisions of Section 1.2(b) shall control cutbacks by underwriters with
respect to Initiating Holders and the number of shares that may be included in
the registration and the underwriting shall be allocated first, to Initiating
Holders on a pro rata basis as described in Section 1.2(b), second, to the
Company, then third to each of the
Holders requesting inclusion of their Registrable Securities in such
registration statement as set forth in the preceding
clause. Notwithstanding the foregoing, no reduction pursuant to the
foregoing sentence shall reduce the amount of securities of the selling Holders
included in the registration below twenty-five percent (25%) of the total amount
of securities included in such registration, unless such offering is the
Qualified Public Offering (as defined in Section 1.11 below) and no such
reduction may be made unless such registration does not include shares of any
other selling stockholders. If any Holder disapproves of the terms of
any such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least ten (10) business
days prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder which is
a partnership, limited liability company or corporation, the partners, retired
partners, members and shareholders of such Holder, or the estates and family
members of any such partners, retired partners and members and any trusts for
the benefit of any of the foregoing persons shall be deemed to be a single
“Holder,”
and any pro rata reduction with respect to such “Holder”
shall be based upon the aggregate number of Registrable Securities owned by all
entities and individuals included in such “Holder,” as defined in this
sentence.
(b) Expenses. All
Registration Expenses incurred in connection with a registration pursuant to
this Section 1.3 shall be borne by the Company. Each Holder
participating in a registration pursuant to this Section 1.3 shall bear
such Holder’s proportionate share (based on the total number of shares sold in
such registration other than for the account of the Company) of all Selling
Expenses incurred in connection with a registration pursuant to this
Section 1.3 and all legal fees of such Holder’s legal counsel.
1.4 Form S-3
Registration. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 and any related qualification
or compliance with respect to all or a part of the Registrable Securities owned
by such Holder or Holders, then the Company will:
(a) promptly
give written notice of the proposed registration and the Holder’s or Holders’
request therefor, and any related qualification or compliance, to all other
Holders of Registrable Securities; and
(b) as soon
as practicable, effect such registration and all such qualifications and
compliances as may be so-requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holder’s or Holders’ Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within twenty (20) days
after receipt of such written notice from the Company; provided, however, that the
Company shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 1.4:
(1) if
Form S-3 is not available for such offering by the Holders;
(2) if the
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than One Million Dollars ($1,000,000);
(3) if the
Company shall furnish to the Holders a certificate signed by the President or
Chief Executive Officer of the Company stating that, in the good faith judgment
of the Board of Directors, 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 no more than twice during any twelve (12)
month period for a period of not more than ninety (90) days following receipt of
the request of the Holder or Holders under this Section 1.4, provided that the
Company shall not be entitled to exercise the
5
deferral
rights set forth in this Section 1.4(b)(3) to defer two consecutive requests by
any Holder or Holders of Registrable Securities that the Company effect a
registration on Form S-3 pursuant to this Section 1.4;
(4) if the
Company has, within the twelve (12) month period preceding the date of such
request, already effected three (3) registrations on Form S-3 for Holders
pursuant to this Section 1.4; or
(5) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Expenses. Subject
to the foregoing, the Company shall file a Form S-3 registration statement
covering the Registrable Securities and other securities so requested to be
registered pursuant to this Section 1.4 soon as practicable after receipt of the
request(s) of the Holder(s) for such registration. Until such time as
three (3) registrations pursuant to this Section 1.4 are declared effective by
the SEC, all Registration Expenses shall be borne by the Company and each Holder
participating in a registration pursuant to this Section 1.4 shall bear such
Holder’s proportionate share (based on the total number of shares sold in such
registration other than for the account of the Company) of all Selling
Expenses. Notwithstanding the foregoing, the Company shall not
be required to pay for any expenses of any registration proceeding begun
pursuant to this 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; provided, however, that if at
the time of such withdrawal, (i) the Holders have learned of a material adverse
change in the condition, business or prospects of the Company not known to the
Holders at the time of their request for such registration and have withdrawn
their request for registration with reasonable promptness after learning of such
material adverse change, (ii) the withdrawal relates to the Company exercising
its right to defer the registration pursuant to Section 1.4(b)(3) or (iii) the
withdrawal is the result of the reduction by the underwriters of greater than
fifty percent (50%) of the Registrable Securities sought to be registered by the
Holders, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to this Section
1.4 Following the third registration pursuant to this
Section 1.4 which is declared effective by the SEC, the Holders who wish to
participate in an S-3 registration shall pay all Registration Expenses and
Selling Expenses incurred in connection with each subsequent registration
requested pursuant to this Section 1.4. The obligation of the
Holders participating in an S-3 registration to pay such Registration Expenses
and Selling Expenses shall be several and not joint and in such proportion so
that each Holder is responsible for the portion of the expenses represented by
the percentage that the number of the Registrable Securities of such Holder
offered by and sold under the registration statement bears to the total number
of all Registrable Securities offered by and sold under such registration
statement.
(d) Not A Demand
Registration. Form S-3 registrations shall not be deemed
to be demand registrations as described in Section 1.2 above.
1.5 Obligations of the
Company. Whenever required to effect the registration of any
Registrable Securities under this Agreement, 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 its best efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to one hundred eighty (180) days;
(b) prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement;
(c) furnish
to the Holders such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are included in
such registration;
6
(d) use its
best efforts to register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holders, provided that the Company shall
not be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions;
(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(s) of such offering (it being understood and agreed
that, as a condition to the Company’s obligations under this clause (e),
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 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; and
(g) furnish,
at the request of any Holder requesting registration of Registrable Securities,
on the date that such Registrable Securities are delivered to the underwriters
for sale, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective,
(i) an opinion, dated as of such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a “comfort”
letter dated as of such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
1.6 Furnish
Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 1.2, 1.3
or 1.4 hereof that the selling Holders shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them and
the intended method of disposition of such securities as shall be required to
timely effect the registration of their Registrable Securities.
1.7 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.
1.8 Indemnification. In
the event any Registrable Securities are included in a registration statement
under Sections 1.2, 1.3 or 1.4 hereof:
(a) Indemnification by the
Company. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, members, officers,
directors and attorneys of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended, (the “Exchange
Act”), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (each 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;
7
(ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading;
or
(iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any federal or state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any federal or state
securities law in connection with the offering covered by such registration
statement;
and the
Company will reimburse each such Holder, partner, member, officer or director,
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 1.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, member, officer, director,
underwriter or controlling person of such Holder.
(b) Indemnification by Selling
Holders. To the extent permitted by law, each selling Holder,
severally and not jointly, will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration statement,
each of its attorneys, each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder’s
partners, members, directors or officers or any person who controls such Holder
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, attorney, controlling person, underwriter or
other such Holder, partner, member or director, officer or controlling person of
such other Holder may become subject under the Securities Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, attorney, controlling
person, underwriter or other Holder, partner, member, officer, director or
controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.8(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; and provided further, that the
total amounts payable in indemnity by a Holder under this Section 1.8(b) in
respect of any Violation shall not exceed the net proceeds received by such
Holder in the registered offering out of which such Violation
arises.
(c) Notice. Promptly
after receipt by an indemnified party under this Section 1.8 of notice of
the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.8, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of 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 to the extent of
such prejudice under this Section 1.8, 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 1.8.
(d) Defect Eliminated in Final
Prospectus. The foregoing indemnity agreements of the Company
and Holders are subject to the condition that, insofar as they relate to any
Violation made in a preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the registration statement
8
in
question becomes effective or the amended prospectus filed with the SEC pursuant
to SEC Rule 424(b) (the “Final Prospectus”),
such indemnity agreement shall not inure to the benefit of any person if a copy
of the Final Prospectus (i) was furnished to the indemnified party, (ii)
would have cured the Violation, and (iii) was not furnished to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act. Notwithstanding the
foregoing, if the offering is an underwritten offering, the foregoing indemnity
agreements shall continue to inure to the benefit of such indemnified party to
the extent such party is unable to receive indemnification from the underwriters
of such offering.
(e) Contribution. In
order to provide for just and equitable contribution to joint liability under
the Securities Act in any case in which either (i) any Holder exercising
rights under this Agreement, or any controlling person of any such Holder, makes
a claim for indemnification pursuant to this Section 1.8 but it is
judicially determined by a court of competent jurisdiction that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 1.8 provides for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of
any such selling Holder or any such controlling person in circumstances for
which indemnification is provided under this Section 1.8; then, and in each
such case, the indemnifying party, in lieu of indemnifying the indemnified
party, shall contribute to the amount paid or payable by such indemnified party
with respect to such loss, liability, claim, damage or expense in the proportion
that is appropriate to reflect the relative fault of the indemnifying party and
the indemnified party 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 the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, however, that, in any
such case, (A) no such Holder will be required to contribute any amount in
excess of the net proceeds of all such Registrable Securities offered and sold
by such Holder pursuant to such registration statement and (B) no person or
entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent
misrepresentation.
(f) Survival. The
obligations of the Company and Holders under this Section 1.8 shall survive
the completion of any offering of Registrable Securities in a registration
statement, and otherwise.
1.9 “Market Stand-Off”
Agreement. Each Holder hereby agrees that it shall not during
the period commencing on the date of the final prospectus relating to the
Company’s initial public offering (the “IPO”) and
ending on the date specified by the Company and the managing underwriter (such
period not to exceed l80 days) or, if required by such underwriter, such longer
period of time as is necessary to enable such underwriter to issue a research
report or make a public appearance that relates to an earnings release or
announcement by the Company within 18 days prior to or after the date that is
one hundred eighty (180) days after the effective date of the registration
statement relating to such offering, (a) lend, offer, pledge, sell,
contract to sell, sell any 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 capital
stock held immediately prior to the
effectiveness of the registration statement for the IPO or (b) 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 capital stock, whether any
such transaction described in clause (a) or (b) above is to be settled by
delivery of capital stock or other securities, in cash or
otherwise, provided, however, that, all
executive officers and directors of the Company and holders of greater than one
percent (1%) of the Company’s outstanding Common Stock (on an as-converted
basis) (“One Percent
Stockholders”) then holding Common Stock of the Company enter into
similar agreements and are similarly bound.
In order
to enforce the foregoing covenant, (i) the Company shall have the right to place
restrictive legends on the certificates representing the shares subject to this
Section 1.9 and to impose stop transfer instructions with respect to the
Registrable Securities and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period and (ii) the Holder agrees to execute an agreement
requested by the Company and/or underwriter providing for the restrictions as
set forth in this Section 1.9; provided, however, that all
executive officers and directors of the Company and One Percent Stockholders
then holding Common Stock of the Company enter into similar agreements; and
provided, further, that such
agreement shall (a) contain a definitive termination date that is no more than
one hundred eighty (180) days from the effective date of such registration
9
statement,
(b) not prevent a Holder from disposing of another company’s stock solely
because such other company operates a similar business to the Company, (c) if
the Company’s registration statement has not been declared effective under the
Securities Act, terminate no later than two hundred seventy (270) days following
the date such agreement is signed and delivered by the Holder to the Company
and/or underwriter and (d) in the event any of the shares of the Common Stock,
excluding any shares which are to be included in such registration, held by the
officers, directors and/or the One Percent Stockholders then holding Common
Stock are released by the underwriters from the lock-up restrictions set forth
in similar agreements, permit a number of shares of the Common Stock held by a
Holder, which number shall be equal to the largest number of shares
of the Common Stock which were released from the lock-up provisions by the
underwriters for an individual officer, directors and/or One Percent
Stockholder, to be released immediately from any remaining lock-up restrictions
provided by such agreement.
1.10 Rule 144
Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC, 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:
(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 of
the first registration under the Securities Act filed by the Company for an
offering of its securities to the general public;
(b) use its
best efforts to file with the SEC 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);
and
(c) as long
as a Holder owns any Registrable Securities, to furnish to the Holder forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of said Rule 144 (at any time after ninety (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 Exchange Act (at any time after it has become subject to
the reporting requirements of the Exchange Act), a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
of the Company as a Holder may reasonably request in availing itself of any rule
or regulation of the SEC allowing a Holder to sell any such securities without
registration (at any time after the Company has become subject to the reporting
requirements of the Exchange Act).
1.11 Termination of the Company’s
Obligations Under this Section 1. The
Company shall have no obligations pursuant to Sections 1.2, 1.3 and 1.4
with respect to: (i) any request or requests for registration
made by any Holder on a date more than three (3) years after the closing date of
the first firmly underwritten public offering of Common Stock of the Company
pursuant to a registration statement filed with, and declared effective by, the
SEC under the Securities Act, on the terms and conditions approved by the Board
of Directors offering shares of the Company’s Common Stock, and for a total
offering of not less than $25 million (after deduction of applicable
underwriters discounts and commissions) (a “Qualified Public
Offering”); or (ii) any Registrable Securities proposed to be sold
by a Holder in a registration pursuant to Section 1.2, 1.3 or 1.4 if, after
the Qualified Public Offering, all such Registrable Securities proposed to be
sold by a Holder may be sold in a three-month period without registration under
the Securities Act pursuant to Rule 144 under the Securities Act and such
Holder owns less than 1% of the Common Stock.
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 sixty six and two thirds percent (66 2/3%) of the Registrable
Securities Then Outstanding and the written consent of the Series B Director and
the Series C Director, enter into any agreement with any holder or prospective
holder of any securities of the Company that provides such holder or prospective
holder with registration rights superior to or on a parity with the registration
rights provided to the Investors pursuant to this Section 1.
2.
ASSIGNMENT AND AMENDMENT;
JOINDER.
2.1 Assignment. Notwithstanding
anything herein to the contrary, the registration rights of a Holder under
Section 1, the Investors’ Right of First Refusal under Section 3, and
the information rights under Section 4, if
10
applicable,
may be assigned only to (i) a party who acquires at least the lesser of all
of the Registrable Securities held by the transferor or Three Hundred Thousand
(300,000) such shares or (ii)(A) a shareholder, a partner (including
retired partner), a member (including former member), a beneficiary, or an
entity that controls, is controlled by, or is under common control with a Holder
that is a corporation, partnership, limited liability company or other entity;
(B) a spouse, child, parent, sibling or beneficiary of the estate of such
Holder or (C) a trust for the benefit of the persons set forth in (A) or
(B); provided,
however, that
no party may be assigned any of the foregoing rights unless the Company is given
written notice by the assigning party at the time of such assignment stating the
name, address and tax identification number of the assignee and identifying the
securities of the Company as to which the rights in question are being assigned;
and provided
further that
any such assignee shall receive such assigned rights subject to all the terms
and conditions of this Agreement, including without limitation the provisions of
this Section 2 and that such assignee is not a competitor of the Company,
as determined on good faith by the Board of Directors.
2.2 Amendment of Rights; Waiver;
Joinder. Any provision of this Agreement may be amended and
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors (and/or any of their permitted successors
or assigns) holding a majority of the Registrable Securities Then
Outstanding. Any amendment or waiver effected in accordance with this
Section 2.2 shall be binding upon each Investor, each Holder, each permitted
successor or assignee of such Investor or Holder and the
Company. Notwithstanding the foregoing, no amendment of this
Agreement will be effective against a party to this Agreement without such
party's prior written consent if such amendment would treat such party in an
adverse manner relative to the other parties hereto. Notwithstanding
the foregoing, any Eligible Purchaser (as defined in the Purchase Agreement) may
become party to this Agreement in connection with the Subsequent Closing (as
defined in the Purchase Agreement) by execution of a counterpart Investor
signature page hereto without any further action or amendment required by the
existing parties hereto.
3. INVESTORS’ RIGHT OF FIRST
REFUSAL.
3.1 Right of First
Refusal. If, at any time after the date of this Agreement and
prior to the termination of this right of first refusal pursuant to
subsection 5.12, the Company should desire to issue any Equity Securities
(as hereinafter defined) in a transaction not registered under the Securities
Act in reliance upon a claimed exemption thereunder, it shall give each Investor
who, together with any person it controls, is controlled by or is under common
control with, or a transferee permitted under Section 2 hereof holds not less than three hundred
thousand (300,000) shares of Registrable Securities (a “Qualifying
Investor”), the right to purchase such Qualifying Investor’s pro rata
share (or any part thereof) of all of such privately offered Equity Securities
on the same terms as the Company is willing to sell such Equity Securities to
any other person. Each such Qualifying Investor’s pro rata share of
the Equity Securities shall be equal to that percentage of the outstanding
Common Stock of the Company held by such Qualifying Investor on the date of
delivery of notice to such Qualifying Investor, as set forth in Section 3.2
below, of the Company’s intention to sell and issue such Equity
Securities. For purposes of this subsection 3.1, the outstanding
Common Stock of the Company shall include (i) outstanding shares of Common
Stock, and (ii) shares of Common Stock issued or issuable upon exercise
and/or conversion of any then outstanding options, warrants and Preferred Stock
of the Company.
3.2 Notice;
Over-Allotment. Prior to any sale or issuance by the Company
of any Equity Securities, the Company shall notify in writing each Qualifying
Investor of its intention to sell and issue such securities, setting forth the
terms under which it proposes to make such sale. Within ten (10)
business days after receipt of such notice, each such Qualifying Investor shall
notify the Company in writing whether such Qualifying Investor desires to
purchase such Qualifying Investor’s pro rata share, or any part thereof, of the
Equity Securities so offered. If any Qualifying Investor fails to
deliver notice in writing within such ten (10) day period of its election to
purchase such Qualifying Investor’s full pro rata share of an offering of Equity
Securities (a “Nonpurchasing
Investor”), then such Nonpurchasing Investor shall forfeit the right
hereunder to purchase that part of its pro rata share of such Equity Securities
that it did not so elect to purchase and the Company shall promptly give each
Qualifying Investor who has timely elected to purchase its full pro rata share
of such offering of Equity Securities (a “Purchasing
Investor”) written notice of the failure of any Nonpurchasing Investor to
purchase such Nonpurchasing Investor’s full pro rata share of such offering of
Equity Securities (the “Over-Allotment
Notice”). Each Purchasing Investor shall have a right of
over-allotment such that such Purchasing Investor may elect to purchase a
portion of the Nonpurchasing Investors’ unpurchased pro rata share of such
offering on a pro rata basis according to the relative pro rata share of the
Purchasing Investors, by delivery of written notice of such election to the
Company at any time within five (5) business days after receiving the
Over-Allotment Notice.
11
3.3 Company Sales
Period. After termination of the ten (10) business day period
plus, if applicable, the subsequent five (5) business day period specified
in subsection 3.2 above, the Company may, during a period of ninety (90)
days following the end of such period, sell and issue such Equity Securities as
to which a Qualifying Investor does not indicate a desire to purchase to another
person upon the same terms and conditions as those set forth in the notice to
the Qualifying Investors. In the event the Company has not sold the
Equity Securities, or has not entered into an agreement to sell the Equity
Securities, within said ninety (90) day period, the Company shall not thereafter
issue or sell any Equity Securities without first offering such securities to
the Qualifying Investors in the manner provided above.
3.4 Closing of Investor
Purchases. If a Qualifying Investor gives the Company notice
that such Qualifying Investor desires to purchase any of the Equity Securities
offered by the Company, payment for the Equity Securities shall be by check or
wire transfer, against delivery of the Equity Securities at the executive
offices of the Company within twenty (20) days after giving the Company such
notice, or, if later, the closing date for the proposed sale of such Equity
Securities. The Company shall take all such action as may be required
by any regulatory authority in connection with the exercise by such Qualifying
Investor of the right to purchase Equity Securities as set forth in this
Section 3.
3.5 Exempted
Issuances. The right of first refusal contained in this
Section 3 shall not apply to the issuance by the Company of Equity
Securities (i) upon conversion of the Securities; (ii) shares issuable
or issued to employees, independent contractors, consultants, officers or
directors of the Company pursuant to the Company’s 2003 Employee, Director and
Consultant Stock Option Plan (the “2003
Plan”) or such other stock option plan or restricted stock plan duly
approved by the Board of Directors of the Company; (iii) in connection with
the acquisition of all or part of another company by the Company by merger or
other reorganization, or by purchase of all or part of the assets of another
company, pursuant to a plan or arrangement duly approved by (a) the Board of
Directors including the director elected solely by the holders of the Series B
Preferred Stock (the “Series B
Director”) and the director elected solely by the holders of the Series C
Preferred Stock (the “Series C
Director”) and (b) the holders of sixty six and two-thirds percent (66
2/3%) of the Registrable Securities; (iv) in connection with equipment
lease or bank financings, or other commercial transactions,
as approved by the Board of Directors, including the Series B
Director and the Series C Director; (v) upon the exercise of warrants,
options or other convertible securities issued on or prior to the date of this
Agreement (including warrants issued by the Company to Sigma on the date
hereof); (vi) in connection with any consolidations, combinations, stock
distributions, stock dividends, stock splits or similar events (each a “Recapitalization
Event”); (vii) in connection with the Qualified Public Offering;
(viii) to any of the investors listed in Schedule A and Schedule A-1 to
the Purchase Agreement; or (ix) by way of a dividend or other distribution on
Equity Securities described in the foregoing clauses (i) through
(viii).
3.6 Equity Securities
Defined. The term “Equity
Securities” shall mean (i) Common Stock, rights, options or warrants
to purchase Common Stock, (ii) any security other than Common Stock having
voting rights in the election of the Board of Directors, not contingent upon a
failure to pay dividends, (iii) any security convertible into or
exchangeable for any of the foregoing, and (iv) any agreement or commitment
to issue any of the foregoing.
4. INFORMATION RIGHTS AND OTHER
COVENANTS.
4.1 Financial Statements and
Reports. The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently
applied. The Company shall deliver to Investors, (i) as soon as
practicable after the end of each fiscal year of the Company, and in any event
within one hundred twenty (120) days thereafter, a consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of such year and
consolidated statements of income, stockholders’ equity and cash flows for such
year, which year-end financial reports shall be in reasonable detail, prepared
in accordance with generally accepted accounting principles and audited by an
accounting firm of national standing; (ii) as soon as practicable after the
end of each fiscal quarter of the Company, and in any event within forty-five
(45) days thereafter, an unaudited, consolidated balance sheet of
12
the
Company and its subsidiaries, if any, as of the end of such quarter and
consolidated statements of income, stockholders’ equity and cash flows for such
quarter, which quarter-end financial reports shall be in reasonable detail,
prepared in accordance with generally accepted accounting principles; and
(iii) as soon as practicable after the end of the month, and in any event
within thirty (30) days thereafter, an unaudited, consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of such month and
consolidated statements of income, stockholders’ equity and cash flows for such
month, which month-end financial reports shall be in reasonable detail, prepared
in accordance with generally accepted accounting principles. The
Company will further deliver to such Investor, within 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 a balance sheet and
statement of operations for such months and, as soon as prepared, any other
budgets or revised budgets prepared by the Company. The Company will
further provide to the holders of the Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock holdimnt at least three hundred
thousand (300,000) Shares such monthly and quarterly reports as such holders
shall reasonably require, to include revenue, cash, burn rate waterfall charts
and quarterly updates.
4.2 Inspection. The
Company shall permit each 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 as may be requested by the Investor.
4.3 Proprietary Inventions and
Information Agreement. The Company agrees to use its best
efforts to cause each employee and consultant whose services are hereafter
retained by the Company to execute a Proprietary Inventions and Information
Agreement in substantially the form attached to the Purchase Agreement as Exhibit I.
4.4 Vesting. The
Company agrees that grants of stock or options issued after the date
hereof to employees and consultants will provide that such grants and options
shall vest (or shall be subject to a right of repurchase that lapses) over a
four-year period from the commencement of service to the Company, (with 1/4
vesting at the end of the first year and 1/48 per month thereafter) unless
different vesting provisions are unanimously approved by the Company’s Board of
Directors. The Company agrees that unvested shares of Common Stock
issued by the Company shall be subject to a repurchase option in favor of the
Company upon the termination of the employee’s services to the Company at the
original cost thereof and the Company shall have a right of first refusal with
respect to shares of Common Stock issued by the
Company. Notwithstanding the foregoing, the Board of Directors shall
have the discretion on a case by case basis to provide that up to four quarters
of vesting may accelerate or the repurchase option may lapse with respect to
four quarters worth of unvested shares upon a Change of Control (as defined in
the Company’s Certificate of Incorporation, as amended from time to time) and
the termination without cause of such holder of unvested options or shares
subject to repurchase (“cause” to be defined by the Board of Directors in good
faith) within one year from the effective date of the Change of
Control. The agreements providing for such vesting or repurchase
option shall prohibit transfer of unvested shares of Common Stock (or such
shares subject to a repurchase option). Such agreements shall also
provide for a market standoff provision prohibiting transfer of the Company’s
Common Stock within one hundred eighty (180) days or, if required by such
underwriter, such longer period of time as is necessary to enable such
underwriter to issue a research report or make a public appearance that relates
to an earnings release or announcement by the Company within 18 days prior to or
after the date that is one hundred eighty (180) days after the effective date of
the registration statement relating to such offering,from the Company’s initial
public offering, subject to standard carve outs.
4.5 Indebtedness. Without
the due approval of the Board of Directors including the Series B Director and
the Series C Director, the Company will not incur additional indebtedness from
the date hereof strictly for money borrowed from a third party, in an amount
exceeding $500,000 (other than purchase money obligations or trade debt in the
ordinary course of business).
4.6 Stock Option
Reserve. The Company shall not increase the number of shares
of the capital stock of the Company reserved for issuance pursuant to the
Company’s 2003 Plan from Fifteen Million Eight Hundred Eighty-Six Thousand
Eight Hundred Thirty-Three (15,886,833) shares of Common Stock without the
approval of either (i) the Board of Directors, including the Series B
Director and the Series C Director, or (ii) the holders of at least sixty
six and two thirds percent (66 2/3%) of the issued and outstanding Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting
as a single class.
4.7 Key Man Insurance; Other
Insurance. Unless otherwise waived in writing by the Series B
Director and the Series C Director, the Company will obtain and maintain
“key man” term life insurance policies for individuals and in the amounts
designated by the Board of Directors, to include at least Dr. ▇▇▇▇▇▇ ▇▇▇▇▇, with
such policies naming the Company as beneficiary. Such policies shall
include, at a minimum, a term life insurance policy for
13
▇▇▇▇▇▇
▇▇▇▇▇ in an amount equal to at least Two Million Dollars
($2,000,000). The Company will keep in force with good and
responsible insurance companies adequate fire, public liability, property damage
and other insurance, of the kinds and in amounts as are usual and customary in
the type of business conducted by the Company.
4.8 Directors and Officers
Insurance. The Company agrees to:
(a) use its
best efforts to obtain at reasonable cost directors and officers liability
insurance in amounts approved by the Board of Directors promptly after the date
hereof, and in any case, the Company shall not file a registration statement
with the SEC nor consummate an event triggering distributions upon liquidation
described in Article IV, Section B(3) of the Company’s Certificate of
Incorporation, as amended, without obtaining directors and officers liability
insurance in amounts approved by the Board of Directors; provided that all or
any of the provisions of this covenant may be waived with the written consent of
a majority of the Board of Directors, including the Series B Director and the
Series C Director; and
(b) enter
into written agreements in customary form after the date hereof with each member
of its Board of Directors and any related investment funds of any such Directors
providing for indemnification to the maximum extent possible in accordance with
Delaware law, and in a manner consistent with its Bylaws and Certificate of
Incorporation, as amended.
4.9 Director
Meetings. The Company agrees to hold quarterly meetings of the
Board of Directors until such time as the Board unanimously agrees to hold such
meetings less frequently. The Company further agrees to reimburse
members of the Board of Directors for reasonable out of pocket expenses
(including reasonable expenses incurred in attending Board meetings outside a
fifty (50) mile radius of such member’s primary office) incurred by them on the
Company’s behalf upon the Company’s receipt of standard documentation for
same.
4.10 Compensation
Committee. The Board of Directors of the Company shall
maintain a compensation committee with the responsibility to recommend
management compensation, benefit plans and general equity incentive plans to the
Board of Directors for approval. The compensation committee shall be
constituted of no more than three members of the Board of Directors, at least
one of whom shall be the Series B Director and at least one of whom shall be the
Series C Director. The charter of such committee shall provide that
no decision regarding executive compensation or the Company’s equity incentive
plans shall be made by such committee without the unanimous approval of its
members.
4.11 Qualified Small Business
Reporting. So long as Investors continue to hold Registrable
Securities, or such shares are held by a transferee whose ownership thereof is
eligible to qualify as Qualified Small Business Stock, as defined in
Section 1202(c) of the Internal Revenue Code of 1986 as amended (the “Code”),
and such reporting and recordkeeping is necessary for such Registrable
Securities to qualify as Qualified Small Business Stock, the Company will comply
with all reporting and recordkeeping requirements required of a Qualified Small
Business by the Code and the regulations promulgated thereunder. In
addition, the Company shall submit such reports and comply with such other
requirements as may be imposed by the Internal Revenue Service
(or corresponding applicable state taxing authority) on corporations
seeking to achieve and maintain status as a qualified small business within the
meaning of Section 1202(d) of the Code. The Company shall not take
any other actions outside the ordinary course of business without the approval
of the Board of Directors, including each of the Series B Director and the
Series C Director, to lose the Company’s status as having “Qualified Small
Business Stock.”
4.12 Reservation of Common
Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the conversion of the
Securities, all Common Stock issuable from time to time upon such
conversion.
14
5. GENERAL
PROVISIONS.
5.1 Notices. All
notices and other communications required or permitted hereunder shall be in
writing and shall be deemed effectively given (i) upon actual delivery to
the party to be notified, (ii) 24 hours after confirmed facsimile
transmission, (iii) the day of sending such notice by electronic mail, or
(iv) one business day after deposit with a recognized overnight courier,
addressed (a) if to the Investor, at the Investor’s address set forth on
the Schedule of Purchasers to the Purchase Agreement, or at such other address
as the Investor shall have furnished to the Company in writing upon 10 days’
notice, or (b) if to any other Holder of Registrable Securities, at such
address as such Holder shall have furnished the Company in writing on 10 days’
notice or, until such Holder so furnishes an address to the Company, 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
following address or at such other address as the Company shall have furnished
to the Investor upon 10 days’ notice:
Nexx
Systems, Inc.
▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ #▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
Chief Executive Officer
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
With a
copy to:
Mintz
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇
▇. ▇▇▇▇▇▇▇, Esquire
Fax: (▇▇▇)▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
5.2 Entire
Agreement. This Agreement, together with all the exhibits
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations, including the Original Rights Agreement, the Investor Rights
Agreement and Restated Investor Rights Agreement, among the parties respecting
the subject matter hereof.
5.3 Governing
Law. This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the State of Delaware as
applied to agreements among Delaware residents entered into and to be performed
entirely within Delaware, excluding that body of law relating to conflict of
laws and choice of law.
5.4 Severability. If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, then such provision(s) shall be excluded from this Agreement and
the balance of this Agreement shall be interpreted as if such provision(s) were
so excluded and shall be enforceable in accordance with its terms.
5.5 Third
Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
5.6 Successors and
Assigns. Subject to the provisions of Section 2.1, the provisions of this Agreement shall
inure to the benefit of, and shall be binding upon, the successors and permitted
assigns of the parties hereto.
5.7 Captions. The
captions to sections of this Agreement have been inserted for identification and
reference purposes only and shall not be used to construe or interpret this
Agreement.
15
5.8 Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
5.9 Costs and Attorneys’
Fees. In the event that any action, suit or other proceeding
is instituted concerning or arising out of this Agreement or any transaction
contemplated hereunder, the prevailing party shall recover all of such party’s
costs and attorneys’ fees incurred in each such action, suit or other
proceeding, including any and all appeals or petitions therefrom.
5.10 Adjustments for Stock Splits
and Certain Other Changes. Wherever in this Agreement there is
a reference to a specific number of shares of Common Stock or Preferred Stock of
the Company of any class or series, then, upon the occurrence of any
Recapitalization Event, the specific number of shares so referenced in this
Agreement shall automatically be proportionally adjusted to reflect the affect
on the outstanding shares of such class or series of stock by such
Recapitalization Event.
5.11 Amendment and
Restatement. This Agreement is intended to and does completely
further amend, restate and replace, the Restated Investor Rights Agreement and
the Restated Investor Rights Agreement is hereby terminated and shall no longer
be of force and effect.
5.12 Termination. Except
as otherwise provided herein, the rights and obligations of an Investor pursuant
to Sections 3 and 4 shall terminate at such time as that Investor shall no
longer be the owner of any Registrable Securities. Unless sooner
terminated in accordance with the preceding sentence, the obligations of the
Company pursuant to Sections 3 and 4 shall terminate upon the occurrence of
any of the following events:
(a) an event
triggering distribution upon liquidation as described in Article IV, Section
B(3) of the Company’s Certificate of Incorporation, as amended;
(b) the
execution by the Company of a general assignment for the benefit of creditors or
the appointment of a receiver or trustee to take possession of the property and
assets of the Company; or
(c) upon the
closing of a Qualified Public Offering.
[signature
page to follow]
16
IN
WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Investor Rights Agreement as of the date and year first above
written.
| Nexx Systems, Inc. | |||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ | ||
| ▇▇▇▇▇▇ ▇▇▇▇▇ | |||
|
Chief
Executive Officer
|
|||
17
Schedule
of Investors
|
Holders of Series A
Preferred Stock
|
Holders of Series B
Preferred Stock
|
Holders of Series C
Preferred Stock
|
Holders of Series D
Preferred Stock
|
|
Newport
Corporation
|
Enterprise
Partners V, L.P.
|
Enterprise
Partners V, L.P.
|
Enterprise
Partners V, L.P.
|
|
Enterprise
Partners VI, L.P.
|
Enterprise
Partners VI, L.P.
|
Enterprise
Partners VI, L.P.
|
|
|
▇▇▇▇▇▇▇
▇. Post
|
▇▇▇▇▇▇▇
▇. Post
|
▇▇▇▇▇▇▇
▇. Post
|
|
|
▇▇▇▇▇
▇. ▇▇▇▇▇
|
Sigma
Partners 6, L.P.
|
Sigma
Partners 6, L.P.
|
|
|
▇▇▇▇▇▇
& ▇▇▇▇ ▇▇▇▇▇▇▇▇
|
Sigma
Associates 6, L.P.
|
Sigma
Associates 6, L.P.
|
|
|
▇▇▇
▇▇▇▇▇▇▇
|
Sigma
Investors 6, L.P
|
Sigma
Investors 6, ▇.▇
|
|
|
▇▇▇▇▇▇
▇▇▇▇▇▇
|
▇▇▇▇▇▇
& ▇▇▇▇ ▇▇▇▇▇▇▇▇
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇
|
|
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
Max
▇▇▇▇▇▇▇
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇
|
|
|
▇▇▇▇▇▇
Prime and ▇▇▇▇ ▇▇▇▇▇▇
|
▇▇▇▇▇▇
▇▇▇▇▇▇
|
▇▇▇▇▇▇
Prime
|
|
|
Seki
Technotron Corp
|
Miklos
▇▇▇▇▇▇▇▇
|
▇▇▇▇
▇▇▇▇▇▇
|
|
|
▇▇▇▇
& ▇▇▇▇▇▇ ▇▇▇▇▇▇
|
▇▇▇▇▇▇
Prime and ▇▇▇▇ ▇▇▇▇▇▇
|
▇▇▇▇
▇▇▇▇▇▇
|
|
|
▇▇▇▇▇
▇▇▇▇▇▇▇
|
Seki
Technotron Corp
|
▇▇▇▇▇▇
▇▇▇▇▇▇
|
|
|
▇▇▇▇
& ▇▇▇▇▇▇ ▇▇▇▇▇▇
|
▇▇▇
▇▇▇▇▇▇▇
|
||
|
▇▇▇▇▇
▇▇▇▇▇▇▇
|
▇▇▇▇▇
▇▇▇▇▇ Investments
|
||
|
▇▇▇▇
& ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇
▇▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇
▇▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇
▇▇▇▇▇
|
|||
|
▇▇▇▇
▇▇▇▇▇▇
|
|||
|
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇
|
|||
|
Teltec
GmbH
|
|||
|
Teltec
SA
|
18