EXHIBIT 10.10
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT
SUMX INC.
December 3, 1998
TABLE OF CONTENTS
SECTION 1. GENERAL
1.1 Definitions
SECTION 2. RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer
2.2 Demand Registration
2.3 Piggyback Registrations
2.4 Form S-3 Registration
2.5 Expenses of Registration
2.6 Obligations of the Company
2.7 Termination of Registration Rights
2.8 Delay of Registration; Furnishing Information
2.9 Indemnification
2.10 Assignment of Registration Rights
2.11 Amendment of Registration Rights
2.12 Limitation on Subsequent Registration Rights
2.13 "Market Stand-Off" Agreement
2.14 Rule 144 Reporting
SECTION 3. COVENANTS OF THE COMPANY
3.1 Basis Financial Information and Reporting
3.2 Inspection Rights
3.3 Confidentiality of Records
3.4 Reservation of Common Stock
3.5 [Reserved]
3.6 Key Man Insurance
3.7 Proprietary Information and Inventions Agreement
3.8 Interested Transactions
3.9 Directors' Liability and Indemnification
3.10 Termination of Covenants
SECTION 4. ADDITIONAL RIGHTS
4.1 Preemptive Rights
4.2 Termination of Rights
4.3 Transfer of Rights
4.4 Excluded Securities
SECTION 5. MISCELLANEOUS
5.1 Governing Law
5.2 Survival
5.3 Successors and Assigns
5.4 Severability
5.5 Amendment and Waiver
5.6 Delays or Omissions
5.7 Notices
5.8 Titles and Subtitles
5.9 Counterparts
SUMX INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is
entered into as of the 3rd day of December 1998, by and among SUMX
INC., a Mississippi corporation (the "Company"), the purchasers of the Series
A Preferred Stock ("Series A Stock") of the Company set forth on Exhibit A
of the Series A Preferred Stock Purchase Agreement of even date herewith
(the "Purchase Agreement")(the purchasers of the Series A Stock shall be
referred to hereinafter as the "Investors" and each, individually, as an
"Investor"), and the stockholders of the Company (the stockholders together
with the Investors are hereinafter referred to as the "Stockholders").
RECITALS
WHEREAS, the Company is selling One Million (1,000,000) shares
of its Series A Stock to the Investors pursuant to the Purchase Agreement;
WHEREAS, as a condition of entering into the Purchase Agreement,
the Investors have requested that the Company extend to them registration
rights, information rights and other rights as set forth below; and
WHEREAS, the stockholders of the Company have requested certain
registration and other rights in connection with the rights being given to the
Investors.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as
follows:
SECTION 1.GENERAL.
1.1 Definitions. As used in this Agreement the following terms
shall have the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Holder" means any person owning of record Shares or
Registrable Securities that have not been sold to the public or any assignee of
record of such Registrable Securities in accordance with Section 2.9 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of the Company's common stock (the "Common
Stock") registered under the Securities Act.
"Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" means (i) the Common Stock of the
Company or the Common Stock issued or issuable upon conversion of the
Shares; and (ii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which
is issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of, such above-described securities. Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person to the public either pursuant to a registration statement or Rule 144 or
sold in a private transaction in which the transferor's rights under Section 2
of this Agreement are not assigned.
"Registration Expenses" shall mean all expenses incurred by
the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, reasonable fees and disbursements
of a single special counsel for the Holders not to exceed $20,000, blue sky
fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"Shares" shall mean the Company's Series A Stock issued
pursuant to the Purchase Agreement or otherwise acquired by a Holder.
"Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC that permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
"SEC" or "Commission" means the Securities and Exchange
Commission.
SECTION 2.RESTRICTIONS ON TRANSFER.
2.1 Restrictions on Transfer.
(a)Each Holder agrees not to make any disposition of all
or any portion of the Shares or Registrable Securities unless and until there is
then in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement or, if there is not in effect such a registration
statement, unless:
(i)the Holder has first offered the Company and
the other Holders the Shares or Registrable Securities in accordance with the
provisions of subsection 2.1(e) of this Agreement; and
(ii)(A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company
with a detailed statement of the circumstances surrounding the proposed
disposition, and (C) if reasonably requested by the Company, such Holder
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the Securities Act. It is agreed that the Company will
not require opinions of counsel for transactions made pursuant to Rule 144
except as may be reasonably requested by counsel to the Company in light of
the circumstances.
(b)Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the
Agreement) be stamped or otherwise imprinted with a legend substantially
similar to the following (in addition to any legend required under (i)
applicable state securities laws (ii) the Voting Agreement and the Agreement
Concerning Sale of Stock between the Company and certain stockholders, dated
as of the date hereof, (iii) the Company's Bylaws, or (iv) as provided
elsewhere in this Agreement):
THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
(THE "ACT') AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE
TRANSFERRED, ASSIGNED, PLEDGED
OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT
OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c)The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the
securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
(d)Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order
of the appropriate blue sky authority authorizing such removal.
(e)Prior to any sale of Shares or Registrable Securities, a
Holder must give prior written notice ("Notice") to the Company offering to
sell those same Shares or Registrable Securities to the Company upon
substantially similar terms that the Holder will propose selling the Shares or
Registrable Securities in the event the Company declines to purchase such
securities from Holder. The Company shall have the right, exercisable upon
written notice to Shareholder within fifteen (15) days after the notice, to
purchase all of the offered securities on substantially similar terms set forth.
If the Company elects not to purchase any portion of the offered shares, the
Holder must then offer the remaining shares to the other Holders upon
substantially similar terms. The other holders shall have the right,
exercisable upon written notice to the Holder within fifteen (15) days, to
purchase the offered securities upon the offered terms. If the Company and
other Holders do not elect to purchase the offered securities, the Shareholder
may enter into an agreement providing for the sale of the offered securities
to a third party or parties on terms and conditions substantially similar to
those described in the notice.
2.2 Demand Registration.
(a)Subject to the conditions of this Section 2.2, if after
twelve (12) months following the date of the Company's Initial Offering, the
Company shall receive a written request from the Holders of more than forty-
five percent (45%) of the Registrable Securities then outstanding (the
"Initiating Holders") that the Company file a registration statement on Form
S-3 under the Securities Act covering the registration of either (i) at least
twenty percent (20%) of the then outstanding Registrable Securities or (ii)
Registrable Securities having an aggregate offering price to the public in
excess of $5,000,000 (a "Qualified Public Offering"), then the Company shall,
within thirty (30) days of the receipt thereof, give written notice of such
request to all Holders, and subject to the limitations of this Section 2.2, use
its best efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered.
(b)If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information in the written
notice referred to in Section 2.2(a). In such event, the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a minority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 2.2, if the underwriter
advises the Company that marketing factors require a limitation of the number
of securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may
be included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(c)The Company shall not be required to effect a
registration pursuant to this Section 2.2:
(i)after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective;
(ii)during the period starting with the date of filing
of, and ending on the date, one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Initial Offering;
provided that the Company makes reasonable good faith efforts to cause such
registration statement to become effective;
(iii)if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to make its Initial Offering
within ninety (90) days; or
(iv)if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 2.2, a certificate
signed by the Chairman of the Board stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental
to the Company and its stockholders for such registration statement to be
effected at such time, in which event the Company shall have the right to defer
such filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided that such right to delay a request
shall be exercised by the Company not more than once in any twelve (12)
month period.
2.3 Piggyback Registrations. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30) days prior to
the filing of any registration statement under the Securities Act for purposes
of a public offering of securities of the Company (including, but not limited
to, registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations, acquisitions or other
transactions under Rule 145 of the Securities Act) and will afford each such
Holder an opportunity to include in such registration statement all or part of
such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Company, so notify the Company in writing. Such notice
shall state the intended method of disposition of the Registrable Securities by
such Holder. If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company, such
Holder shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent registration statement or 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.
(i)If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant
to this Section 2.3 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their Registrable Securities through such underwriting shall enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
(ii)Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; second, to the Holders on a pro rata basis based on the total
number of Registrable Securities held by the Holders; and third, to any
stockholder of the Company (other than a Holder) on a pro rata basis. Except
as may be required pursuant to the remainder of this subsection (ii), no such
reduction shall reduce the securities being offered by the Company for its own
account to be included in the registration and underwriting. In no event shall
the amount of securities of the selling Holders included in the registration be
reduced below thirty percent (30%) of the total amount of securities included
in such registration, unless such offering is the Initial Offering and such
registration does not include shares of any other selling stockholders, in which
event any or all of the Registrable Securities of the Holders may be excluded
in accordance with the first sentence of this subsection (ii). In no event will
shares of any other selling stockholder be included in such registration which
would reduce the number of shares which may be included by Holders without
the written consent of Holders of not less than a majority of the Registrable
Securities proposed to be sold in the offering.
(b)Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 2.3 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive
from any Holder or Holders of Registrable Securities a written request or
requests that the Company effect a registration on Form S-3 (or any successor
to Form S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a)promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of Registrable Securities; and
(b)as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 2.4:
(i)if Form S-3 (or any successor or similar form)
is not available for such offering by the Holders;
(ii)if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $1,000,000;
(iii)if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form
S-3 registration statement for a period of not more than ninety (90) days after
receipt of the request of the Holder or Holders under this Section 2.4;
provided, that such right to delay a request shall be exercised by the Company
not more than once in any twelve (12) month period; or
(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.
(c)Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders.
2.5 Expenses of Registration. Except as specifically provided
herein, all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be
borne by the holders of the securities (including Registrable Securities) so
registered pro rata on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for expenses of any
registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Holders unless (a)
the withdrawal is based upon material adverse information concerning the
Company of which the Initiating Holders were not aware at the time of such
request or (b) the Holders of a majority of Registrable Securities agree to
forfeit their right to one requested registration pursuant to Section 2.2 or
Section 2.4, as applicable (in which event such right shall be forfeited by all
Holders). If the Holders are required to pay the Registration Expenses, such
expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above,
then the Holders shall not forfeit their rights pursuant to Section 2.2 or
Section 2.4 to a demand registration.
2.6 Obligations of the Company. Whenever required to effect
the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a)Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one hundred
twenty (120) days or, if earlier, until the Holder or Holders have completed
the distribution related thereto.
(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 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(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f)Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect includes an untrue statement of 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)Furnish, at the request of a majority of the Holders
participating in the registration, 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 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 if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
2.7 Termination of Registration Rights. All registration rights
granted to a Holder under this Section 2 shall terminate and be of no further
force if (i) the Company has completed its Initial Offering and is subject to
the provisions of the Exchange Act, (ii) such Holder (together with its
affiliates, partners and former partners, members and former members) holds
less than 1% of the Company's outstanding Common Stock (treating all shares of
convertible Preferred Stock on an as converted basis), (iii) all Registrable
Securities held by and issuable to such Holder (and its affiliates, partners and
former partners, members and former members) may be sold under Rule 144
during any ninety (90) day period, and (iv) the Company's Common Stock is
traded on a national exchange or the Nasdaq National Market.
2.8 Delay of Registration; Furnishing Information.
(a)No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b)It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method
of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
(c)The Company shall have no obligation with respect to
any registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's
obligation to initiate such registration as specified in Section 2.2 or Section
2.4, whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a)To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, members, officers,
directors and legal counsel of each Holder, and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act
or the Exchange Act, against any losses, claims, damages, or liabilities (joint
or several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each
such Holder, partner, member, officer or director, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained
in this Section 2.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written 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)To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within
the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holder's partners, directors or officers or any person who controls such
Holder, against any losses, claims, damages or liabilities (joint or several) to
which the Company or any such director, officer, controlling person,
underwriter or other such Holder, or partner, director, officer or controlling
person of such other Holder may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder under an instrument duly executed by
such Holder and stated to be specifically for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, underwriter or other Holder, or partner, officer, director or
controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9(b) exceed the net proceeds from the offering
received by such Holder.
(c)Promptly after receipt by an indemnified party under
this Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(d)If the indemnification provided for in this Section 2.9
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission; provided, that in no event shall any
contribution by a Holder hereunder exceed the proceeds from the offering
received by such Holder.
(e)The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
transferred or assigned by a Holder to a transferee or assignee of Registrable
Securities which (i) is, with respect to a Holder, a stockholder, subsidiary,
parent, general partner, limited partner, retired partner, member or former
member or a liquidating trust for the benefit of any such entity, (ii) is a
Holder's family member or trust for the benefit of an individual Holder, or
(iii) acquires at least five hundred thousand (500,000) Shares (as adjusted for
stock splits, combinations and similar events); provided, however, that (A) the
transferor shall, upon such transfer, furnish to the Company written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned and (B) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement.
2.11 Amendment of Registration Rights. Subject to the terms of
the Voting Agreement, any provision of this Section 2 may be amended and
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Holders of more than two thirds of the
Registrable Securities then outstanding. Any amendment or waiver effected
in accordance with this Section 2.11 shall be binding upon each Holder and
the Company. By acceptance of any benefits under this Article II, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 Limitation on Subsequent Registration Rights. After the
date of this Agreement, the Company shall not, without the prior written
consent of the Holders of more than two thirds of the Registrable Securities
then outstanding, enter into any agreement with any holder or prospective
holder of any securities of the Company that would grant such holder
registration rights senior to those granted to the Holders hereunder.
2.13 "Market Stand-Off" Agreement. If requested by the
Company or the representative of the underwriters of Common Stock (or
other securities) of the Company, each Holder shall not sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the
Company held by such Holder (other than those included in the registration)
for a period specified by the representative of the underwriters not to exceed
one hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act, provided that:
(a)such agreement shall apply only to the Company's
Initial Offering; and
(b)all officers and directors of the Company and all
employees of the Company who are holders of at least one percent (1%) of
the Company's voting securities enter into similar agreements.
The obligations described in this Section 2.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may
be promulgated in the future. The Company may impose stop-transfer
instructions with respect to the shares of Common Stock (or other securities)
subject to the foregoing restriction until the end of said one hundred eighty
(180) day period. The Company shall use its best efforts to obtain agreements
not to sell from all future holders of in excess of one percent (1%) of the
Company's voting securities which are not less favorable to the Company that
the foregoing.
2.14 Rule 144 Reporting. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts after the Initial
Offering to:
(a)Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or
analogous rule promulgated under the Securities Act, at all times after the
effective date of the first registration filed by the Company for an offering of
its securities to the general public;
(b)File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act;
(c)So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule
144 of the Securities Act, and of the Exchange Act (at any time after it has
become subject to such reporting requirements); a copy of the most recent
annual or quarterly report of the Company; and such other reports and
documents as a Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.
SECTION 3.COVENANTS OF THE COMPANY.
3.1 Basis Financial Information and Reporting.
(a)The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered
in accordance with generally accepted accounting principles consistently
applied, and will set aside on its books all such proper accruals and reserves
as shall be required under generally accepted accounting principles
consistently applied.
(b)So long as any Shares remain outstanding, the
Company will furnish each Investor:
(i)as soon as practicable after the end of each
fiscal year, and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Company, as at the end of such fiscal year, and a
consolidated statement of income and a consolidated statement of cash flows
of the Company, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied, all in reasonable detail.
Such financial statements shall be accompanied by a report and opinion
thereon by independent public accountants selected by the Company's Board
of Directors.
(ii)as soon as practicable after the end of the first,
second and third quarterly accounting periods in each fiscal year of the
Company, and in any event within forty-five (45) days thereafter, a
consolidated balance sheet of the Company as of the end of each such
quarterly period, and a consolidated statement of income of the Company for
such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no
notes need be attached to such statements and year-end audit adjustments may
not have been made.
(iii)(A) prior to the beginning of each fiscal year an
annual budget and operating plans for such fiscal year (and as soon as
available, any subsequent revisions thereto), and (B) as soon as practicable
after the end of each quarter, and in any event within forty five (45) days
thereafter, a consolidated balance sheet of the Company as of the end of each
such quarter, and a consolidated statement of income of the Company for
such quarter and for the current fiscal year to date, including a comparison to
plan figures for such period, prepared in accordance with generally accepted
accounting principles consistently applied, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not
have been made.
(c)The right to receive Company information pursuant to
this Section 3.1 may be transferred or assigned by an Investor to a transferee
or assignee of Shares which (i) is a stockholder, subsidiary, parent, general
partner, limited partner, retired partner, member or retired member of an
Investor, (ii) is an Investor's family member or trust for the benefit of an
individual Investor, or (iii) holds at least five hundred thousand (500,000)
Shares (as adjusted for stock splits and combinations) immediately following
such transfer or assignment.
3.2 Inspection Rights. Each Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries,
and to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under
this Section 3.2 with respect to a competitor of the Company or with respect
to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and
to use its best efforts to insure that its authorized representatives use, the
same degree of care as such Investor uses to protect its own confidential
information and to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Investor may
disclose such proprietary or confidential information to any partner,
subsidiary, member or parent of such Investor for the purpose of evaluating
its investment in the Company as long as such partner, subsidiary, member or
parent is advised of and agrees to be bound by the confidentiality provisions
of this Section 3.3.
3.4 Reservation of Common Stock. The Company will at all
times reserve and keep available, solely for issuance and delivery upon the
conversion of the Shares, such number of shares of Common Stock as the
Board of Directors shall in good faith determine will be issuable upon such
conversion.
3.5 [Reserved].
3.6 Key Man Insurance. The Company will use its best efforts
to obtain and maintain in full force and effect term life insurance in the
amount of Five Hundred Thousand ($500,000) Dollars for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, naming the Company as beneficiary.
3.7 Proprietary Information and Inventions Agreement. The
Company shall require all key employees and consultants to execute and
deliver a Proprietary Information and Inventions
Agreement substantially in the form attached to the Purchase Agreement.
3.8 Interested Transactions. The Company shall not, without the
approval of a majority of the Board of Directors, with all disinterested
Directors (so long as there is at least one such disinterested Director) voting
and the approval of at least one of the Directors designated by the Investors,
authorize or enter into any transactions with any director, stockholder or
management employee, or such director's, stockholder's or employee's
immediate family.
3.9 Directors' Liability and Indemnification. The Company's
Amended and Restated Articles of Incorporation and Bylaws shall provide (i)
for elimination of the liability of director to the maximum extent permitted by
law and (ii) for indemnification of directors and officers for acts on behalf of
the Company to the maximum extent permitted by law.
3.10 Termination of Covenants. All covenants of the Company
contained in Section 3 of this Agreement shall expire and terminate as to each
Investor on the effective date of the registration statement pertaining to the
Initial Offering.
SECTION 4. ADDITIONAL RIGHTS.
4.1 Preemptive Rights. If the Company proposes to issue any
Equity Securities (as defined below), it shall give each Holder written notice
of its intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Holder
shall have fifteen (15) days from the giving of such notice to agree to purchase
its pro rata share of the Equity Securities upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Holder who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale unless the
Company can be adequately protected and indemnified from the result of such
offer or sale to the Holder. If not all of the Holders elect to purchase their
pro rata share of the Equity Securities, then the Company shall promptly notify
in writing the Holders who do so elect and shall offer such Holders the right to
acquire such unsubscribed shares. The Holders shall have fifteen (15)
additional days after receipt of such notice to notify the Company of their
election to purchase all or a portion thereof of the unsubscribed shares. If the
Holders fail to exercise in full these rights, the Company shall have ninety
(90) days thereafter to sell the Equity Securities in respect of which the
Holder's rights were not exercised, at a price and upon general terms and
conditions not materially more favorable to the purchasers thereof than
specified in the Company's notice to the Holders pursuant to Section 4.1 hereof.
If the Company has not sold such Equity Securities within ninety (90) days of
the notice provided pursuant to Section 4.1, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Holders in the manner provided above. Each Holder's pro rata share is equal
to the ratio of (A) the number of shares of the Company's Common Stock
(treating all Preferred Stock as if it were converted to Common Stock) which
such Holder is deemed to hold (without including shares subject to a
repurchase option) immediately prior to the issuance of such Equity Securities
to (B) the total number of shares of the Company's outstanding Common
Stock immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, preferred stock or
other security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, preferred stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any
Common Stock, preferred stock or other security or (iv) any such warrant or
right.
4.2 Termination of Rights. The rights established by this Section
4 shall not apply to, and shall terminate upon the effective date of the
registration statement pertaining to, the Company's Initial Offering.
4.3 Transfer of Rights. The rights of each Holder under this
Section 4 may be transferred or assigned by a Holder to a transferee or
assignee of Shares which (i) is a stockholder, subsidiary, parent corporation,
general partner, limited partner, retired partner, member or former member of
a Holder, (ii) is a Holder's family member or trust for the benefit of an
individual Holder, or (iii) holds at least five hundred thousand (500,000)
Shares (as adjusted for stock splits and combinations) immediately following
such transfer or assignment.
4.4 Excluded Securities. The preemptive rights and rights of first
refusal established by this Section 4 shall have no application to any of the
following Equity Securities:
(a)Up to 242,857 shares of Common Stock (and/or
options, warrants or other Common Stock purchase rights issued pursuant to
such options, warrants or other rights) issued or to be issued to employees,
officers or directors of, or consultants or advisors to the Company or any
subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors, including at least
one member of the Board designated by the Investors;
(b)any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or similar business
combination approved by the Board, including at least one member of the
Board designated by the Investors;
(c)shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Company;
(d)shares of Common Stock issued or issuable upon
conversion of any shares of Series A Stock issued pursuant to the Purchase
Agreement.
SECTION 5. MISCELLANEOUS.
5.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Mississippi as applied to agreements
among Mississippi residents entered into and to be performed entirely within
Mississippi.
5.2 Survival. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder
and the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by
or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate
or instrument.
5.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate
written notice of the transfer of any Registrable Securities specifying the full
name and address of the transferee, the Company may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes, including the payment of dividends
or any redemption price.
5.4 Severability. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.5 Amendment and Waiver.
(a)Except as otherwise expressly provided, this
Agreement may be amended or modified only upon the written consent of the
Company and the holders of more than two thirds of the Registrable
Securities.
(b)Except as otherwise expressly provided, the obligations
of the Company and the rights of the Holders under this Agreement may be
waived only with the written consent of the holders of eighty-five percent
(85%) of the Registrable Securities.
(c)Notwithstanding the foregoing, this Agreement may be
amended with only the written consent of the Company to include additional
purchasers of Shares as "Investors," "Holders" and parties hereto.
5.6 Delays or Omissions. It is agreed that no delay or omission
to exercise any right, power, or remedy accruing to any Holder, upon any
breach, default or noncompliance of the Company under this Agreement shall
impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval
of any kind or character on any Holder's part of any breach, default or
noncompliance under the Agreement or any waiver on such Holder's part of
any provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to
Holders, shall be cumulative and not alternative.
5.7 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified; or (ii) three (3) days after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.8 Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.9 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this
INVESTOR RIGHTS AGREEMENT as of the date first above written.
COMPANY: INVESTOR:
SUMX INC. ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. By: /s/ W. Page ▇▇▇▇▇
__________________________ ________________________
Its: President & CEO Its: President & CEO
HOLDERS:
SUMMIT RESEARCH, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
________________________
Its: President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
_____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.