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EXHIBIT 10.5
▇▇▇▇▇ MANAGEMENT SYSTEMS CORPORATION
INVESTOR RIGHTS AGREEMENT
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TABLE OF CONTENTS
PAGE
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1. GENERAL..........................................................1
1.1 Definitions.................................................1
2. REGISTRATION; RESTRICTIONS ON TRANSFER...........................2
2.1 Restrictions on Transfer....................................2
2.2 Demand Registration.........................................3
2.3 Piggyback Registrations.....................................4
2.4 Form S-3 Registration.......................................5
2.5 Expenses of Registration....................................6
2.6 Obligations of the Company..................................7
2.7 Termination of Registration Rights..........................8
2.8 Delay of Registration; Furnishing Information...............8
2.9 Indemnification.............................................8
2.10 Assignment of Registration Rights..........................10
2.11 Amendment of Registration Rights...........................10
2.12 Limitation on Subsequent Registration Rights...............10
2.13 "Market Stand-Off" Agreement...............................10
2.14 Rule 144 Reporting.........................................11
2.15 Indemnification and Contribution...........................11
3. COVENANTS OF THE COMPANY........................................12
3.1 Basic Financial Information and Reporting..................12
3.2 Inspection Rights..........................................13
3.3 Confidentiality of Records.................................13
3.4 Reservation of Common Stock................................13
3.5 Key Man Insurance..........................................13
3.6 Proprietary Information and Inventions Agreement...........13
3.7 Related Party Transactions.................................13
3.8 Board of Directors Approval................................13
3.9 Directors' Liability and Indemnification...................14
3.10 Reincorporation............................................14
3.11 Executive Compensation.....................................14
3.12 Real Property Holding Corporation..........................15
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3.13 Stipulated Activities.............................................. 15
3.14 Termination of Covenants........................................... 15
4. MISCELLANEOUS........................................................... 15
4.1 Governing Law...................................................... 15
4.2 Survival........................................................... 15
4.3 Successors and Assigns............................................. 15
4.4 Entire Agreement................................................... 16
4.5 Severability....................................................... 16
4.6 Amendment and Waiver............................................... 16
4.7 Delays or Omissions................................................ 16
4.8 Notices............................................................ 16
4.9 Attorneys' Fees.................................................... 16
4.10 Titles and Subtitles............................................... 17
4.11 Counterparts....................................................... 17
Attachment A Schedule of Investors A-1
Attachment B Form of Indemnity Agreement B-1
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▇▇▇▇▇ MANAGEMENT SYSTEMS CORPORATION
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as
of the 27th day of February, 1998, by and among ▇▇▇▇▇ MANAGEMENT SYSTEMS
CORPORATION, a California corporation (the "Company"), and the purchasers of
the Company's Series D Preferred Stock ("Series D Stock") set forth on Exhibit
A-1 of that certain Series D Preferred Stock Purchase Agreement of even date
herewith (the "Purchase Agreement") and Attachment A hereto. The purchasers of
the Series D Stock shall be referred to hereinafter as the "Investors" and each
individually as an "Investor."
RECITALS
WHEREAS, pursuant to the Purchase Agreement, the Investors propose to
purchase an aggregate of Six Million Eight Hundred Thousand (6,800,000) shares
of the Company's Series D Stock, of which Five Million Six Hundred Fifteen
Thousand Eight Hundred Sixty-Seven (5,615,867) shall be issued and sold by the
Company to the Investors and an aggregate of One Million One Hundred
Eighty-Four Thousand One Hundred Thirty-Three (1,184,133) shall be sold to the
Investors by certain holders of outstanding shares of Series D Stock (the
"Shareholders"), which shares represent all shares of Series D Stock currently
held by such Shareholders; and
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.
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:
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.
"FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the
Securities Act.
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"REGISTER," "REGISTERED," AND "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; (b) Common Stock of the Company
issued or issuable upon exercise of that certain Warrant to purchase 250,000
shares of Common Stock issued to Westminster Health Care Limited and dated as of
the date hereof; and (c) 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 transferror's rights under Section 2
of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Fifteen Thousand Dollars ($15,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SEC" OR "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean (i) the Company's Series D Stock issued and sold
by the Company and (ii) the Company's Series D Stock sold by the Shareholders
pursuant to the Purchase Agreement, and held by the Investors listed on Exhibit
A hereto and their permitted assigns.
2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
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(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 in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder; provided that in each
case the transferee will be subject to the terms of this Agreement to the same
extent as if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be
stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or 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.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of more than thirty percent
(30%) of the Registrable Securities then outstanding (the "Initiating Holders")
that the Company file a registration statement under the Securities Act
covering the registration of Registrable Securities having an aggregate
offering price to the public in excess of $15,000,000 (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.
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(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority 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 or Section 2.4, 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) prior to the second anniversary of the date of this
Agreement; or
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective; or
(iii) during the period starting with the date of filing of, and
ending on the date one hundred eighty (180) days following the effective date
of the registration statement pertaining to the Initial Offering; provided that
the Company makes reasonable good faith efforts to cause such registration
statement to become effective;
(iv) if within thirty (30) days of receipt of a written request
from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to
the Holders of the Company's intention to make its Initial Offering within
ninety (90) days; or
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by
the Chairman of the Board 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 shareholders 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 twice 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 or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to
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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. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting
or (ii) reduce the amount of securities of the selling Holders included in the
registration below twenty-five (25%) 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 shareholders, in which
event any or all of the Registrable Securities of the Holders may be excluded in
accordance with the immediately preceding sentence. In no event will shares of
any other selling shareholder 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
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all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company,
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose
to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $500,000, or
(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 shareholders 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) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or
(v) 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. All such Registration Expenses incurred in
connection with registrations requested pursuant to this Section 2.4 after the
first two (2) registrations shall be paid by the selling Holders pro rata in
proportion to the number of shares sold by each.
2.5 EXPENSE OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be
borne by the holders of the securities so registered pro rata on the basis of
the number of shares so registered. The Company shall not, however, be required
to pay for expenses of any registration proceeding begun pursuant to Section
2.2 or 2.4, the request of which has been subsequently withdrawn by the
Initiating Holders unless (a) the withdrawal is based upon material adverse
information concerning the Company of which the Initiating Holders were not
aware at the time of such request or (b) the Holders of a majority of
Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2 or Section 2.4, as applicable, in which
event such right shall be forfeited by all Holders). If the Holders are
required to pay the Registration Expenses, such expenses shall be borne by the
holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
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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 ninety (90) 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.
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2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (a) the Company has completed its
Initial Offering and is subject to the provisions of the Exchange Act, (b) 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 share of convertible Preferred Stock on an as converted basis) and
(c) all Registrable Securities held by and issuable to such Holder (and its
affiliates, partners and former partners) may be sold under Rule 144 during any
ninety (90) day period.
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, officers, directors and legal counsel
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation") by the
Company: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, any state securities
law or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each
such Holder, partner, officer, director, legal counsel, 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
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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, officer, director, legal counsel,
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, legal counsel, controlling person, underwriter or other
Holder, or partner, officer, director, legal counsel or controlling person of
such other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action if it is judicially determined that there
was such a Violation; provided, however, that the indemnity agreement contained
in this Section 2.9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the 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
9
13
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 the Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner or retired partner, member
or former member of a Holder, (b) is a Holder's family member or trust for the
benefit of an individual Holder, or (c) acquires at least two hundred fifty
thousand (250,000) shares of Registrable Securities (as adjusted for stock
splits and combinations); provided, however, (i) the transferor shall, within
ten (10) days after such transfer, furnish to the Company written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned and (ii) such transferee
shall agree to be subject to all restrictions set forth in this Agreement.
Notwithstanding the foregoing, and transfer effected pursuant to Section 2.3 of
the Stock Purchase Agreement shall not be subject to the limitation set forth in
subsection (c) above.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this 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 a majority 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. Each Holder hereby agrees that
such 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 of Common Stock (or other securities) of the Company 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:
10.
14
(i) such agreement shall apply only to the Company's Initial
Offering; and
(ii) all officers and directors of the Company and holders of
at least one percent (1%) of the Company's voting securities enter into similar
agreements.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. 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.
2.14 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities
to the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(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.
2.15 INDEMNIFICATION AND CONTRIBUTION. In addition to the
indemnification obligations of the Company pursuant to Sections 2.9 and 3.9
hereto:
(a) The Company agrees to indemnify and hold harmless each Investor
and its general partners (collectively, the "Indemnitees") against any
investigations, proceedings, claims, or actions and for any expenses, damages,
liabilities, or losses (joint or several) arising out of any such
investigation, proceeding, claim or action, to which any such Investor may
become subject under the Securities Act and any rules or regulation promulgated
thereunder, the Exchange Act and any rules or regulations promulgated
thereunder, or any state law or regulation, or common law, arising out of,
related to or in any way attributable to an Indemnitee's investment in the
Company that arise out of or are based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company contained herein
or in the Purchase Agreement, (ii) any untrue statement or alleged omission to
state a material fact in any registration statement filed by the Company or any
amendment or supplement thereto, or (iii) any untrue statement or alleged
untrue statement of any material fact or the omission or alleged omission to
state a material fact in any prospectus distributed by the Company or any
amendment or supplement thereto or (iv) any round of financing of the Company
(including but not limited to non-participation or non-pro rata
11.
15
participation), or (v) any statement by or on behalf of the Company or action
taken by or on behalf of the Company. Upon written request, the Company agrees
to reimburse each Indemnitee for any legal or other expenses reasonably
incurred in connection with investigating or defending any such investigation,
proceeding, claim, or action, as such expenses or other costs are incurred;
provided, however, each Indemnitee shall reimburse the Company for any such
sums paid to it if it is ultimately determined by final judgment of a court of
competent jurisdiction that such Indemnitee is not entitled to indemnification.
The Indemnitees, collectively, may select their own counsel. This indemnity
agreement shall extend upon the same terms and conditions to, and shall inure
to the benefit of, each person, if any, who controls any Indemnitee within the
meaning of the Securities Act or the Exchange Act.
3. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will
set aside on its books all such proper accruals and reserves as shall be
required under generally accepted accounting principles consistently applied.
(b) 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, the
Company will furnish each Investor 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 and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
public accountants of national standing selected by the Company's Board of
Directors.
(c) The Company will furnish each Investor, 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 and a
consolidated statement of cash flows of the Company for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
(d) So long as an Investor (with its affiliates) shall own not less
than two hundred fifty thousand (250,000) shares of Registrable Securities (as
adjusted for stock splits and combinations) (a "Major Investor"), the Company
will furnish each such Major Investor (i) at least thirty (30) days prior to
the beginning of each fiscal year an annual budget and operating plans for such
fiscal year (and as soon as available, any subsequent revisions thereto); and
(ii) as soon as practicable after the end of each month, and in any event
within twenty (20) days thereafter, a consolidated balance sheet of the Company
as of the end of each such month, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such month 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.
12.
16
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries,
and to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested at all 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 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 or parent of such Investor for the purpose of evaluating its
investment in the Company as long as such partner, subsidiary or parent is
advised of 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
Series D Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 KEY MAN INSURANCE. Subject to the approval of the Board of Directors,
the Company will use its best efforts to obtain and maintain in full force and
effect term life insurance in the amount of two million dollars ($2,000,000) on
the lives of each of ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ and one million dollars
($1,000,000) on the life of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, naming the Company as
beneficiary.
3.6 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in the form attached to the Purchase
Agreement.
3.7 RELATED PARTY TRANSACTIONS. The Company shall not enter into any
agreement with any shareholder, officer or director of the Company, or any
"affiliate" or "associate" of any such person (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity, without the consent of at least a
majority of the members of the Company's Board of Directors having no interest
in such agreement or arrangement.
3.8 BOARD OF DIRECTORS APPROVAL. The Company shall not, without the
approval of a majority of the Board of Directors with all Directors voting,
take any of the following actions:
(a) repurchase or redeem any equity securities, pay or declare a
dividend, whether in cash or property, or otherwise authorize any distribution
to shareholders (except for acquisitions of common stock by the Company
pursuant to agreements which permit the company to repurchase such shares upon
termination of employment, the exercise of the Company's right of first refusal
upon a proposed transfer, or as set forth in Company's Articles of
Incorporation in connection with the rights preferences and privileges of the
Series D Stock);
(b) purchase equity securities of, loan to or invest in any business
entity more than one hundred thousand ($100,000) dollars;
13.
17
(c) incur any debt in any twelve month period in excess of one
hundred thousand ($100,000) dollars, except pursuant to short term commercial
lending arrangements of six months or less for working capital purposes or in
accordance with the company's budget as previously approved by the company's
Board of Directors or otherwise in the ordinary course of business in accordance
with the Company's past practices;
(d) sell or otherwise transfer securities of any of its subsidiaries
to any third party;
(e) except as required by law in the event of an employee's
termination, pay any deferred salaries or fees except for those employees' and
directors' salaries and fees incurred from October 1, 1997 to the date hereof;
or
(f) make any fundamental change in the operations of the Company as
now conducted or as proposed to be conducted.
3.9 DIRECTORS' LIABILITY AND INDEMNIFICATION. The Company's Articles of
Incorporation and Bylaws shall provide (a) for elimination of the liability of
director to the maximum extent permitted by law and (b) for indemnification of
directors for acts on behalf of the Company to the maximum extent permitted by
law. In addition, the Company shall enter into and use its best efforts to at
all times maintain indemnification contracts substantially in the form attached
as Attachment B hereto with each of its directors to indemnify such directors to
the maximum extent permissible under California law.
3.10 REINCORPORATION. Subject to the approval of the Board of Directors and
the shareholders of the Company, the Company shall, within six (6) months of the
date hereof, reincorporate the Company in the State of Delaware. In the event of
any delay, the Company shall use its best efforts to effect such reincorporation
as promptly as possible following the expiration of such six (6) month period.
3.11 EXECUTIVE COMPENSATION. Subject to the approval of the Board of
Directors of the Company, promptly following the date hereof, (a) the Company
and ▇▇▇▇▇ ▇▇▇▇ ("▇▇▇▇") shall enter into an agreement which shall include,
without limitation, provision for (i) Lang's waiver of all prospective bonuses
or commissions that may otherwise be due under agreements between Lang and the
Company as of the date hereof, (ii) bonuses to be paid to Lang based upon
performance criteria mutually agreed upon by Lang and the Company, and (iii) a
waiver of all deferred compensation owed to Lang by the Company as of the date
hereof in exchange for the right to receive, as a performance bonus, $335,000
upon an Initial Offering, or a change of control (as defined below) in which the
aggregate proceeds payable to the Company and/or its Shareholders exceeds Forty
Million Dollars ($40,000,000) and (b) the Company and ▇▇▇▇▇▇▇ ▇▇▇ ("▇▇▇") shall
enter into an agreement which shall include, without limitation, provision for
(i) Kay's waiver of all prospective bonuses or commissions that may otherwise be
due under agreements between ▇▇▇ and the Company as of the date hereof and (ii)
bonuses to be paid to ▇▇▇ based upon performance criteria mutually agreed upon
by ▇▇▇ and the Company.
A "Change in Control" shall be deemed to have occurred if (i) a tender
offer shall be made and consummated for the ownership of more than fifty percent
(50%) of the outstanding voting securities of the Company, (ii) the Company
shall be merged or consolidate with another corporation and as a result of such
merger or consolidation less than fifty percent (50%) of the outstanding voting
securities of the surviving or resulting corporation shall be owned in the
aggregate by the former shareholders of the Company, as the same shall have
existed immediately prior to such merger or consolidation, (iii) the Company
shall sell all or substantially all of its assets to another corporation which
is not a wholly-owned subsidiary, or (iv) a person within the meaning of Section
3(a)(9) or Section 13(d)(3) (as in effect on the date hereof) of the
14.
18
Securities and Exchange act of 1934 ("Exchange Act"), shall acquire more than
fifty percent (50%) of the outstanding voting securities of the Company
(whether directly, indirectly, beneficially or of record). For purposes hereof,
ownership of voting securities shall take into account and shall including
ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) (as
in effect on the date hereof) pursuant to the Exchange Act.
3.12 REAL PROPERTY HOLDING CORPORATION. The Company covenants that it will
operate in a manner such that it will not become a "United States real property
holding corporation" as that term is defined in Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder
("FIRPTA"). The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
Section 1.897-2(h), or any supplementary or successor provision thereto. Within
30 days of a request from an Investor or any of its partners, the Company will
inform the requesting party, in the manner set forth in Reg. Section
1.897-2(h)(1)(iv) or any supplementary or successor provision thereto, whether
that party's interest in the Company constitutes a United States real property
interest (within the meaning of Internal Revenue Code Section 897(c)(1) and the
regulations thereunder) and whether the Company has provided to the Internal
Revenue Service all required notices as to its USRPHC status.
3.13 STIPULATED ACTIVITIES. Each senior officer of the Company (each, a
"Principal") shall, within ten (10) days of the occurrence thereof, provide the
Board of Directors of the Company with a list and description of each
Stipulated Activity (as defined in the Purchase Agreement) in which such
Principal is engaged or otherwise involved which has commenced, expired or been
modified since such Principal delivered the most recent such list and
description to the Board of Directors.
3.14 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.
4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
4.2 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.
4.3 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.
15.
19
4.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
4.5 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and unenforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
4.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least a majority of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority 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.
4.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default, or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
4.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
4.9 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
16.
20
4.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.11 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.
17.
21
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR RIGHTS
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
▇▇▇▇▇ MANAGEMENT SYSTEMS CORPORATION BEDROCK CAPITAL PARTNERS I, L.P.
By: /s/ [ILLEGIBLE] By:
--------------------------------- --------------------------------
Title: [ILLEGIBLE] Title:
------------------------------ -----------------------------
BEDROCK CAPITAL SIDE-BY-SIDE, L.P.
By:
--------------------------------
Title:
-----------------------------
GREYLOCK IX LIMITED PARTNERSHIP
BY: GREYLOCK IX GP LIMITED
PARTNERSHIP,
ITS GENERAL PARTNER
By: /s/ [ILLEGIBLE]
--------------------------------
SEQUOIA CAPITAL VII
A CALIFORNIA LIMITED PARTNERSHIP
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
SEQUOIA TECHNOLOGY PARTNERS VII
A CALIFORNIA LIMITED PARTNERSHIP
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
22
SQP 1997
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
SEQUOIA 1997 LLC
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
SEQUOIA INTERNATIONAL PARTNERS
BY: SC VII-A MANAGEMENT, LLC A
CALIFORNIA LIMITED LIABILITY
COMPANY,
ITS GENERAL PARTNER
By:
--------------------------------
Managing Member
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT