EXHIBIT 10.4
CENTILLIUM TECHNOLOGY CORPORATION
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
This SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the
"Agreement") is made as of this 30th day of April 1999, by and among Centillium
Technology Corporation, a California corporation (the "Company"), a majority of
the holders of Series A Preferred Stock and a majority of the holders of Series
B Preferred Stock of the Company (the "Existing Majority Holders") on behalf of
all the holders of Series A Preferred Stock and Series B Preferred Stock (the
"Existing Preferred Holders"), the purchasers of shares of Series C Preferred
Stock (the "Series C Preferred") of the Company (the "Series C Purchasers") and
the founders of the Company identified on Exhibit A hereto (the "Founders"; the
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Founders, the Existing Preferred Holders and the Series C Purchasers,
collectively, the "Stockholders"). Each of the Stockholders are identified by
name and ownership of shares of the Company's capital stock on Exhibit B hereto.
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R E C I T A L S
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A. The Company proposes to enter into a Series C Preferred Stock Purchase
Agreement to be dated the date hereof (the "Series C Purchase Agreement") with
the Series C Purchasers pursuant to which the Company shall sell in the
aggregate 7,535,400 shares of its Series C Preferred to the Series C Purchasers
in one or more closings.
B. The Company and certain of the Stockholders are parties to that certain
First Amended and Restated Investor Rights Agreement dated as of July 31, 1997
(the "Prior Agreement").
C. The Prior Agreement between the Company and certain Stockholders sets
forth all the investor rights of the Stockholders.
D. Pursuant to Section 10 of the Prior Agreement, the Prior Agreement may
be amended with the written consent of the Company and the Existing Majority
Holders.
E. In order to induce the Series C Purchasers to enter into the Series C
Purchase Agreement, the Company and the Existing Majority Holders have agreed to
amend and fully restate the Prior Agreement and execute this Agreement.
NOW, THEREFORE, the parties hereto agree that (i) the Prior Agreement and
all other agreements, written or oral, to register Company securities are
terminated and of no further force and effect, and (ii) the Company and the
Stockholders accept and agree to the termination of all prior investor rights
and accept and agree to be bound by the terms of this Agreement. In
consideration of the mutual promises and covenants hereinafter set forth, all
parties hereto agree as follows:
1. Certain Definitions. All capitalized terms used and not otherwise
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defined herein shall have the meanings given them in the Series C Purchase
Agreement. As used in this Agreement, the following terms shall have the
following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
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other federal agency at the time administering the Securities Act.
"Company Registration Statement" shall have the meaning set forth in
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Section 5.1(a)(ii)(C).
"Conversion Stock" means the Common Stock issued or issuable pursuant
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to conversion of the Preferred Stock.
"Holder" shall mean (i) any of the Preferred Stockholders holding
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Registrable Securities, and (ii) any person holding Registrable Securities to
whom the rights under this Agreement have been transferred in accordance with
Section 5.9 hereof.
"Initiating Holders" shall mean any Holders who in the aggregate hold
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not less than twenty percent (20%) of the Registrable Securities.
"Preferred Stock" shall mean the Series A Preferred Stock, the Series
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B Preferred Stock and the Series C Preferred.
"Preferred Stockholders" shall mean those Stockholders holding
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Preferred Stock.
"Qualified Offering" shall have the meaning set forth in Section 7(e)
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hereof.
"Registrable Securities" means the Conversion Stock and any Common
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Stock of the Company issued or issuable in respect of the Conversion Stock upon
any stock split, stock dividend, recapitalization, or similar event, or any
Common Stock otherwise issuable with respect to the Conversion Stock; provided,
however, that shares of Conversion Stock or other securities shall only be
treated as Registrable Securities if and so long as they have not been sold to
or through a broker or dealer or underwriter in a public distribution or a
public securities transaction.
The terms "register," "registered" and "registration" refer to a
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registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as stated in
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Section 5.4 hereof, incurred by the Company in complying with Sections 5.1, 5.2
and 5.3 hereof, including, without limitation, all registration, qualification
and filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
(i) the compensation of regular employees of the Company which shall be paid in
any event by the
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Company and (ii) underwriting discounts and commissions) and fees and
expenses of one counsel for all Holders as appointed by the Holders and
reasonably acceptable to the Company.
"Restricted Securities" shall mean the securities of the Company
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required to bear the legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
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any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
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commissions and stock transfer taxes applicable to the securities registered by
the Holders and, except as set forth under "Registration Expenses", all
reasonable fees and disbursements of counsel for any Holder.
2. Restrictions on Transferability. The Conversion Stock and any other
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securities issued in respect of the Conversion Stock upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall not be
sold, assigned, transferred or pledged except upon the conditions specified in
this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Holder will cause any proposed purchaser,
assignee, transferee, or pledgee of any such shares held by the Holder to agree
to take and hold such securities subject to the provisions and upon the
conditions specified in this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Conversion
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Stock and (ii) any other securities issued in respect of the Conversion Stock
upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of Section 4
below) be stamped or otherwise imprinted with a legend in substantially the
following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE
OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS COVERING THE
PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY.
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Each Holder consents to the Company's making a notation on its records
and giving instructions to any transfer agent for the Conversion Stock in order
to implement the restrictions on transfer established in this Agreement.
4. Notice of Proposed Transfers. The holder of each certificate
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representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, (ii) in transactions
involving the distribution without consideration of Restricted Securities by a
Preferred Stockholder to any of its partners or members, or retired partners or
members, or to the estate of any of its partners or members or retired partners
or members (iii) any transfer to any affiliate controlled by or under common
control with any Preferred Stockholder or (iv) in transactions in compliance
with Rule 144), unless there is in effect a registration statement under the
Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied, at such holder's expense by either
(i) an unqualified written opinion of legal counsel who shall be, and whose
legal opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (ii) a "no
action" letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. It is agreed that the Company will not request an
opinion of counsel for the holder for transactions made in reliance on Rule 144
under the Securities Act except in unusual circumstances, the existence of which
shall be promptly determined in good faith by the Board of Directors of the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear, except if such transfer is made pursuant to Rule 144,
the appropriate restrictive legend set forth in Section 3 above, except that
such certificate shall not bear such restrictive legend if in the opinion of
counsel for such holder (if required above) and the Company such legend is not
required in order to establish compliance with any provision of the Securities
Act.
5. Registration.
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5.1 Requested Registration.
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(a) Request for Registration. In case the Company shall receive
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from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to at least twenty
percent (20%) of the Registrable Securities, or any lesser number of shares
of Registrable Securities if the anticipated aggregate offering price, net
of underwriting discounts and commissions would exceed $25 million, the
Company will:
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(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect
such registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within fifteen (15) days after receipt of such written notice
from the Company;
Provided, however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 5.1:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) Prior to twelve (12) months after the effective
date of the Company's first registered public offering of its stock, or prior to
April 1, 2000, whichever is earlier;
(C) Following notice to the Holders by the Company,
during the period starting with the date sixty (60) days prior to the Company's
estimated date of filing of, and ending on the date six (6) months immediately
following the effective date of, any registration statement pertaining to
securities of the Company ("Company Registration Statement") (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective; and provided further that if the Company shall not have filed the
Company Registration Statement within 60 days of the notice to the Holders, the
Company shall use its best efforts thereafter to effect the registration
requested pursuant to Section 5.1(a) as soon as practicable;
(D) After the Company has effected two such
registrations pursuant to this subparagraph 5.1(a), and such registrations have
been declared or ordered effective and each has remained effective until the
earlier to occur of 90 days or the sale of all of the securities offered
pursuant to such registration;
(E) If the Company shall furnish to such Initiating
Holders a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company or its stockholders for a registration
statement to be filed in the near future, then the Company's obligation to use
its best efforts to register, qualify or comply under this Section 5.1 shall be
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deferred for a period not to exceed ninety (90) days from the date of receipt of
written request from the Initiating Holders, provided that the Company may not
exercise this deferral right more than once per twelve (12) month period; and
provided further that the Company shall not be entitled to exercise this
deferral right if the Company had exercised the deferral right in Section
5.1(a)(ii)(C) in the previous 12 months.
Subject to the foregoing clauses (A) through (E), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. If the Initiating Holders intend to distribute the
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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
Section 5.1(a), and the Company shall include such information in the written
notice given pursuant to Section 5.1(a)(i). The managing underwriter will be
selected by a majority in interest of the Initiating Holders, provided that such
managing underwriter is reasonably acceptable to the Company. In such event, the
right of any Holder to include his 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.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter. Notwithstanding any other
provision of this Section 5.1, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
Holders of Registrable Securities, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders at the time of
filing the registration statement. Neither the Company nor any other holders of
Company securities may participate in the proposed offering if any Holders have
been cut back pursuant to this Section 5.1(b). No Registrable Securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. To facilitate the allocation
of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall continue to
be subject to the terms of this Agreement including Section 6 hereof.
5.2 Company Registration.
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(a) Notice of Registration. If at any time or from time to time
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the Company shall determine to register any of its equity securities, either for
its own account or the
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account of a security holder or holders, other than (i) a registration relating
solely to employee benefit plans, (ii) a registration relating solely to a Rule
145 transaction, or (iii) a registration in which the only equity security being
registered is Common Stock issuable upon conversion of convertible debt
securities which are also being registered, the Company will:
(i) promptly give to each Holder and Founder written notice
thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within twenty (20) days after receipt of such written notice
from the Company, by any Holder or Founder.
(b) Underwriting. If the registration of which the Company gives
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notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders and the Founders as a part of the written
notice given pursuant to Section 5.2(a)(i). In such event the right of any
Holder and any Founder to registration pursuant to this Section 5.2 shall be
conditioned upon such Holder's or Founder's participation in such underwriting,
and the inclusion of Registrable Securities in the underwriting shall be limited
to the extent provided herein.
All Holders and Founders proposing to distribute their securities through
such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 5.2, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may exclude some or all of the Registrable Securities, or securities
of other holders of registration rights other than persons exercising demand
registration rights, from such registration, except that other than with respect
to the Company's initial public offering, the Holders will be entitled to
include, on a pro rata basis, Registrable Securities in an aggregate amount
equal to at least thirty percent (30%) of the offering. The Company shall
advise all Holders, Founders and other holders distributing their securities
through such underwriting of any limits imposed on their participation in the
underwriting as provided in this Section 5.2(b). The number of shares of
Registrable Securities, or securities of other holders of registration rights
other than persons exercising demand registration rights, that may be included
in the registration and underwriting in accordance with this Section 5.2(b)
shall be allocated among all the Holders, Founders and such other holders of
securities not exercising demand registration rights shall be allocated in the
following priority: first to Holders of Registrable Securities up to seventy
percent (70%) of the total number of shares to be included in the secondary
portion of the offering (and pro rata among such holders on the basis of all
Registrable Securities then held by such holders) provided that such amount is
not less than 30% of the offering; second, to Founders, to the extent of ten
percent (10%) of the total number of shares to be included in the secondary
portion of the offering (and pro rata among the Founders on the basis of all
Common Stock then held by the Founders); and third among all other shareholders
of the Company in proportion, as nearly as
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practicable, to the respective amounts of securities which they had requested to
be included in such registration at the time of filing of the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder,
Founder or other holder to the nearest 100 shares.
If any Holder, Founder or other holder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall continue
to be subject to the terms of this Agreement including Section 6 hereof.
(c) No shareholder of the Company shall be granted any rights
superior to those granted to the Preferred Stockholders pursuant to this Section
5.2 without the prior consent of more than 50% of (i) the then outstanding
shares of Preferred Stock plus (ii) if some or all of the Preferred has been
converted into Common Stock, the Conversion Stock issued pursuant to such
conversion.
(d) Right to Terminate Registration. The Company shall have the
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right to terminate or withdraw any registration initiated by it under this
Section 5.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
5.3 Registration on Form S-3.
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(a) If any Holder or Holders of at least 5% of the then
outstanding Registrable Securities request that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of all or some of the shares of the Registrable Securities held by such Holder
or Holders the reasonably anticipated aggregate price to the public of which,
net of underwriting discounts and commissions, would exceed two million dollars
($2,000,000), and the Company is a registrant entitled to use Form S-3 to
register the Registrable Securities for such an offering, the Company shall use
its best efforts to cause such Registrable Securities to be registered for the
offering on such form and to cause such Registrable Securities to be qualified
in such jurisdictions as such Holder or Holders may reasonably request. The
Company shall inform other Holders of the proposed registration and offer them
the opportunity to participate. In the event the registration is proposed to be
part of a firm commitment underwritten public offering, the substantive
provisions of Section 5.1(b) shall be applicable to each such registration
initiated under this Section 5.3. The Company may include other shares of Common
Stock in any of the registrations provided for in this Section 5.3, provided
that such inclusion will not interfere with the marketing (including the price
to the public) of the Registrable Securities to be registered by the Holders.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 5.3:
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration,
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qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act;
(ii) during the period starting with the date sixty (60)
days prior to the Company's estimated date of filing of, and ending on the date
six (6) months immediately following, the effective date of any Company
Registration Statement (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; and provided further that if the
Company shall not have filed the Company Registration Statement within 60 days
after the notice to the Holders, the Company shall use its best efforts to
effect the registration requested pursuant to Section 5.3(a) as soon as
practicable; or
(iii) if the Company shall furnish to such Holder or
Holders a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company or its shareholders for registration
statements to be filed in the near future, then the Company's obligation to use
its best efforts to file a registration statement shall be deferred for a period
not to exceed sixty (60) days from the receipt of the request to file such
registration statement by such Holder or Holders, provided that the Company may
not exercise this deferral right more than once per twelve (12) month period and
provided further that the Company shall not be entitled to exercise this
deferral right if the Company had exercised the deferral right in Section
5.3(b)(ii) in the previous 12 months.
5.4 Expenses of Registration. Registration Expenses incurred in
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connection with (i) up to two requested registrations pursuant to Section 5.1,
(ii) all company registrations pursuant to Section 5.2, and (iii) all Form S-3
registrations pursuant to Section 5.3 shall be borne by the Company. Selling
Expenses shall be borne by the selling shareholders incurring such expenses.
5.5 Registration Procedures. In the case of each registration,
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qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense, the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least ninety (90)
days or until the distribution described in the registration statement has been
completed, whichever first occurs; provided, however, that (i) such 90-day
period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (i) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 90-day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor
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rule under the Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section 10(a)(3) of the
Act or (II) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15 (d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents (including amendments or supplements
thereto) as such Holders or underwriters may reasonably request in order to
facilitate the public offering of such securities.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdiction, unless the Company is
already subject to service in such jurisdiction.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. 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 Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and as
promptly as practicable amend or supplement the prospectus to correct such
misstatement or omission.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
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(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 5.5, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 5.5, 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 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, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated 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, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
(j) In the event of any underwritten public offering, cooperate with
the Holders requesting registration pursuant to this Section, the underwriters
participating in the offering and their counsel in any due diligence
investigation reasonably requested by the Holders or the underwriters in
connection therewith, and participate, to the extent reasonably requested by the
managing underwriter for the offering or the Holders, in efforts to sell the
Registrable Securities under the offering (including without limitation,
participating in "roadshow" meetings with prospective investors) that would be
customary for underwritten primary offerings of a comparable amount of equity
securities by the Company.
5.6 Indemnification.
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(a) The Company will indemnify each Holder, each of such Holder's
officers, directors, members, partners, legal counsel and agent, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or any violation by the
Company of the Securities Act of 1933, the Securities Exchange Act of 1934,
state securities law or any rule or regulation promulgated under such laws
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of such Holder's officers and directors, and
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members, partners, legal counsel, agents and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and any other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating, preparing or defending of any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein; provided, however, that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any such
untrue statement, alleged untrue statement, omission or alleged omission made in
a preliminary prospectus on file with the Commission at the time the
registration statement becomes effective or the amended prospectus filed with
the Commission pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any underwriter or any Holder, if
there is no underwriter, if a copy of the Final Prospectus was not furnished to
the person asserting the loss, liability, claim or damage at or prior to the
time such action is required by the Securities Act, and if the Final Prospectus
would have cured the defect giving rise to the loss, liability, claim or damage.
(b) Each Holder severally, and not jointly will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of such Holder's officers and
directors and each person controlling such Holder within the meaning of Section
15 of the Securities Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred, as such expenses are incurred, in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
Notwithstanding the foregoing, the liability of each Holder under this
subsection 5.6(b) shall be limited in an amount equal to the net proceeds
received from the sale of the shares sold by such Holder.
(c) Each party entitled to indemnification under this Section 5.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any
-12-
claim as to which indemnity may be sought, and shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall conduct
the defense of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Agreement unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action and provided further, that
the Indemnifying Party shall not assume the defense for matters as to which
there is a conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation or which
includes an admission of fault on behalf of the Indemnified Party.
(d) If the indemnification provided for in this Section 5.6 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall to the extent permitted by applicable law contribute to
the amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by 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 the
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. Notwithstanding the foregoing,
the amount to be contributed by any Holder under this Section 5.6(d) shall be
limited to an amount equal to the net proceeds received from the sale of the
shares sold by such Holder.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and the Holders under this Section
5.6 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement. No Indemnifying
Party 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 each
Indemnified Party of a release from all liability in respect to such claim or
litigation;
-13-
provided, that no Indemnified Party shall consent to entry of any judgment or
enter into any settlement without the consent of Indemnifying Party. No person
guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
5.7 Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
5.8 Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use all reasonable efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (at any time after it has become
subject to such reporting requirements); and
(c) So long as the Holder owns any Restricted Securities to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as the
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing the Holder to sell any such securities without
registration.
5.9 Transfer of Registration Rights. The rights to cause the Company
-------------------------------
to register securities granted to the Holders under Sections 5.1, 5.2 and 5.3
may be assigned to a transferee or assignee in connection with (a) any transfer
or assignment of 100,000 (as adjusted for stock splits, stock dividends,
recapitalizations and the like) or more shares of Registrable Securities by the
Holder to one or more persons in a single transaction or series of related
transactions, provided that (i) the Company is given notice thereof and the
transferee covenants to be bound by the provisions of this Agreement and (ii)
such transfer may otherwise be affected in accordance with applicable securities
laws or (b) any transfer or assignment of Registrable Securities by the Holder
to partners, members or affiliates of such Holder.
-14-
5.10 Termination of Registration Rights. The rights granted pursuant
----------------------------------
to Sections 5.1, 5.2 and 5.3 of this Agreement shall terminate at the earlier of
(i) five (5) years after the date of the closing of the Company's initial public
offering, or (ii) with respect to a Holder, at such time as the Holder is able
to sell all of such Holder's shares pursuant to Rule 144 promulgated under the
Securities Act, during any three (3) month period provided that the Company is
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended.
5.11 Subsequent Registration Rights. From and after the date of this
------------------------------
Agreement, the Company shall not grant any registration rights to subsequent
purchasers of the Company's equity securities that are, in the good faith
judgment of the Company's Board of Directors, superior to the registration
rights granted to the Preferred Stockholders hereunder without the prior written
consent of the holders of at least 51% of the Registrable Securities.
6. Standoff Agreement. In connection with the initial public
------------------
offering of the Company's securities, each Holder agrees, upon request of the
Company or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any securities of the Company (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the effective date of such
registration as may be requested by the underwriters, provided that the officers
and directors of the Company who own stock or options of the Company and holders
at least 1% of the Company's capital stock also agree to such restrictions;
provided, further, that the Company and its underwriters will not release any
party from such restrictions without (i) providing the Holders at least five
days' prior written notice and (ii) simultaneously releasing the Holders to the
same extent from any lock-up letter or similar agreement to which they are a
party; and provided, further, that such restrictions shall not apply to
securities of the Company purchased in the initial public offering or purchased
in the open market following the initial public offering. The Holders agree
that the Company may instruct its transfer agent to place stop-transfer
notations in its records to enforce the provisions of this Section 6.
Notwithstanding anything herein to the contrary, this agreement shall
not restrict ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. and its affiliates from engaging in any
brokerage, investment advisory, financial advisory, anti-raid advisory, merger
advisory, financing, asset management, trading, market making, arbitrage and
other similar activities conducted in the ordinary course of its or its
affiliates' business.
7. Right of First Refusal.
----------------------
(a) New Issuances. Subject to all of the provisions of this
-------------
Section 7, the Company hereby grants to all Stockholders holding (together with
their affiliates) at least 200,000 shares of Preferred Stock or Common Stock
issued upon conversion of the Preferred Stock (as adjusted for any subsequent
stock dividends, stock split, mergers, consolidations or recapitalizations) (the
"First Refusal Rightsholder"), the right of first refusal (the "Right of
-15-
First Refusal") to purchase on a pro rata basis "New Securities" (as defined in
this Section 7) that the Company may, from time to time, propose to sell and
issue. Such pro rata share, for purposes of this right of first refusal, is the
ratio (X) the number of shares of capital stock of the Company then owned by
such First Refusal Rightsholder (on an as converted basis) to (Y) the total
number of shares of capital stock of the Company then outstanding (on an as
converted basis).
(b) "New Securities" shall mean any Common Stock and Preferred
--------------
Stock of the Company whether or not authorized on the date hereof, and rights,
options, or warrants to purchase Common Stock or Preferred Stock and securities
of any type whatsoever that are, or may become, convertible into Common Stock or
Preferred Stock; provided, however, that "New Securities" does not include the
following:
(i) shares of Series C Preferred issued pursuant to
the Series C Purchase Agreement;
(ii) shares of Common Stock issuable upon conversion
of Preferred Stock;
(iii) securities of the Company issued pursuant to
the acquisition of a business by the Company by merger, purchase of assets, or
other acquisition or reorganization approved by the Board of Directors;
(iv) securities of the Company issued in connection
with arm's length transactions approved by the Board of Directors with respect
to equipment lease or bank financings; or
(v) shares of Common Stock, or options to purchase
shares of Common Stock, issued or granted to officers, directors, employees and
consultants of the Company pursuant to stock plans and option plans or other
arrangements approved by the Board of Directors (including a majority of outside
directors); and
(vi) shares of Common Stock or Preferred Stock
issued in connection with any stock split, stock dividend, or recapitalization
by the Company.
(c) Notice. In the event that the Company proposes to undertake an
------
issuance of New Securities, it shall give each First Refusal Rightsholder
written notice of its intention, describing the type of New Securities, the
price, and the general terms upon which the Company proposes to issue the same.
Each First Refusal Rightsholder shall have twenty (20) business days after
receipt of such notice to agree to purchase its pro rata share of such New
Securities at the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. If any First Refusal Rightsholder fails to agree to purchase
its full pro rata share within such twenty (20) business day period, the Company
will give the First Refusal Rightsholders who did so agree (the "Electing
Purchasers") notice of the number of shares which were not subscribed for. Such
notice may be by telephone if followed by written confirmation within two days.
The Electing Purchasers shall have
-16-
have ten (10) business days from the date of such notice to agree to purchase
pro rata all of the New Securities not purchased by such non-purchasing
purchasers.
(d) Sale of New Securities. In the event that the First Refusal
----------------------
Rightsholders fail to exercise in full the right of first refusal within the
twenty (20) business plus ten (10) business day period specified above, the
Company shall have one hundred twenty (120) days thereafter to sell (or enter
into an agreement pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within sixty (60) days from the date of said
agreement) the New Securities respecting which the rights of the purchasers were
not exercised at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has
not sold the New Securities within such one hundred twenty (120) day period (or
sold and issued New Securities in accordance with the foregoing within sixty
(60) days from the date of such agreement) the Company shall not thereafter
issue or sell any New Securities, without first offering such New Securities to
the purchasers in the manner provided above.
(e) Termination. The Right of First Refusal granted under this
-----------
Section 7 shall expire immediately prior to the completion by the Company of an
initial public offering if the anticipated aggregate offering price thereof, net
of underwriting discounts and commissions, would exceed $25 million at a public
offering price of not less than $8.00 per share (as adjusted for any subsequent
stock dividend, stock split or recapitalization) (the "Qualified Offering").
This Right of First Refusal shall terminate as to any First Refusal Rightsholder
at such time as such First Refusal Rightsholder ceases to own any Preferred
Stock or Common Stock issuable upon conversion of the Preferred Stock. This
Right of First Refusal shall terminate as to any transferee or assignee of a
First Refusal Rights holder at such time as such transferee or assigneee ceases
to own any Preferred Stock or Common Stock issuable upon conversion of the
Preferred Stock.
(f) Assignment of Right of First Refusal. This Right of First Refusal
------------------------------------
may be assigned to a transferee or assignee that is an affiliate of a First
Refusal Rightsholder or in connection with the transfer or assignment of at
least 200,000 of the Stockholder's shares of Preferred Stock or Common Stock
issued upon conversion of the Preferred Stock (as adjusted for any subsequent
stock dividend, stock splits or recapitalization); provided that the Company is
given notice thereof and the transferee covenants to be bound by the provisions
of this Agreement.
8. First Refusal and Co-Sale Rights on Certain Stock: In the event
-------------------------------------------------
that any Founder receives a bona fide offer from any person to purchase any of
such Founder's Common Stock (the "Founder's Shares"), then such Founder (the
"Selling Founder") shall first give the Preferred Stockholders (the
"Rightholders") notice of his intention to sell Founders Shares, describing the
amount of Founder's Shares proposed to be transferred, the identity of the
proposed transferee, and the price and terms upon which he proposes to make such
transfer (the "Transfer Notice").
-17-
8.1 First Refusal. Each Rightholder shall have the right to purchase, at
-------------
the price and on the terms set forth in the Transfer Notice, such person's pro
rata share (based on the number of shares of the Company (on an as-converted to
Common Stock basis) held by the Rightholder at the date of the Transfer Notice
divided by the total number of shares of the Company (on an as-converted to
Common Stock basis) then outstanding) of the Founder's Shares proposed to be
transferred by tendering to the Selling Founder, within fifteen (15) days of
delivery of the Transfer Notice the purchase price therefore as set forth in the
Transfer Notice and complying with the other terms of the offer set forth in the
Transfer Notice. Any Rightholder who exercises any rights under this Section 8.1
with respect to a transaction shall be deemed to have declined to exercise its
rights under Section 8.2 with respect to that transaction.
8.2 Co-Sale. Within fifteen (15) days after delivery of the Transfer
-------
Notice, each Rightholder may elect to sell up to such person's pro rata share of
the shares to be purchased by the transferee described in the Transfer Notice by
giving written notice thereof to the Selling Founder and tendering to the
Secretary of the Company a certificate representing the shares to be sold,
properly endorsed for transfer, with written instructions to transfer the shares
to the transferee described in the Transfer Notice upon receipt of payment for
such shares from such transferee for the benefit of such Rightholder. The
Selling Founder shall thereupon notify the transferee of the co-sale
arrangements hereunder, and instruct the transferee to deliver payment for the
shares to be purchased from the Rightholders to the Secretary of the Company,
who shall transmit such payment to the Rightholders. For the purpose of the co-
sale right set forth in this Section 8.2, the pro rata share of a Rightholder
shall be determined based on the number of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock held by each Rightholder divided
by the sum of (A) the total number of shares of Common Stock issued or issuable
upon conversion of the Preferred Stock held by all Rightholders exercising the
Co-Sale Right pursuant to this Section 8.2 plus (B) the number of shares of
Common Stock held by the Founder at the date of the Transfer Notice (assuming
conversion of all convertible securities and exercise of all vested options and
warrants held by such Founder). Any Rightholder who exercises any rights under
this Section 8.2 with respect to a transaction shall be deemed to have declined
to exercise its rights under Section 8.1 with respect to that transaction.
8.3 Failure to Exercise Right. In the event that some or all of the
-------------------------
Founder's Shares proposed to be transferred are not purchased by the
Rightholders as allowed by Section 8.1, and to the extent the Rightholders
decline to exercise the co-sale right as allowed by Section 8.2, the Selling
Founder may, within ninety (90) days after the date on which Rightholders' first
refusal and co-sale rights lapsed, transfer some or all of the Founder's Shares
which were the subject of the Transfer Notice at a price and on terms no more
favorable to the transferee(s) than specified in the Transfer Notice. Founder's
Shares transferred in accordance with the provisions of this Section 8 shall no
longer be subject to the restrictions on Founder's Shares forth in this Section
8. After the expiration of said ninety (90) day period, the Selling Founder
shall not transfer any of his Founder's Shares without first offering such
securities to the Rightholders in the manner provided above in Sections 8.1 and
8.2.
8.4 Permitted Transfers. Any transfer of Founder's Shares without
-------------------
consideration to a family member of the Founder or a trust or custodian for the
benefit of the
-18-
Founder or a family member of the Founder and transfers pursuant to a pledge to
secure a bank loan shall not be subject to the provisions of this Section 8,
provided that the transferee agrees in writing to be bound by the provisions of
this Section 8 with respect to any subsequent transfer of such shares; provided
further that Founder may transfer up to an aggregate of fifteen percent (15%) of
that Founder's Shares without complying with the right of first refusal and co-
sale provisions under this Section 8.
8.5 Assignment. The rights of first refusal and co-sale granted under this
----------
Section 8 may be assigned to a transferee or assignee that is an affiliate of a
Holder or in connection with any transfer or assignment of at least 100,000
shares of Registrable Securities (as adjusted for any subsequent stock
dividends, stock splits or recapitalizations) provided that: (i) such transfer
may otherwise be effected in accordance with applicable securities laws; and
(ii) such assignees or transferees are constituent members, partners or
shareholders of, or retired members or partners of, a Holder which is a limited
liability company, partnership or corporation and such members, partners or
shareholders agree to act collectively through a single representative.
8.6 Termination. The rights of the Rightholders pursuant to this Section 8
-----------
shall terminate and be of no further force or effect upon earlier of (i) ▇▇▇▇▇
▇, ▇▇▇▇, (▇▇) the closing of the Company's Qualified Offering and (iii) the
acquisition of the Company by any other entity in a transaction in which the
holders of the Company's outstanding stock immediately preceding such
transaction hold less than a majority of the outstanding stock of the surviving
entity on an as-converted to Common Stock basis.
9. Information, Inspection, and Management Rights.
----------------------------------------------
9.1 Rights.
------
(a) So long as a Stockholder, together with its affiliates, partners
or members of such Stockholder (collectively, a "Stockholder Group") holds
shares of Preferred Stock or Conversion Stock, the Company shall deliver to such
Stockholder within ninety (90) days of the end of each fiscal year the audited
consolidated financial statements, including a balance sheet and statements of
cash flow and shareholders' equity, for the Company and a capitalization table
in reasonable detail for such fiscal year and its consolidated subsidiaries for
such year, prepared in accordance with generally accepted accounting principles,
and the unaudited quarterly financial statements of the Company; provided that
the Company may exclude a Stockholder from the distribution of such information
if the Board of Directors determines in good faith upon advice of counsel that
such exclusion is reasonably necessary to preserve attorney-client privilege or
to protect a trade secret or other similar confidential information.
(b) So long as a Stockholder together with its Stockholder Group
holds at least 600,000 shares of Preferred Stock or Conversion Stock, the
Company will deliver to that Stockholder (i) as soon as practicable, but in any
event within forty-five (45) days after the end of each quarter of each fiscal
year of the Company, an unaudited income statement, balance sheet and comparison
to budget for and as of the end of such quarter, in reasonable detail, (ii)
within
-19-
thirty (30) days of the end of each month, an unaudited income statement,
balance sheet and comparison to budget for and as of the end of such month, in
reasonable detail, (iii) as soon as practicable, but in any event thirty (30)
days prior to the end of each fiscal year, a budget and business plan for the
next fiscal year, prepared on a monthly basis, including balance sheets and, as
soon as prepared, any other budgets or revised budgets prepared by the Company.
In addition, the Company shall provide such other information relating to the
financial condition, business, prospects or corporate affairs of the Company as
the Stockholder may from time to time reasonably request; provided that the
Company may exclude a Stockholder from the distribution of such information if
the Board of Directors determines in good faith upon advice of counsel that such
exclusion is reasonably necessary to preserve attorney-client privilege, or to
protect a trade secret or similar confidential information.
(c) So long as a Stockholder together with its Stockholder Group
holds at least 500,000 shares of Preferred Stock or Conversion Stock, such
Stockholder or its representative shall have the right to: (i) consult with and
advise management of the Company on significant business issues, including
management's proposed annual operating plans, (ii) meet with management of the
Company regularly during each year at the Company's facilities at mutually
agreeable times for such consultation and advice and to review progress in
achieving said plans, (iii) examine the books and records of the Company and
inspect its facilities and request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations; provided that the Company may exclude a Stockholder from the
distribution of such information if the Board of Directors determines in good
faith upon advice of counsel that such exclusion is reasonably necessary to
preserve attorney-client privilege, or to protect trade secret or other similar
confidential information.
For the purposes of this Section 9, "Stockholder" shall mean any
Stockholder together with any affiliate of such Stockholder.
9.2 Board Visitation Rights. The Company shall give notice to and
-----------------------
invite a representative from each of Integral Capital Partners IV, L.P.
("Integral") and General Electric Capital Corporation ("GECC") to attend all
meetings of its Board of Directors and Board committee meetings in a non-voting
advisory capacity. Each of Integral's and GECC's representatives shall receive
copies of all notices, minutes, consents and other materials that the Company
provides to the directors of the Company at the same time as such materials are
provided to the directors; provided that the Company may exclude Integral and/or
GECC from the distribution of such information if the Board of Directors
determines in good faith upon advice of counsel that such exclusion is
reasonably necessary to preserve attorney-client privilege between the Company
and its counsel or would result in disclosure of trade secrets to such
representative. Integral's and GECC's visitation rights will terminate upon the
closing of the Company's Qualified Offering or upon the sale of the Company.
9.3 Assignment of Information and Inspection Rights. The rights
-----------------------------------------------
granted pursuant to Section 9.1 may be assigned or otherwise conveyed by any
Stockholder to an affiliate of such Stockholder and may not be assigned or
otherwise conveyed to any other person only
-20-
with the prior written consent of the Company, which consent shall not be
unreasonably withheld.
9.4 Confidentiality. Each Stockholder agrees, and any representative
---------------
of such Stockholder will agree, to hold in confidence and trust and not use or
disclose any confidential information provided to or learned by it in connection
with the rights granted in Sections 9.1 and 9.3 other than in connection with
the investment in the Company.
9.5 Termination of Covenants. The obligations of the Company set
------------------------
forth in Sections 9.1 and 9.3 shall terminate and be of no further force or
effect upon the earlier of (i) the closing of an underwritten public offering
pursuant to an effective registration statement under the Securities Act, or
(ii) at such time as the Company is required to file reports pursuant to Section
13 of the Securities Exchange Act of 1934, as amended. The confidentiality
provisions set forth in Section 9.4 shall survive any such termination.
Notwithstanding the foregoing, any Stockholder may disclose any such
confidential information to the extent required by any applicable law,
regulation, or court or governmental order provided that such Stockholder shall
give the Company prior written notice thereof.
10. Amendment. Any provision of this Agreement may be amended or 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 not less than a majority of the Registrable
Securities then outstanding, provided that Section 9.2 of this Agreement may
only be amended with the written consent of Integral and/or GECC, as applicable
and if an amendment by its terms affects the rights of a subset, series or class
of securities differently than other securities, such amendment must be approved
by written consent of not less than a majority of the holders of that subset,
class or series of securities. Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon each Preferred Stockholder and each
Holder of Registrable Securities at the time outstanding (including securities
into which such securities are convertible), each future holder of all such
securities, and the Company. Any amendment to Section 8 of this Agreement that,
in the good faith judgment of the Board of Directors, adversely affects the
Founders must be approved by a majority of the Founders.
11. Rescission of Investor Rights Agreement. The First Amended and
---------------------------------------
Restated Investor Rights Agreement by and among the Company, the Founders and
the other parties named therein dated as of July 31, 1997 is hereby terminated
and shall be null and void. The parties hereto acknowledge that the preemptive
rights contained in the Prior Agreement have been satisfied or otherwise waived.
12. Governing Law. This Agreement and the legal relations between
-------------
the parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California, without respect to rules concerning
the conflict of laws which would otherwise require application of the
substantive law of another jurisdiction. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California
matters with respect to the breach or interpretation of this Agreement or the
enforcement of any and all rights,
-21-
duties, liabilities, obligations, powers, and other relations between the
parties arising under this Agreement.
13. Entire Agreement. This Agreement, together with all Exhibits hereto,
----------------
constitute the full and entire understanding and agreement between the parties
regarding the matters set forth herein. 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.
14. Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or three (3) days after deposit
with the United States mail, by registered or certified mail, postage prepaid,
addressed (a) if to a Preferred Stockholder, at such Preferred Stockholder's
address as set forth on the Schedule of Preferred Stockholders attached hereto,
or at such other address as such Preferred Stockholder shall have furnished to
the Company in writing in accordance with this Section 14, (b) if to any other
holder of Conversion Stock, at such address as such holder shall have furnished
the Company in writing in accordance with this Section 14, or, until any such
holder so furnishes an address to the Company, then to and at the address of the
last holder thereof who has so furnished an address to the Company, or (c) if to
the Company, at its principal office.
15. 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.
16. Aggregation of Securities. All shares of Preferred Stock or Common
-------------------------
Stock issued upon conversion of the Preferred Stock (as adjusted for any
subsequent stock dividends, stock splits or recapitalizations) held by
affiliates or partners or members of such Holder, shall be aggregated for the
purpose of determining the availability of any right under this Agreement.
[Remainder of page intentionally left blank]
-22-
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
CENTILLIUM TECHNOLOGY CORPORATION
By: /s/ A. ▇▇▇▇▇▇ ▇▇▇▇▇, President
_______________________________________
A. ▇▇▇▇▇▇ ▇▇▇▇▇, President
"FOUNDERS"
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
___________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
___________________________________________
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
___________________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇ MADAVA
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇ MADAVA
___________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
___________________________________________
[Signature page to the Series C Investor Rights Agreement]
"EXISTING MAJORITY HOLDERS"
VERTEX ASIA LIMITED
By: /s/ VERTEX ASIA LIMITED
_________________________________________
Name:
Title:
VERTEX INVESTMENT II LIMITED
By: /s/ VERTEX INVESTMENT II LIMITED
_________________________________________
Name:
Title:
PACVEN ▇▇▇▇▇▇ VENTURES III, L.P.
By: /s/ PACVEN ▇▇▇▇▇▇ VENTURES III, L.P.
_________________________________________
Name:
Title:
ASIAN VENTURES CAPITAL INVESTMENT CORPORATION
By: /s/ ASIAN VENTURES CAPITAL INVESTMENT
CORPORATION
_________________________________________
Name:
Title:
TWG INVESTMENT LDC
By: /s/ TWG INVESTMENT LDC
_________________________________________
Name:
Title:
OW&W INVESTMENTS LTD.
By: /s/ OW&W INVESTMENTS LTD.
_________________________________________
Name:
Title:
[Signature page to the Series C Investor Rights Agreement]
"EXISTING MAJORITY HOLDERS"
MITSUBISHI INTERNATIONAL CORPORATION
By: /s/ MITSUBISHI INTERNATIONAL CORPORATION
_________________________________________
Name:
Title:
MITSUBISHI ELECTRONICS AMERICA, INC.
By: /s/ MITSUBISHI ELECTRONICS AMERICA, INC.
_________________________________________
Name:
Title:
U.S. VENTURE PARTNERS V, L.P.
By: /s/ U.S. VENTURE PARTNERS V, L.P.
_________________________________________
Name:
Title:
U.S. V INTERNATIONAL, L.P.
By: /s/ U.S. V INTERNATIONAL, L.P.
_________________________________________
Name:
Title:
USVP ENTREPRENEUR PARTNERS V, L.P.
By: /s/ USVP ENTREPRENEUR PARTNERS V, L.P.
_________________________________________
Name:
Title:
2180 ASSOCIATES FUND V, L.P.
By: /s/ 2180 ASSOCIATES FUND V, L.P.
_________________________________________
Name:
Title:
[Signature page to the Series C Investor Rights Agreement]
"SERIES C PURCHASERS"
____________________________________________
Name of Purchaser
By:_________________________________________
Name:
Title:
[Signature page to the Series C Investor Rights Agreement]
EXHIBIT A
FOUNDERS
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ Madaua
▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT B
STOCKHOLDERS
The following table lists the number of shares of capital stock of the
Company subject to the provisions of this Agreement as of the date hereof.
Series A Series B1 Series B2 Series B3 Series C
Name Common Stock Preferred Preferred Preferred Preferred Preferred
-------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,573,187 -- -- -- -- --
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 2,510,493 -- -- -- -- --
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇ 1,305,440 -- -- -- -- --
Surendra ▇▇▇▇ ▇▇▇▇▇▇▇ 1,305,440 -- -- -- -- --
▇▇▇▇▇ ▇▇▇▇▇▇ 1,305,440 -- -- -- -- --
U.S. Venture Partners V, L.P. -- 450,000 -- -- 225,000 495,000
USVP V International, L.P. -- 25,000 -- -- 12,500 27,500
2180 Associates Fund V, L.P. -- 14,000 -- -- 5,500 15,400
USVP V Entrepreneur Partners L.P. -- 11,000 -- -- 7,000 12,100
F & W Investments 1996-II -- 45,000 -- -- -- --
WS Investment Company 97A -- 40,500 -- -- -- --
Trustee, WSGR Retirement Plan
For ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ -- 105,000 -- -- -- --
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ -- 4,500 -- -- -- --
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ -- 4,000 -- -- -- --
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ -- 4,000 -- -- -- --
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ -- 4,000 -- -- -- --
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ -- 4,000 -- -- -- --
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ -- 4,000 -- -- -- --
▇▇▇▇▇ ▇▇▇▇▇ -- 20,000 -- -- -- --
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ -- 40,000 -- -- -- --
▇▇▇▇▇▇▇ ▇▇▇▇▇ -- 40,000 -- -- -- --
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ -- 20,000 -- -- -- --
▇▇▇ ▇▇▇▇▇▇ -- 20,000 -- -- -- --
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ -- 20,000 -- -- -- --
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ -- 20,000 -- -- -- --
Sera Reddy -- 20,000 -- -- -- --
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ -- 20,000 -- -- -- --
▇▇▇▇▇ ▇▇▇▇▇▇ -- 20,000 -- -- -- --
▇▇▇ ▇▇▇▇▇▇▇ -- 40,000 -- -- -- --
R. ▇▇▇▇▇▇▇ ▇▇▇▇▇ -- 50,000 -- -- -- --
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ -- 20,000 -- -- -- --
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ -- 15,000 -- -- -- --
Noriyuki Ebara -- 40,000 -- -- -- --
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ -- 10,000 -- -- -- --
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as separate property -- 20,000 -- -- -- --
▇▇▇ ▇▇▇▇▇▇▇▇ -- 20,000 -- -- -- --
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ -- 10,000 -- -- -- --
Vertex Asia Ltd. -- -- -- 400,000 250,000 --
Vertex Investment II Ltd. -- -- -- 400,000 250,000 380,000
Series A Series B1 Series B2 Series B3 Series C
Name Common Stock Preferred Preferred Preferred Preferred Preferred
-------------------------------------------------------------------------------------------------------------------------
Korea Technology Banking Corporation -- -- -- -- 175,000 80,000
▇▇▇▇ ▇▇▇▇ -- -- -- -- 3,000 --
▇▇▇ ▇▇▇▇ -- -- -- -- 2,500 --
Ibrahim Korgav -- -- -- -- 6,250 --
▇▇▇▇▇▇ ▇▇▇▇▇▇ -- -- -- -- 2,500 --
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇. -- -- -- -- 6,250 --
Gwill E. York -- -- -- -- 6,250 --
▇▇▇▇▇▇ ▇▇▇▇▇ -- -- -- -- 3,750 --
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ -- -- -- -- 11,250 --
▇▇▇▇ ▇▇▇▇▇▇ -- -- -- -- 2,500 --
▇▇▇▇▇ ▇▇▇▇▇▇ -- -- -- -- 3,000 --
Mitsubishi International Corporation -- -- -- -- 167,500 --
Mitsubishi Electronics America, Inc. -- -- -- -- 500,000 --
MC Silicon Valley, Inc. -- -- -- -- 82,500 --
Bayview Investors Limited -- -- -- -- 48,232 --
Hajime Yamazaki -- -- -- -- 3,000 --
▇▇▇▇▇▇ ▇▇▇▇▇▇ -- -- -- -- 14,000 --
▇▇▇▇▇ ▇▇▇▇▇▇ -- -- -- -- 7,500 --
▇▇▇▇▇▇ ▇▇▇▇▇▇ -- -- -- -- 2,500 --
▇▇▇▇▇ ▇▇▇▇▇▇▇ -- -- -- -- 1,250 --
Seed Ventures II, Ltd. -- -- 75,000 -- -- 50,000
Asian Ventures Capital Investment Corp. -- -- 80,364 -- 47,273 --
TWG Investment LDC -- -- 74,181 -- 43,637 --
OCBC, Wearnes & ▇▇▇▇▇▇ Investments
(Singapore) Ltd. -- -- -- -- -- 40,000
Pacven ▇▇▇▇▇▇ Ventures III, L.P. -- -- 270,455 -- 159,090 400,000
O W & W Investments Ltd. -- -- -- -- 75,000 60,000
InveStar Burgeon Venture Capital, Inc. -- -- -- -- 62,500 --
InveStar Semiconductor Development
Fund, Inc. -- -- -- -- 187,500 --
InveStar Dayspring Venture Capital Inc. -- -- -- -- 125,000 --
▇▇▇▇▇▇▇ ▇▇ -- -- -- -- 50,000 --
Sumitomo Electric Industries -- -- -- -- 500,000 --
▇▇. ▇▇▇▇▇▇ ▇▇▇▇ -- -- -- -- 5,000 --
Dr. Yukio Mizuno -- -- -- -- 2,500 --
▇▇▇ ▇▇▇▇▇▇▇▇ -- -- -- -- 2,500 --
Current Ventures Group, Ltd. -- -- -- -- 62,500 --
▇▇▇ ▇▇▇▇▇▇ -- -- -- -- 2,500 --
ZyXEL Communications, Inc. -- -- -- -- 62,500 --
Dynalink International Corporation -- -- -- -- 62,500 --
▇▇▇▇ ▇▇▇▇▇▇▇ -- -- -- -- 2,000 --
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. -- -- -- -- 6,250 --
GVC Group -- -- -- -- 100,000 --
▇▇▇ ▇▇▇▇▇▇ -- -- -- -- 2,500 --
▇▇▇▇ ▇▇▇▇▇ Capital -- -- -- -- -- 5,000
▇▇▇▇ ▇▇▇▇▇ Capital, L.P. -- -- -- -- -- 67,000
Series A Series B1 Series B2 Series B3 Series C
Name Common Stock Preferred Preferred Preferred Preferred Preferred
-------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇ Capital International -- -- -- -- -- 28,000
▇▇▇▇ ▇▇▇▇▇ Capital Ventures, L.P. -- -- -- -- -- 20,000
Creative Technology -- -- -- -- -- 400,000
GE Capital Equity Investments, Inc. -- -- -- -- -- 1,000,000
The Chase Manhattan Bank, as Trustee
for the First Plaza Group Trust by
the Chase Manhattan Bank -- -- -- -- -- 1,600,000
The ▇▇▇▇▇▇▇ ▇▇▇▇▇ Group, L.P. -- -- -- -- -- 500,000
Stone Street Fund 1999, L.P. -- -- -- -- -- 75,760
Bridge Street Fund 1999, L.P. -- -- -- -- -- 24,240
Integral Capital Partners IV, L.P. -- -- -- -- -- 995,442
Integral Capital Partners IV MS
Side Fund, L.P. -- -- -- -- -- 5,449
J&W ▇▇▇▇▇▇▇▇ & Co. (▇▇▇▇▇▇▇▇
Communications and Information
Fund, Inc.) -- -- -- -- -- 400,000
▇▇▇▇▇▇ Brothers VC Partners L.P. -- -- -- -- -- 200,000
LB I Group, Inc. -- -- -- -- -- 75,354
Velocity Technology and
Communications Fund Trust C -- -- -- -- -- 400,000
Smart Technology Ventures II, LLC -- -- -- -- -- 100,000
▇▇▇▇ ▇▇▇ ▇▇▇▇▇, Co-Trustee The ▇▇▇
▇▇▇▇▇ Family Trust -- -- -- -- -- 10,000
▇▇▇▇▇▇▇▇ Maniei & Reza Sisaktii -- -- -- -- -- 20,000
▇▇▇▇ Leopard -- -- -- -- -- 10,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ -- -- -- -- -- 20,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ -- -- -- -- -- 10,000
▇▇▇▇▇▇▇ ▇▇▇▇▇ -- -- -- -- -- 20,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ -- -- -- -- -- 10,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ -- -- -- -- -- 5,000
▇▇▇▇▇ ▇▇▇▇▇▇ -- -- -- -- -- 200
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ -- -- -- -- -- 200
Current Ventures Group, Ltd -- -- -- -- -- 10,000
▇▇▇▇▇▇ ▇▇▇▇ -- -- -- -- -- 20,000