TECHWAVE INC.
SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Second Amended and Restated Registration Rights Agreement (this
"AGREEMENT"), is effective as of November 30, 1998, among TECHWAVE INC., a
Washington corporation (the "COMPANY"), and the Persons executing a counterpart
of this Agreement listed as Holders on the signature pages of this Agreement,
and such other Persons that become parties hereto after the date of this
Agreement in accordance with the terms and provisions hereof. This Agreement
amends the Amended and Restated Registration Rights Agreement, under which the
Registration Rights Agreement dated February 29, 1997, as amended thereafter on
May 13, 1997 and on October 31, 1997, among the Company and certain Holders, was
amended and restated in its entirety, as of December, 1997, and subsequently
amended on March 20, 1998.
AGREEMENT
SECTION 1. DEFINITIONS.
1.1 As used in this Agreement, the following terms shall have the
following meanings:
"AFFILIATE" means any entity controlling, controlled by or under
common control with a designated Person. For the purposes of this definition,
"control" shall have the meaning specified as of the date of this Agreement for
that word in Rule 405 promulgated by the Commission under the Securities Act.
"AGENT WARRANTS" means those warrants exercisable for shares of
Common issued to Madison Securities, Inc. as placement agent for the offerings
of Series D Preferred, Series E Preferred, Series F Preferred and the placement
of the Bridge Notes.
"BOARD" means the Board of Directors of the Company.
"BRIDGE NOTES" means the 13% promissory notes sold by the Company on
or about October 1998 in the aggregate principal amount of $3,700,000.
"COMMISSION" means the Securities and Exchange Commission, and any
successor thereto.
"COMMON" means the Company's Common Stock, $.01 par value per share.
"CONVERSION STOCK" means shares of Common issued upon conversion of
the Preferred or exercise of the Agent Warrants, the Series C Warrants and the
Warrants.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"HOLDERS" means (a) holders as of the date of this Agreement of
Outstanding Registrable Securities, each of whom is a party to this Agreement,
and (b) any subsequent legal or beneficial owner of Outstanding Registrable
Securities who has become a party to this Agreement, either (i) in accordance
with Section 13 of this Agreement or (ii) in accordance with Section 16.1 of
this Agreement.
"INVESTOR" means (a) each party listed as an Investor in this
Agreement with respect to shares of Preferred or shares of Common issuable upon
exercise of Agent Warrants, Series C Warrants or Warrants and (b) each Merger
Investor.
"MERGER INVESTOR" means a former shareholder of The Internet Mall,
Inc., a Delaware corporation, who received shares of Common in connection with
the merger of TechWave Acquisition Corporation III, a Delaware corporation, with
and into The Internet Mall, Inc. and who (a) may be added as a party to this
Agreement pursuant to Section 16.1 hereof and (b) executes a counterpart
signature page to this Agreement.
"MINIMUM PROCEEDS" means an amount with respect to an Investor or
the Holder of Series A Preferred that is equal to two times their respective
aggregate cost basis of the sum of (i) the Preferred and (ii) the Common
issuable upon exercise of the Agent Warrants, Series C Warrants and the
Warrants.
"MANAGER" means any of ▇▇▇▇▇▇ ▇▇▇▇▇▇ (with respect to shares of
Common), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"PERSON" means an individual, partnership, corporation, business
trust, limited liability company, joint stock company, trust, unincorporated
association, joint venture, or other entity of whatever nature.
"PREFERRED" means, collectively, the Series A Preferred, the Series
B Preferred, the Series C Preferred, Series D Preferred, Series E Preferred and
the Series F Preferred.
"REGISTRABLE COMMON" means, (a) any shares of Common then
outstanding which were issued upon conversion of Preferred; and (b) any shares
of Common then issuable upon conversion of then-outstanding Preferred; and (c)
any shares of Common then outstanding which were issued as, or were issued
directly or indirectly upon the conversion of other Securities issued as, a
dividend or other distribution with respect to, or in replacement of, Preferred
or other Registrable Common; and (d) any shares of Common then issuable directly
or indirectly upon the conversion or exercise of other Securities issued as a
dividend of other distribution with respect to, or in replacement of, Preferred
or other Registrable Common; (e) any shares of Common then issuable upon
exercise of the Agent Warrants, the Series C Warrants
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and the Warrants; (f) any shares of Common then outstanding which are issued in
the name of a Manager or an Investor or a permitted assignee of a Manager or
Investor (provided such assignee has become party to this Agreement in
accordance with Section 13 below); provided, however, that outstanding shares of
Common shall no longer be Registrable Common when they shall have been (y)
effectively registered under the Securities Act and sold by the holder thereof
in accordance with such registration, or (z) sold to the public pursuant to Rule
144; and (g) any shares of Common then outstanding that were issued to Merger
Investors.
"OUTSTANDING REGISTRABLE SECURITIES" means (a) any shares of
Preferred then outstanding, and (b) any shares of Common then outstanding which
were issued upon conversion of Preferred; and (c) any shares of Common then
outstanding which were issued or were issued directly or indirectly upon the
conversion of other Securities issued as, a dividend or other distribution with
respect to, or in replacement of, Preferred or other Registrable Common; (d) any
shares of Common then outstanding which were issued upon exercise of the Agent
Warrants, the Series C Warrants or the Warrants; (e) any shares of Common
outstanding as of the date of this Agreement in the name of a Manager or an
Investor and which are then outstanding in the name of a Manager, an Investor or
permitted assignee of a Manager or Investor (provided such assignee has become
party to this Agreement in accordance with Section 13 below); and (f) any shares
of Common then outstanding that were issued to the Merger Investors.
"RULE 144" means Rule 144 promulgated by the Commission under the
Securities Act, as such rule may be amended from time to time, or any successor
Rule thereto.
"SECURITIES" means any debt or equity securities of the Company,
whether now or hereafter authorized, and any instrument convertible into, or
exercisable or exchangeable for, Securities or a Security.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES A PREFERRED" means (a) the outstanding shares of the
Company's Series A Preferred Stock, $.01 par value; (b) any shares of Series A
Preferred Stock issued in payment of a dividend upon any share of Series A
Preferred Stock and (c) any other Securities issued as a dividend or other
distribution with respect to, or in replacement of, any Series A Preferred
except shares of Registrable Common.
"SERIES B PREFERRED" means (a) the outstanding shares of the
Company's Series B Preferred Stock, $.01 par value; (b) any shares of Series B
Preferred Stock issued in payment of a dividend upon any share of Series B
Preferred Stock and (c) any other Securities issued as a dividend or other
distribution with respect to, or in replacement of, any Series B Preferred
except shares of Registrable Common.
"SERIES C PREFERRED" means (a) the outstanding shares of the
Company's Series C Preferred Stock, $.01 par value; (b) any shares of Series C
Preferred Stock
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issued upon exercise of the Series C Warrants; (c) any shares of Series C
Preferred Stock issued in payment of a dividend upon any shares of Series C
Preferred Stock and (d) any other Securities issued as a dividend or other
distribution, with respect to, or in replacement of, any Series C Preferred
except shares of Registrable Common.
"SERIES C WARRANTS" means those warrants exercisable for shares of
Series C Preferred.
"SERIES D PREFERRED" means (a) the outstanding shares of the
Company's Series D Preferred Stock, $0.01 par value; (b) any shares of Common
issued upon exercise of the Warrants issued in connection with the sale of the
Series D Preferred Stock; (c) any shares of Series D Preferred Stock issued in
payment of a dividend upon any share of Series D Preferred Stock; and (d) any
other Securities issued as a dividend or other distribution with respect to, or
in replacement of, any Series D Preferred Stock, except shares of Registrable
Common.
"SERIES E PREFERRED" means (a) the outstanding shares of the
Company's Series E Preferred Stock, $0.01 par value; (b) any shares of Common
issued upon exercise of the Warrants issued in connection with the sale of the
Series E Preferred Stock; (c) any shares of Series E Preferred Stock issued in
payment of a dividend upon any share of Series E Preferred Stock; and (d) any
other Securities issued as a dividend or other distribution with respect to, or
in replacement of, any Series E Preferred Stock, except shares of Registrable
Common.
"SERIES F PREFERRED" means (a) the outstanding shares of the
Company's Series F Preferred Stock, $.01 par value; (b) any shares of Common
issued upon exercise of the Warrants issued in connection with the sale of the
Series F Preferred Stock; (c) any shares of Series F Preferred Stock issued in
payment of a dividend upon any share of Series F Preferred Stock, and (d) any
other Securities issued as a dividend or other distribution with respect to, or
in replacement of, any Series F Preferred except shares of Registrable Common.
"SHORT FORM" means Form S-2 or Form S-3 under the Securities Act,
and any other form promulgated after the date of this Agreement applicable in
circumstances substantially comparable to either of those forms, regardless of
its designation.
"WARRANTS" means those warrants exercisable for shares of Common
issued in connection with the sale of the Series D Preferred, those warrants
exercisable for shares of Common issued in connection with the sale of the
Series E Preferred and those warrants exercisable for shares of Common issued in
connection with the sale of the Series F Preferred.
1.2 For purposes of references in this Agreement to Securities
"equivalent to" an amount of Registrable Common issued and issuable, (a) a
Holder of Preferred will be deemed to be the Holder of Registrable Common
issuable upon conversion of such Preferred but not then issued (disregarding any
legal restriction then
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applicable to the conversion of such Preferred), and (b) the Registrable Common
issuable but not then issued with respect to outstanding Preferred will be
included in the total number of Registrable Common.
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SECTION 2. REGISTRATIONS ON LONG FORMS.
2.1 By a written notice to the Company received at any time after
the earlier of (a) February 26, 2002 or (b) nine (9) months after the effective
date of the first registration statement filed by the Company covering a public
offering of its securities, the Investor or Investors owning Outstanding
Registrable Securities equivalent to more than 50% of the Registrable Common
issued and issuable to Investors may request that the Company register any
Registrable Common specified in the notice in a public offering that has a
public offering price of at least $5.00 per share of Common (as adjusted for any
stock dividends, stock splits or similar events) and the anticipated aggregate
proceeds of which would exceed $4,000,000, under the Securities Act and under
other relevant securities laws, for disposition in accordance with methods
stated in the notice.
2.2 When it receives a registration notice under Section 2.1, the
Company shall promptly deliver a copy of the registration notice to each
Investor who is not a party to the registration notice, each of whom may then
specify, by prompt notice to the Company, a number of shares of Registrable
Common held by or issuable to it which it wishes to include in any registration
pursuant to the registration notice under Section 2.1.
2.3 When it receives a registration notice under Section 2.1, the
Company shall use its best efforts (a) to file a registration statement under
the Securities Act as soon as practicable, and in any event within sixty (60)
days of the receipt of such request, and (b) to effect the registration under
the Securities Act of Registrable Common specified in the registration notice
under Section 2.1 and subsequent notices under Section 2.2 that are received
within twenty (20) days after the mailing of the notices under Section 2.2, all
to the extent requisite to permit disposition by such Investors in accordance
with the intended methods of disposition described in the registration notice.
SECTION 3. REGISTRATIONS ON SHORT FORMS.
3.1 If at any time the Company is a registrant entitled to use a
Short Form to register Registrable Common, Investors of Outstanding Registrable
Securities equivalent to more than 50% of the Registrable Common issued and
issuable to Investors may, by a written notice to the Company, request that the
Company register such Investor's Registrable Common specified in the notice on a
Short Form.
3.2 When it receives a notice under this Section 3, the Company
shall use its best efforts to effect the expeditious registration under the
Securities Act, on the Short Form specified in such notice, of Registrable
Common specified in the notice; provided, however, that the Company shall not be
obligated to effect any such registration pursuant to this Section 3 if: (a) the
Short Form is not available for such offering by the Investors; (b) the
Investors, together with the other holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Common and such other securities (if any) at an aggregate price to the
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public of less than $750,000; (c) the Company shall furnish the certificate in
Section 5(b)(i) subject to the limitations set forth therein; (d) the Company
has effected one (1) such registration during the immediately-preceding
twelve-month period; or (e) it is to be effected more than three (3) years after
the Company's initial public offering.
SECTION 4. INCIDENTAL REGISTRATION. The Company shall give at least sixty
(60) days' advance written notice to each Holder of the Company's intention to
register any of its Securities under the Securities Act. Each Holder may then
specify, by prompt notice to the Company, a number of shares of Registrable
Common held by it which it wishes to include in the Company's proposed
registration. Subject to the market cutback limitations of Section 9, the
Company will use its best efforts to effect the registration under the
Securities Act of Registrable Common specified by Holders under this Section 4.
SECTION 5. LIMITATIONS ON REGISTRATION RIGHTS. Notwithstanding any
contrary provision of this Agreement:
(a) the Company shall not be required to effect more than one (1)
registration pursuant to Section 2 (provided, however, that a demand
for registration shall not count as a registration permitted
pursuant to Section 2 under this clause (a) if either (y) the
registration statement filed with respect to such registration is
not declared effective by the Commission, or (z) the Investors
requesting registration of Registrable Common under Sections 2.1 and
2.2 do not register and sell at least 90% of the Registrable Common
they have requested be registered in such registration for reasons
other than their voluntary decision not to do so, and provided
further that the Company shall not be required to effect a second
registration pursuant to Section 2 within the same twelve-month
period of a registration that failed to qualify as the Investor's
demand right under Section 2, nor shall the Company be required to
undertake to effect a registration under Section 2 more than three
times); and
(b) the Company shall not be required to effect any registration
pursuant to Section 2 hereof, if (i) the Company shall furnish to
the Initiating Investors a certificate signed by the President 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 registration statement to be
filed and that it is essential to defer the filing of such
registration statement, in which case the Company shall then have
the right to defer such filing for a period of not more than 180
days after receipt of the request from the Initiating Investors and
provided further that the Company may not utilize this right more
than once; (ii) during the period starting with the date 60 days
prior to the Company's good faith estimate of the date of filing of,
and ending on a date 180 days after the effective date of, a
registration statement initiated by the Company, provided that the
Company is actively employing in good faith all reasonable efforts
to cause such registration to
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become effective; or (iii) the initiating Investors propose to
dispose shares of Registrable Common that may be immediately
registered on a Short Form pursuant to a request made under Section
3.1; and
(c) Section 4 shall not apply to (i) a registration relating to a
corporate reorganization or other transaction under Rule 145 of the
Securities Act, or (ii) a registration effected solely to implement
an employee benefit plan, or (iii) to any other form or type of
registration which does not permit inclusion of Registrable Common
pursuant to Commission rule or practice.
SECTION 6. REGISTRATION PROCEDURES.
6.1 Whenever the Company is required by the provisions of this
Agreement to use its best efforts to effect the registration of any Registrable
Common under the Securities Act, the Company will, as expeditiously as possible:
(a) in the case of a registration required under Section 2, and
subject to Section 14 below, engage one or more underwriters;
(b) before filing each registration statement or prospectus or
amendment or supplement thereto with the Commission, furnish counsel
for the sellers with copies of all such documents proposed to be
filed, which shall be subject to the reasonable approval of such
counsel;
(c) prepare and file with the Commission a registration statement
with respect to such Registrable Common and use its best efforts to
cause such registration statement to become and remain effective for
the period provided in Section 6.2;
(d) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions
of the Securities Act with respect to the sale or other disposition
of all Registrable Common covered by such registration statement in
accordance with the intended methods of disposition set forth in
such registration statement;
(e) prepare and promptly file with the Commission, and notify each
seller of such Registrable Common immediately after the filing of,
such amendment or supplement to such registration statement or
prospectus as may be necessary to correct any statements or
omissions if, during such periods as a prospectus relating to such
Securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus
or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, and notify
each seller immediately after its discovery of such event;
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(f) furnish to the underwriters and each seller of such Registrable
Common such numbers of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus) and
such other documents as such underwriters or seller may reasonably
request in order to facilitate the disposition of the Registrable
Common subject to such registration statement in accordance with
such registration statement;
(g) use its best efforts to register or qualify any Registrable
Common covered by such registration statement under the securities
or blue sky laws of such jurisdictions within the United States of
America as the seller or the underwriters reasonably request, and to
take any other acts which a seller or the underwriters may
reasonably request under such securities or blue sky laws to enable
the consummation of the disposition in such jurisdictions of such
Registrable Common (provided, however, that the Company may not be
required under this Agreement (i) to qualify generally to do
business as a foreign corporation in any jurisdiction in which it
would not otherwise be required to qualify, or (ii) to subject
itself to taxation in any such jurisdiction, or (iii) to consent to
general service of process in any such jurisdiction);
(h) provide a transfer agent and registrar for all Registrable
Common sold under the registration not later than the effective date
of the registration statement;
(i) use its best efforts to cause all Registrable Common sold under
the registration to be listed on each securities exchange or to be
qualified and eligible for trading in any automated quotation
system, if any, on which similar Securities issued by the Company
are then listed or traded or, if no such listing or qualification
has then occurred, to cause such Securities to be so listed or
qualified on an exchange or in a trading system that is reasonably
acceptable to the Holders of Registrable Common;
(j) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
underwriters, if any, or the Holders of more than 50% of the
Registrable Common being sold reasonably request in order to
expedite or facilitate the disposition of such Registrable Common
(including, without limitation, effecting a stock split or a
combination of shares); and
(k) make available for inspection by the sellers of Registrable
Common, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, employees and
independent
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accountants to supply all information reasonably requested by any
such seller or underwriter in connection with such registration
statement, all subject to such limitations as the Company reasonably
deems appropriate in order to protect the Company's confidential or
proprietary information.
6.2 Notwithstanding any contrary provision of this Section 6, the
Company shall not be required to use its best efforts to maintain the
effectiveness of any registration statement for a period in excess of 180 days
or until the sellers have sold or otherwise disposed of their Registrable Common
registered under such registration statement, whichever is earlier.
6.3 It shall be a condition precedent to the inclusion of the
Registrable Common of any Holder in a registration effected pursuant to this
Agreement that such Holder shall (a) furnish to the Company such information
regarding such Holder, the Registrable Common of such Holder to be registered
and the intended method of disposition of such Registrable Common, and (b)
execute such indemnities, underwriting agreements, lockups (as required by
Section 11) and other documents, as the Company or the managing underwriter
shall reasonably request in order to satisfy the requirements applicable to such
registration.
SECTION 7. EXPENSES. The Company shall pay all expenses incurred in
effecting all registrations of Registrable Common provided for in Sections 2 and
3 of this Agreement, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel for the Company,
reasonable fees and disbursements of one counsel for the sellers selected by the
Investors, underwriting expenses other than discounts and commissions, and
expenses of any audits incident to or required by any such registration and
expenses of complying with the securities or blue sky laws of any jurisdictions
pursuant to Section 6.1(g) of this Agreement. The Company shall pay, for each
Holder, all expenses incurred in effecting all registrations provided for in
Section 4 hereof, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel for the Company,
reasonable fees and disbursements for one counsel for the selling Holders,
underwriting expenses other than discounts and commissions, and expenses of any
audits incident to or required by such registration and all expenses of
complying with the blue sky or securities laws of any jurisdiction.
SECTION 8. INDEMNIFICATION.
8.1 In the event of any registration of any of its Registrable
Common under the Securities Act pursuant to this Agreement, the Company agrees,
to the extent permitted by law, to indemnify and hold harmless each seller of
Registrable Common, and each Affiliate of such seller, against any losses,
claims, damages or liabilities, joint or several, arising out of or based upon:
(a) any alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under
which such Securities were registered under the Securities Act, any
preliminary
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prospectus or final prospectus contained therein, or any summary
prospectus contained therein, or any Securities being registered, or
any amendment or supplement thereto, or
(b) any alleged omission to state in any such document a material
fact required to be stated therein or necessary to make the
statements therein not misleading,
except insofar as any such loss, claim, damage or liability is:
(x) caused by or contained in any information furnished in writing
to the Company by such seller expressly for use in connection with
such registration, or
(y) caused by such seller's failure to deliver a copy of the
registration statement or prospectus or any amendment or supplement
thereto as required by the Securities Act or the rules or
regulations thereunder, or
(z) caused by the use of a prospectus or preliminary prospectus or
any amendment or supplement thereto after receipt of notice from the
Company that it should no longer be used.
In connection with an underwritten offering, the Company will indemnify such
underwriters, their officers and directors and each Person who controls (within
the meaning of the Securities Act) such underwriters to the same extent as
provided above with respect to the sellers of Registrable Common. The Company
shall reimburse each Person indemnified pursuant to this Section 8.1 in
connection with investigating or defending any loss, claim, damage, liability or
action indemnified against. The reimbursements required by this Section 8.1
shall be made by periodic payments during the course of the investigation or
defense, as and when bills are received or expenses incurred. The indemnities
provided pursuant to this Section 8.1 shall remain in force and effect
regardless of any investigation made by or on behalf of the indemnified party
and shall survive transfer of Registrable Common by a seller.
8.2 In the event of any registration of any Registrable Common under
the Securities Act pursuant to this Agreement, each Holder agrees to furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any registration statement or prospectus in
connection with the registration or any amendment or supplement thereto.
8.3 To the extent permitted by law, and subject to the limitation
set forth in the last sentence of this Section 8.3, each Holder which is a
seller of Registrable Common in a registration pursuant to this Agreement agrees
severally and not jointly to indemnify and hold harmless the Company, its
directors and officers, each other seller of Securities in such registration,
each Affiliate of each such other seller, and each Affiliate of the Company,
against:
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(a) any losses, claims, damages or liabilities, joint or several,
arising out of or based upon:
(i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration
statement under which such Securities were registered under the
Securities Act, any preliminary prospectus or final prospectus
contained therein, or any summary prospectus contained therein, or
any Securities that were being registered, or any amendment or
supplement thereto, or
(ii) any alleged omission to state in any such document a
material fact required to be stated therein or necessary to make the
statements therein not misleading,
but only insofar as any such loss, claim, damage or liability is caused by
or contained in any information furnished in writing to the Company by the
indemnifying seller expressly for use in connection with such
registration, and excluding any such loss, claim, damage or liability
which is caused by or contained in such statements, or caused by such
omissions, based upon the authority of an expert as defined in the
Securities Act (but only if the indemnifying seller had no grounds to
believe, and did not believe, that the statements made on the authority of
an expert were untrue or that there was an omission to state a material
fact); and
(b) any losses, claims, damages or liabilities, joint or several,
arising out of or based upon any failure by such seller to deliver a
copy of the registration statement or prospectus or any amendment or
supplement thereto as required by the Securities Act or the rules or
regulations thereunder. In connection with an underwritten offering,
each seller will indemnify such underwriters, their officers and
directors and each Person who controls (within the meaning of the
Securities Act) such underwriters to the same extent as provided
above with respect to the Company and other sellers. Each seller
shall reimburse each Person indemnified pursuant to this Section 8.3
in connection with investigating or defending any loss, claim,
damage, liability or action indemnified against. The reimbursements
required by this Section 8.3 shall be made by periodic payments
during the course of the investigation or defense, as and when bills
are received or expenses incurred. The indemnities provided pursuant
to this Section 8.3 shall remain in force and effect regardless of
any investigation made by or on behalf of the indemnified party and
shall survive transfer of Registrable Common by an indemnifying
seller, and transfer of other Securities by any other indemnified
seller. Notwithstanding any contrary provision of this Agreement,
however, the liability under this Section 8 of each Holder which is
a seller of Registrable Common shall be limited in the aggregate,
with respect to the claims of all indemnified Persons taken as a
whole, not to exceed the amount of
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proceeds to the indemnifying seller from the sale of the Registrable
Common sold by the indemnifying seller.
8.4 Indemnification similar to that specified in Sections 8.1 and
8.3 (with such modifications as shall be appropriate) shall be given by the
Company and each Holder of any Registrable Common covered by any registration or
other qualification of Securities under any federal or state securities law or
regulation other than the Securities Act with respect to any such registration
or other qualification effected pursuant to this Agreement.
8.5 In the event the Company or any Holder receives a complaint,
claim or other notice of any loss, claim or damage, liability or action, giving
rise to claim for indemnification under this Section 8, the Person claiming
indemnification shall promptly notify the Person against whom indemnification is
sought of such complaint, notice, claim or action, and such indemnifying Person
shall have the right to investigate and defend any such loss, claim, damage,
liability or action. The Person claiming indemnification shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall not be at the expense of
the Person against whom indemnification is sought (unless the Person claiming
indemnification reasonably believes that the ability of the counsel defending
such action to defend such Person's interests therein is affected adversely and
materially by a conflict of interest) and the indemnifying Person shall not be
obligated to indemnify any Person for any settlement of any claim or action
effected without the indemnifying Person's consent, which consent will not be
unreasonably withheld.
8.6 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.
SECTION 9. MARKETING RESTRICTIONS.
9.1 If:
(a) a registration is to be made pursuant to a registration
notice under Section 2 or Section 3 of this Agreement, and
(b) the offering proposed to be made by the Investor or
Investors for whom such registration is to be made is to be an
underwritten public offering, and
(c) in the opinion of the managing underwriters of such
public offering, the total amount of Securities to be included in
such offering would exceed the maximum number of shares of Common
which can be marketed without otherwise materially and adversely
affecting such offering,
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then the rights of the Investors, of the holders of other Securities
having the right to include Common in such registration and of the Company
to participate in such offering shall be in the following order of
priority:
First: each Investor and the Holder of Series A Preferred
shall be entitled to participate in such offering to the extent of
such Investor's or Holder's receipt of its respective Minimum
Proceeds, or of the aggregate number of shares of Registrable Common
that all such Investors and the Holder of Series A Preferred shall
have requested to be registered, whichever is less, PRO RATA among
themselves in accordance with their respective Applicable Percentage
(as defined below) of the maximum number of shares of Common
requested to be registered by the Investors and Holder of Series A
Preferred; and
Second: once each Investor and the Holder of Series A
Preferred have each received its respective Minimum Proceeds all
Holders shall be entitled to participate PRO RATA in accordance with
their respective Applicable Percentage of the maximum number of
shares of Common requested to be registered by them or otherwise
allocated as they may agree;
and no Securities (issued or unissued) other than those registered and
included in the underwritten offering shall be offered for sale or other
disposition in a transaction which would require registration under the
Securities Act until the expiration of 180 days after the effective date
of the registration statement filed in connection with such registration
or such earlier time consented to by the managing underwriter.
9.2 If:
(a) any Holder of Registrable Common requests registration
of Registrable Common under Section 4 of this Agreement, and
(b) the offering proposed to be made is to be an
underwritten public offering, and
(c) in the opinion of the managing underwriters of such
public offering, the total amount of securities to be included in
such offering would exceed the maximum amount of Securities which
can be marketed without materially and adversely affecting such
offering,
then the rights of the Holders, of the holders of other Securities having
the right to include such Securities in such registration and of the
Company to participate in such offering shall be in the following order of
priority:
First: the Company shall be entitled to include such
shares of Common as it wishes to include in the offering; and
then
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Second: each Investor and the Holder of Series A
Preferred shall be entitled to participate in such offering to
the extent of such Investor's or Holder's receipt of its
respective Minimum Proceeds, PRO RATA among themselves in
accordance with their respective Applicable Percentage (as
defined below) of the maximum number of shares of Common
requested to be registered by the Investors and Holder of
Series A Preferred; and
Third: once each Investor and the Holder of Series A
Preferred have each received its respective Minimum Proceeds,
all Holders shall be entitled to participate PRO RATA in
accordance with the number of shares of Registrable Common
which each such Holder shall have requested be registered, or
in such other proportion as shall mutually be agreed by such
Holders. (For purposes of this Agreement, "Applicable
Percentage" shall be the percentage derived by dividing the
number of fully-diluted shares of Common held by the Holder by
the aggregate number of fully-diluted shares of Common held by
all Holders in the aggregate); and then
Fourth: all other holders (including the Company, if
such registration shall have been requested by a Person other
than the Company) of Securities having the right to include
such Securities in such registration shall be entitled to
participate PRO RATA in accordance with the number of shares
proposed to be registered by them or otherwise allocated as
they may agree;
and no Securities (issued or unissued) other than those
registered and included in the underwritten offering shall be
offered for sale or other disposition in a transaction which would
require registration under the Securities Act until the expiration
of 180 days after the effective date of the registration statement
filed in connection with such registration or such earlier time
consented to by the managing underwriter.
9.3 In connection with any offering involving an underwriting of
Registrable Common pursuant to Section 4 of this Agreement, the Company shall
not be required to include any of the Registrable Common of a Holder in such
offering unless such Holder agrees to the terms of the underwriting agreed to
between the Company and the underwriter or underwriters selected by the Company.
SECTION 10. SALE OF PREFERRED TO UNDERWRITER. Notwithstanding anything in
this Agreement to the contrary, in lieu of converting any Preferred to
Conversion Stock prior to or simultaneously with the filing or the effectiveness
of any registration statement filed pursuant to this Agreement, the Holder of
such Preferred may sell such Preferred to the underwriter of the offering being
registered upon the undertaking of such underwriter to convert such Preferred
into Conversion Stock before making any distribution pursuant to such
registration statement and agreeing to include such Conversion Stock among
15
the Securities being offered pursuant to such registration statement. The
Company agrees to cause such Conversion Stock to be issued within such time as
will permit the underwriter to make and complete the distribution contemplated
by the underwriting and to register the Conversion Stock in any registration
statement so that the Holder may make the sale described in the first sentence
of this Section 10.
SECTION 11. LOCKUP AGREEMENT. Each Holder agrees in connection with any
registration of any of the Company's Securities that, upon the request of the
Company or the underwriters managing any underwritten offering of the Company's
Securities, he or it will not 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 the Securities 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 180 days) from the effective date of such
registration as the Company or the underwriters may specify.
SECTION 12. COMPLIANCE WITH RULE 144. In the event that the Company (a)
registers a class of Securities under Section 12 of the Exchange Act, or (b)
commences to file reports under Section 13 or 15(d) of the Exchange Act, then at
the request of any Holder who proposes to sell Securities in compliance with
Rule 144, the Company shall, to the extent necessary to enable such Holder to
comply with such Rule, (y) forthwith furnish to such Holder a written statement
of compliance with the filing requirements of the Commission as set forth in
Rule 144 and (z) make available to the public and such Holders such information
as will enable the Holders to make sales pursuant to Rule 144.
SECTION 13. ASSIGNABILITY OF REGISTRATION RIGHTS. The rights set forth in
this Agreement shall accrue to each subsequent Holder of Registrable Common who
shall have executed a written consent agreeing to be bound by the terms and
conditions of this Agreement as a party to this Agreement; provided that such
subsequent Holder of Registrable Common holds at least 100,000 shares of
Registrable Common.
SECTION 14. DESIGNATION OF UNDERWRITER. In the case of any registration
effected pursuant to Section 2 or 3, the managing underwriters and any other
investment banking advisers to the Company shall be selected in accordance with
the terms of the Amended and Restated Shareholders Agreement among the Company
and its shareholders and the Placement Agent Agreement between the Company and
Madison Securities, Inc.
SECTION 15. TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request registration or inclusion in any registration statement pursuant to
Sections 2, 3 or 4 shall terminate on the closing of the first Company-initiated
registered public offering of Common if all shares of Registrable Common held or
entitled to be held upon conversion by such Holder may immediately be sold under
Rule 144 during any 90-day period, or on such date after the closing of the
first Company-initiated registered public offering of Common as all shares of
Registrable Common held or entitled to be held by such Holder may be immediately
sold under Rule 144 during any 90-day period; provided, however, that the
foregoing provisions shall not apply to any Holder who owns
16
more than 1% of the outstanding Common until such time as such Holder owns less
than 1% of the outstanding Common. In addition, no Holder may exercise any right
provided for under Section 3 or 4 after five (5) years following the
consummation of the first registered public offering of Common.
SECTION 16. MISCELLANEOUS.
16.1 AMENDMENT. This Agreement may be amended to add Holders to this
Agreement, to grant rights to Holders under this Agreement or consent to rights
of other holders of Securities of the Company, superior to, on parity with, or
junior to the rights of the Holders of Outstanding Registrable Securities, or to
effect any other amendment to or waiver under this Agreement, by a written
agreement signed by all of the following:
(a) the Company, and
(b) the Investors owning at least 67% of the Outstanding
Registrable Securities owned by all Investors; and
(c) the Holders of Outstanding Registrable Securities
equivalent to more than 50% of the Registrable Common issued and
issuable.
Notwithstanding the foregoing requirements, the purchasers of Series D
Preferred, Series E Preferred and Series F Preferred will automatically become
an "Investor" under this Agreement at the time of purchase.
16.2 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying such registration as the
result of any controversy that might arise with respect to interpretation or
implementation of Section 2, 3 or 4 of this Agreement.
16.3 SEVERABILITY. In the event that any court or any governmental
authority or agency declares all or any part of any Section of this Agreement to
be unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any other Section of this Agreement, and in the event that only a
portion of any Section is so declared to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate the balance of such
Section.
16.4 SUCCESSORS AND ASSIGNS. All representations, warranties,
covenants and agreements of the parties contained in this Agreement or made in
writing in connection herewith, shall, except as otherwise provided herein, be
binding upon and inure to the benefit of their respective successors and
assigns. In addition, and whether or not any express assignment has been made,
the provisions of this Agreement which are for the benefit of the Holders or
other Holders of Securities are also for the benefit of, and enforceable by, any
subsequent Holders of Securities, except any subsequent Holder who acquires any
such security after such Security has been sold to the public pursuant to an
effective registration statement under the Securities Act or in a sale under
Rule 144.
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16.5 NOTICES. All communications in connection with this Agreement
shall be in writing and shall be deemed properly given if hand delivered or sent
by telecopier (provided that such communication is confirmed by same-day deposit
in the United States mail) or overnight courier with adequate evidence of
delivery or sent by registered or certified mail, return receipt requested, and,
if to a Holder, addressed to such Holder's address as shown on the books of the
Company or its transfer agent, and if to the Company, at its offices at:
Techwave Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
or such other addresses or Persons as the recipient shall have designated to the
sender by a written notice given in accordance with this Section. Any notice
called for hereunder shall be deemed given when received.
16.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington applicable to
agreements between Washington residents entered into and to be performed
entirely within Washington.
16.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same Agreement. A written consent executed
pursuant to Section 13 of this Agreement shall be deemed to be part of, and
constitute a counterpart of, this Agreement.
16.8 HEADINGS. The headings used herein are solely for the
convenience of the parties and shall not control or affect the meaning or
construction of any provisions hereof.
16.9 ENTIRE AGREEMENT. This Agreement and the other documents and
agreements executed by the parties hereto on this date or referred to herein
together constitute the entire agreement and understanding of the parties hereto
in respect of the subject matter referred to herein and therein, and there are
no restrictions, promises, representations, warranties, covenants, or
undertakings with respect to the subject matter hereof, other than those
expressly set forth or referred to herein or therein. This Agreement supersedes
all prior agreements and understandings between the parties hereto with respect
to the subject matter hereof.
16.10 ARBITRATION. In the event of a claimed breach of this
Agreement by any of the parties hereto, except for a dispute where the remedy
sought is specific performance or another form of extraordinary equitable
relief, such dispute shall be submitted to alternative resolution in accordance
with the terms of this Section 16.10. The party who is alleging that a dispute
exists shall send a notice of such dispute to all other parties to this
Agreement, setting forth in detail the dispute, the parties involved
18
and the position of such party with respect to the dispute. The parties to such
dispute shall endeavor in good faith to select an alternative dispute resolution
service to resolve the dispute and the rules that shall govern the resolution.
If agreement as to the matters detailed in the preceding sentence is not reached
within twenty (20) business days after receipt of the notice, then, within ten
(10) business days thereafter, counsel for the parties shall mutually select as
an arbitrator an attorney practicing in Chicago, Illinois (or such other
location as is agreed to by the parties), who is experienced in commercial
arbitration. If counsel for the parties are unable to agree upon the selection
of the arbitrator, the arbitrator shall be selected by the American Arbitration
Association (the "AAA"). Any disputes as to the rules for conducting the
arbitration shall be resolved by reference to the AAA rules for commercial
arbitration by the arbitrator. The arbitrator shall schedule a hearing on the
disputed issues within forty (40) business days after his appointment, and the
arbitrator shall render his decision after the hearing, in writing, as
expeditiously as possible, and shall deliver copies of such decision to the
parties. A default judgment may be entered against any party who fails to appear
at the arbitration hearing. Such decision and determination shall be final and
unappealable and may be filed as a judgment of record in any jurisdiction
designated by the successful party. The parties to this Agreement agree that
this paragraph has been included to rapidly and inexpensively resolve any
disputes among them with respect to the matters described above, and that this
paragraph shall be grounds for dismissal of any court action commenced by any
party with respect to a dispute arising out of such matters.
16.11 CONSTRUCTION AND REPRESENTATION. The parties understand and
acknowledge that they have each been represented by (or have had the opportunity
to be represented by) counsel in connection with the preparation, execution and
delivery of this Agreement. This Agreement shall not be construed against any
party for having drafted it.
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IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and
Restated Registration Rights Agreement to be executed as of the day first above
written.
THE COMPANY: TECHWAVE INC., a Washington corporation
By:____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, Its President
HOLDERS:
EXISTING INVESTORS:
THE PRODUCTIVITY FUND III, L.P., a
Delaware limited partnership
By:____________________________________
First Analysis Management Company III,
L.L.C., Its General Partner
By:____________________________________
First Analysis Corporation, a Member
By:____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice Chairman
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ENVIRONMENTAL PRIVATE EQUITY FUND II, L.P.,
a Delaware limited partnership
By:____________________________________
Environmental Private Equity
Management II, L.P., Its General
Partner
By:____________________________________
First Analysis EPEF Management
Company II, a General Partner
By:____________________________________
First Analysis Corporation, a General
Partner
By:____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice Chairman
_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
_______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_______________________________________
▇▇▇▇▇▇▇ MAR
_______________________________________
21
▇▇▇▇▇▇▇ ▇. AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
_______________________________________
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________________________
▇▇▇▇ ▇. AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_______________________________________
▇▇▇▇ ▇. AND ▇▇▇▇▇ ▇▇▇▇▇▇▇
_______________________________________
▇▇▇▇▇ ▇. AND ▇▇▇▇▇ ▇. ▇▇▇▇▇
_______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________________________
▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
TMZ INVESTMENT FUND
By:____________________________________
TOLMEY LLC
By:____________________________________
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MANAGERS:
_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
_______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_______________________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇/
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
NEW INVESTORS:
MADISON SECURITIES, INC.
By:____________________________________
Name:
Title:
[Merger Investors]
DATE: ____________________, __________
23