Exhibit 10.6
INVESTOR RIGHTS AGREEMENT
[________] , 2003
--
To each of the several Purchasers named in
Exhibit 1.01 to the Series D Convertible
Preferred Stock Purchase Agreement of even
date herewith (the "Investors")
This will confirm that in consideration of the Investors' purchase on the
date hereof of an aggregate of 485,267,267 shares (the "Series D Preferred
Shares") of Series D Convertible Preferred Stock, $0.001 par value (the "Series
D Preferred Stock"), of Voxware, Inc., a Delaware corporation (together with all
of its subsidiaries, the "Company"), pursuant to the Series D Convertible
Preferred Stock Purchase Agreement dated as of April 16, 2003 (the "Purchase
Agreement") between the Company and the Investors and as an inducement to the
Investors to consummate the transactions contemplated by the Purchase Agreement,
the parties hereto have agreed as follows herein. All defined terms used but not
defined herein shall have the meaning ascribed to them in the Purchase
Agreement.
WHEREAS, the Company and certain of the Investors are parties to a
Registration Rights Agreement, dated as of August 15, 2000 (the "First Prior
Agreement").
WHEREAS, the Company and certain of the Investors are parties to a
Registration Rights Agreement dated as of April 19, 2001 (the "Second Prior
Agreement" and, together with the First Prior Agreement, the "Prior
Agreements").
WHEREAS, the parties to this Agreement that are parties to the Prior
Agreements wish permanently to waive all rights pursuant to and terminate the
Prior Agreements and to enter into this Agreement, as of the date first written
above.
WHEREAS, the parties to this Agreement represent the Holders (as that term
is defined in the First Prior Agreement) of at least a majority of the
outstanding Registrable Securities (as that term is defined in the First Prior
Agreement), as required for amendment or waiver of the provisions of the First
Prior Agreement pursuant to Article X thereof.
WHEREAS, the parties to this Agreement represent the Holders (as that term
is defined in the Second Prior Agreement) of at least a majority of the
outstanding Registrable Securities (as that term is defined in the Second Prior
Agreement), as required for amendment or waiver of the provisions of the Second
Prior Agreement pursuant to Article X thereof.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
Investor Rights Agreement - Page 2
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Affiliate" means any Person who, directly or indirectly, controls, is
controlled by or is under common control with any other Person.
"Board of Directors" shall mean the board of directors of the Company
as constituted from time to time.
"Castle Creek" shall mean the Investor by the name of Castle Creek
Technology Partners, LLC and its Affiliates.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $0.001 par value, of the
Company, as constituted as of the date of this Agreement.
"Common Stock Warrants" shall mean the warrants to purchase Common
Stock issued pursuant to the Purchase Agreement.
"Computer Programs" shall mean (i) any and all computer programs
(consisting of sets of statements or instructions to be used directly or
indirectly in a computer in order to bring about a certain result), and (ii) all
associated data and compilations of data, regardless of their form or
embodiment. "Computer Programs" shall include, without limitation, all source
code, object code and natural language code therefor, all versions thereof, all
screen displays and designs thereof, all component modules, all descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing, and all documentation, including without limitation user
manuals and training materials, relating to any of the foregoing.
"Conversion Shares" shall mean shares of Common Stock issued or
issuable upon (i) conversion of the Series D Preferred Stock (including the
Common Stock issued or issuable upon (a) the conversion of Series D Preferred
Stock issued or issuable upon the exercise of the Series D Warrants and (b) the
conversion of the Series D Preferred Stock issued or issuable after the date
hereof pursuant to the Exchange Agreement) and (ii) the exercise of the Common
Stock Warrants.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
Investor Rights Agreement - Page 3
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Exchange Agreement" shall mean that certain Exchange Agreement, dated
as of April 16, 2003, by and among the Company, certain holders of convertible
debentures due July 1, 2003 issued by the Company and certain holders of
ownership interests in Voxware NV, a limited liability company organized under
the laws of the Belgium.
"Indebtedness" shall mean all obligations, contingent and otherwise,
which should, in accordance with generally accepted accounting principles, be
classified upon the obligor's balance sheet (or the notes thereto) as
liabilities, but in any event including liabilities secured by any mortgage on
property owned or acquired subject to such mortgage, whether or not the
liability secured thereby shall have been assumed, and also including (i) all
guaranties, endorsements and other contingent obligations, in respect of
Indebtedness of others, whether or not the same are or should be so reflected in
said balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (ii) the present value of any lease payments due
under leases required to be capitalized in accordance with applicable Statements
of Financial Accounting Standards, determined by discounting all such payments
at the interest rate determined in accordance with applicable Statements of
Financial Accounting Standards.
"Intellectual Property Rights" shall mean all of the following: (i)
patents, patent applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, re-examination, utility, model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations, (ii) trademarks, service marks, trade dress,
logos, tradenames, service names and corporate names and registrations and
applications for registration thereof, (iii) copyrights and registrations and
applications for registration thereof, (iv) mask works and registrations and
applications for registration thereof, (v) trade secrets and confidential
business information, whether patentable or nonpatentable and whether or not
reduced to practice, know-how, manufacturing and product processes and
techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (vi)
Computer Programs, (vii) other proprietary rights relating to any of the
foregoing (including without limitation associated goodwill and remedies against
infringements thereof and rights of protection of an interest therein under the
laws of all jurisdictions) and (viii) copies and tangible embodiments thereof.
"Key Employee" or "Key Employees" shall mean and include the
President, chief executive officer, chief financial officer, chief operating
officer, chief technology officer, vice presidents of operations, finance,
research, development, sales or marketing, or any other individual who performs
a significant role in the operations of the Company or a Subsidiary as may be
reasonably designated by the Board of Directors of the Company.
Investor Rights Agreement - Page 4
"Liquidation Event" shall mean any liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary.
"Material Adverse Change" shall mean a material adverse change in the
business, operations, affairs, or condition (financial or otherwise) of the
Company.
"Person" or "Persons" shall mean an individual, corporation,
partnership, joint venture, trust, or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Registration Expenses" shall mean the expenses so described in
Section 8.
"Reserved Employee Shares" shall mean shares of Common Stock not to
exceed in the aggregate 92,600,000 shares (appropriately adjusted to reflect
stock splits, stock dividends, combinations of shares and the like with respect
to the Common Stock) reserved by the Company for issuance pursuant to stock
purchase, stock grant or stock option arrangements for employees, directors or
consultants of the Company, all under arrangements approved by the Board of
Directors. The foregoing number of Reserved Employee Shares may not be increased
without the vote or written consent of the holders of at least a majority of the
then outstanding shares of Series D Preferred Stock.
"Restricted Stock" shall mean the Conversion Shares now or hereafter
held by the Investors, excluding Conversion Shares which (a) have been
registered under the Securities Act pursuant to an effective registration
statement filed thereunder and disposed of in accordance with the registration
statement covering them, (b) have been publicly sold pursuant to Rule 144 under
the Securities Act or (c) are then eligible for resale to the general public
pursuant to paragraph (k) of Rule 144 under the Securities Act by the Investors
and all partners and affiliates of the Investors to which such Conversion Shares
may be distributed or otherwise transferred.
"Sale of the Company" shall mean any (i) consolidation or merger of
the Company into or with any other Person or Persons which results in the
exchange of outstanding shares of the Company for securities or other
consideration issued or paid or caused to be issued or paid by any such Person
or affiliate thereof (except a consolidation or merger into a Subsidiary or
merger in which the Company is the surviving corporation and the holders of the
Company's voting stock outstanding immediately prior to the transaction hold a
majority of the voting stock of the Company outstanding immediately following
the transaction), (ii) sale or transfer by the Company of a substantial portion
of its assets, or (iii) sale of a majority of the outstanding capital stock in a
single transaction or a series of related transactions (such that after giving
effect to such sale or series of sales less than a majority of outstanding
voting power of the Company would be held by stockholders of the Company
immediately prior to such event or the first of such series of events).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Investor Rights Agreement - Page 5
"Selling Expenses" shall mean the expenses so described in Section 7.
"Series B Preferred Stock" shall mean the Series B Convertible
Preferred Stock of the Company, par value $0.001 per share.
"Series D Warrants" shall mean the warrants to purchase Series D
Preferred Stock issued pursuant to the Purchase Agreement.
"Subsidiary" or "Subsidiaries" shall mean any corporation or trust of
which the Company and/or any of its other Subsidiaries (as herein defined)
directly or indirectly owns at the time outstanding shares of every class of
such corporation or trust other than directors' qualifying shares comprising at
least fifty percent (50%) of the voting power of such corporation or trust.
2. Restrictive Legend. Each certificate representing Series D Preferred
Shares or Restricted Stock shall, except as otherwise provided in this Section 2
or in Section 3, be stamped or otherwise imprinted with a legend substantially
in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR THE
AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company (it being agreed that ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
LLP shall be satisfactory) the securities represented thereby may be publicly
sold without registration under the Securities Act and any applicable state
securities laws.
3. Legends with Respect to Transfers. Each certificate for Series D
Preferred Shares or Restricted Stock transferred as above provided shall bear
the legend set forth in Section 2, except that such certificate shall not bear
such legend if (i) such transfer is in accordance with the provisions of Rule
144 (or any other rule permitting public sale without registration under the
Securities Act) or (ii) the opinion of counsel referred to above is to the
further effect that the transferee and any subsequent transferee (other than an
affiliate of the Company) would be entitled to transfer such securities in a
public sale without registration under the Securities Act. The restrictions
provided for in this Section 3 shall not apply to securities which are not
required to bear the legend prescribed by Section 2 in accordance with the
provisions of that Section.
Investor Rights Agreement - Page 6
4. Required Registration.
(a) The Company shall make all reasonably practicable efforts to file,
within thirty (30) days of the Closing, a shelf registration statement with the
Commission relating to the offer and sale of the Restricted Stock by the
Investors from time to time in accordance with the methods of distribution
elected by the Investors and set forth in such shelf registration statement, and
the Company shall make all reasonably practicable efforts to have such shelf
registration statement effective within 120 days after its filing with the
Commission. The Company shall make all reasonably practicable efforts to keep
such shelf registration statement continuously effective for two (2) years
following the expiration of the one (1) year lock-up described in the first
sentence of Section 15(f) hereof. As soon as reasonably practicable after the
issuance to the Investors of any shares of Common Stock as a dividend pursuant
to Article FOURTH, Section 2 of the Company's Amended and Restated Certificate
of Incorporation, the Company shall file such amendments or supplements to such
shelf registration statement as are necessary to qualify such shares of Common
Stock for offer and sale by the Investors from time to time in accordance with
the methods of distribution elected by the Investors and set forth in such shelf
registration statement.
(b) The only securities which the Company shall be required to
register pursuant this Section 4 and Sections 5 and 6 hereto shall be shares of
Common Stock; provided, however, that, in any underwritten public offering
contemplated by this Section 4 or Sections 5 and 6, the holders of Series D
Preferred Shares shall be entitled to sell such Series D Preferred Shares to the
underwriters for conversion and sale of the shares of Common Stock issued upon
conversion or exercise and conversion, as applicable, thereof. Notwithstanding
anything to the contrary contained herein, no request may be made under this
Section 4 within 180 days after the effective date of any registration statement
on Form S-1 filed by the Company.
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 4 shares of Common Stock to be sold by the
Company for its own account, except as and to the extent that, in the opinion of
the managing underwriter, if any, such inclusion would adversely affect the
marketing of the Restricted Stock to be sold. If in the opinion of the managing
underwriter, if any, the inclusion of all of the Restricted Stock requested to
be registered under this Section would adversely affect the marketing of such
shares, shares to be sold by the holders of Restricted Stock, if any, shall be
excluded only after any shares to be sold by the Company have been excluded and
in such manner that the shares to be sold shall be allocated among the selling
holders pro rata based on their ownership of Restricted Stock.
5. Incidental Registration. If the registration statement pursuant to
Section 3 is no longer current or effective, and the Company (other than
pursuant to Section 4 or Section 6) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms ▇-▇, ▇-▇ or another form not available for
registering the Restricted Stock for sale to the public), each such time it will
give written notice to all holders of outstanding Restricted Stock of its
intention so to do. Upon the written request of any such
Investor Rights Agreement - Page 7
holder, received by the Company within 30 days after the giving of any such
notice by the Company, to register any of its Restricted Stock, the Company will
use its commercially reasonable efforts to cause the Restricted Stock as to
which registration shall have been so requested to be included in the securities
to be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the
holder of such Restricted Stock so registered. In the event that any
registration pursuant to this Section 5 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of shares of Restricted
Stock to be included in such an underwriting may be reduced (pro rata among the
requesting holders based upon the number of shares of Restricted Stock owned by
such holders) if and to the extent that the managing underwriter shall be of the
opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein, provided, however, that such
number of shares of Restricted Stock shall not be reduced if any shares are to
be included in such underwriting for the account of any person other than the
Company or requesting holders of Restricted Stock, and provided, further,
however, that in no event may less than twenty percent (20%) of the total number
of shares of Common Stock to be included in such underwriting be made available
for shares of Restricted Stock unless the managing underwriter shall in good
faith advise the holders proposing to distribute their securities through such
underwriting that such level of participation would, in its opinion, materially
adversely affect the offering price or its ability to complete the offering and
shall specify the number of shares of Restricted Stock which, in its opinion,
can be included in the registration and underwriting without such an effect.
6. Registration on Form S-2 or Form S-3.
(a) If the registration statement pursuant to Section 3 is no longer
current or effective and (i) a holder or holders of Restricted Stock request
that the Company file a registration statement on Form S-2 or Form S-3 or any
successors thereto for a public offering of all or any portion of the shares of
Restricted Stock held by such requesting holder or holders, provided that, the
reasonably anticipated aggregate price to the public of such offering must be at
least $500,000 and (ii) the Company is a registrant entitled to use Form S-2 or
Form S-3 or any successors thereto to register such shares, then the Company
shall use its commercially reasonable efforts to register under the Securities
Act on Form S-2 or Form S-3 or any successors thereto, for public sale in
accordance with the method of disposition specified in such notice, the number
of shares of Restricted Stock specified in such notice.
(b) Following receipt of any notice under this Section 6, the Company
shall immediately notify all holders of Restricted Stock and Series D Preferred
Shares from whom notice has not been received and such holders shall then be
entitled within 30 days thereafter to request the Company to include in the
requested registration all or any portion of their shares of Restricted Stock.
The Company shall use its commercially reasonable efforts to register under the
Securities Act, for public sale in accordance with the method of disposition
described in paragraph (a) above, the number of shares of Restricted Stock
specified in such notice (and in all notices received by the Company from other
holders within 30 days after the giving of such notice by the Company).
Investor Rights Agreement - Page 8
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 6 shares of Common Stock to be sold by the
Company for its own account, except as and to the extent that, in the opinion of
the managing underwriter, such inclusion would adversely affect the marketing of
the Restricted Stock to be sold. No other shares may be included in such
registration statement. Except for registration statements on Form ▇-▇, ▇-▇ or
any successor thereto, the Company will not file with the Commission any other
registration statement with respect to its Common Stock, whether for its own
account or that of other shareholders, from the date of receipt of a notice from
requesting holders requesting sale pursuant to an underwritten offering pursuant
to this Section 6 until the completion of the period of distribution of the
registration contemplated thereby.
(d) If in the opinion of the managing underwriter the inclusion of all
of the Restricted Stock requested to be registered under this Section 6 would
adversely affect the marketing of such shares, shares to be sold by the holders
of Restricted Stock, if any, shall be excluded only after any shares to be sold
by the Company have been excluded, in such manner that the shares to be sold
shall be allocated among the selling holders pro rata based on their ownership
of Restricted Stock.
(e) If at the time of any request to register Restricted Stock
pursuant to this Section 6, the Company is engaged or has plans to engage in a
registered public offering or is engaged in any other activity which, in the
good faith determination of the Board of Directors, would be adversely affected
by the requested registration, then the Company may at its option direct that
such request be delayed for a period not in excess of 60 days from the date of
such request.
7. Registration Procedures. If and whenever the Company is required by the
provisions of Sections 4, 5 or 6 to use its commercially reasonable efforts to
effect the registration of any shares of Restricted Stock under the Securities
Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its commercially reasonable efforts to cause
such registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) 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 for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each underwriter
such number of copies of the registration statement and the prospectus included
therein (including
Investor Rights Agreement - Page 9
each preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Restricted Stock covered
by such registration statement;
(d) use its commercially reasonable efforts to register or qualify the
Restricted Stock covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions as the sellers of Restricted Stock or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) use its commercially reasonable efforts to list the Restricted
Stock covered by such registration statement with any securities exchange or
automated quotation service on which the Common Stock of the Company is then
listed; provided, however, that if the Common Stock of the Company is not then
listed with any securities exchange or automated quotation service, then the
Company shall use its commercially reasonable efforts to list such Restricted
Stock with whatever quotation or reporting service with which the Common Stock
of the Company is then listed;
(f) provide a transfer agent and registrar for all such Restricted
Stock, not later than the effective date of such registration statement;
(g) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained 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 light of the circumstances then existing; provided, moreover,
that the Company shall use its commercially reasonable efforts to prepare and
furnish such amendments or supplements to such prospectus as may be necessary so
that, as thereafter delivered to purchases of such Restricted Stock, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
(h) if the offering is underwritten and at the request of any seller
of Restricted Stock, use its commercially reasonable efforts to furnish on the
date that Restricted Stock is delivered to the underwriters for sale pursuant to
such registration: (i) an opinion dated such date of 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 and to such seller, and (ii) a letter dated such date from
the independent certified public accountants retained by the Company, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and to such seller;
Investor Rights Agreement - Page 10
(i) make available for inspection by each seller of Restricted Stock,
any underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such seller
or underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement. The rights granted pursuant to this subsection (h) may not be
assigned or otherwise conveyed by such person or by any subsequent transferee of
any such rights without the written consent of the Company, which consent shall
not be unreasonably withheld; provided that the Company may refuse such written
consent if the proposed transferee is a competitor of the Company as determined
by the Company's Board of Directors; and provided further, that no such written
consent shall be required if the transfer is made to a party who is not a
competitor of the Company and who is a parent, subsidiary, affiliate, partner or
group member of such person;
(j) advise each selling holder of Restricted Stock, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for such purpose
and promptly use all reasonable efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued;
(k) cooperate with the selling holders of Restricted Stock and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Restricted Stock to be sold, such certificates to
be in such denominations and registered in such names as such holders or the
managing underwriters may request at least two business days prior to any sale
of Restricted Stock; and
(l) permit any holder of Restricted Stock which holder, in the sole
and exclusive judgment, exercised in good faith, of such holder, might be deemed
to be a controlling person of the Company, to participate in good faith in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included, subject
to review by the Company and its counsel after consultation with such holder.
For purposes of Section 7(a) and 7(b) and of Section 6(c), the period of
distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Restricted Stock in any other registration shall be deemed to extend until
the earlier of the sale of all Restricted Stock covered thereby and 120 days
after the effective date thereof; provided, however, that the period of
distribution with respect to the registration statement filed pursuant to
Section 4 shall be 2 years from the expiration of the one (1) year lockup
described in the first sentence of Section 15(f) hereof.
In connection with each registration hereunder, the sellers of Restricted
Stock will furnish to the Company in writing such information with respect to
themselves and the proposed
Investor Rights Agreement - Page 11
distribution by them as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Sections 4, 5 or 6
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
8. Expenses. All expenses incurred by the Company in complying with
Sections 4, 5 and 6, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, costs of insurance, and fees and
disbursements of one counsel for the sellers of Restricted Stock, but excluding
any Selling Expenses, are called "Registration Expenses." All underwriting
discounts and selling commissions applicable to the sale of Restricted Stock are
called "Selling Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 4, 5 or 6. All Selling Expenses in
connection with each registration statement under Sections 4, 5 or 6 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
9. Indemnification and Contribution.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 4, 5 or 6, the Company will
indemnify and hold harmless each seller of such Restricted Stock thereunder,
each underwriter of such Restricted Stock thereunder and each other person, if
any, who controls such seller or underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Restricted Stock was
registered under the Securities Act pursuant to Sections 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such seller, each such underwriter and each such controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so
Investor Rights Agreement - Page 12
made in conformity with information furnished by any such seller, any such
underwriter or any such controlling person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the net proceeds received by such seller from the sale of Restricted Stock
covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 9 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be
Investor Rights Agreement - Page 13
liable to such indemnified party under this Section 9 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 9 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
9; then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
10. Changes in Common Stock or Series D Preferred Stock. If, and as often
as, there is any change in the Common Stock or the Series D Preferred Stock by
way of a stock split, stock dividend, combination or reclassification, or
through a merger, consolidation, reorganization or recapitalization, or by any
other means, appropriate adjustment shall be made in the provisions hereof so
that the rights and privileges granted hereby shall continue with respect to the
Common Stock and the Series D Preferred Stock as so changed.
11. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which, among other benefits, may
at any time permit the sale of the Restricted Stock to the public without
registration, at all times after 90 days after any registration statement
covering a public offering of securities of the Company under the Securities Act
shall have become effective, the Company agrees to:
Investor Rights Agreement - Page 14
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its commercially reasonable efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Stock without
registration.
12. Right of First Refusal
(a) Right of First Refusal. The Company shall not issue, sell or
exchange, agree or obligate itself to issue, sell or exchange, or reserve or set
aside for issuance, sale or exchange, any (i) shares of Common Stock, (ii) any
other equity security of the Company, including without limitation, Series D
Preferred Shares, (iii) any debt security of the Company (other than debt with
no equity feature) including without limitation, any debt security which by its
terms is convertible into or exchangeable for any equity security of the
Company, (iv) any security of the Company that is a combination of debt and
equity, or (v) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any such equity security or any such debt security of the
Company, unless in each case the Company shall have first offered to sell such
securities (the "Offered Securities") to the Investors (each an "Offeree" and
collectively, the "Offerees") as follows: Each Offeree shall have the right to
purchase (x) that portion of the Offered Securities as the number of shares of
Series D Preferred Stock then held by such Offeree bears to the total number of
shares of Series D Preferred Stock held on such date by all Offerees (the "Basic
Amount"), and (y) such additional portion of the Offered Securities as such
Offeree shall indicate it will purchase should the other Offerees subscribe for
less than their Basic Amounts (the "Undersubscription Amount"), at a price and
on such other terms as shall have been specified by the Company in writing
delivered to such Offeree (the "Offer"), which Offer by its terms shall remain
open and irrevocable for a period of twenty-five (25) days from receipt of the
offer.
(b) Notice of Acceptance. Notice of each Offeree's intention to
accept, in whole or in part, any Offer made pursuant to Section 12(a) shall be
evidenced by a writing signed by such Offeree and delivered to the Company prior
to the end of the 25-day period of such offer, setting forth such of the
Offeree's Basic Amount as such Offeree elects to purchase and, if such Offeree
shall elect to purchase all of its Basic Amount, such Undersubscription Amount
as such Offeree shall elect to purchase (the "Notice of Acceptance"). If the
Basic Amounts subscribed for by all Offerees are less than the total Offered
Securities, then each Offeree who has set forth Undersubscription Amounts in its
Notice of Acceptance shall be entitled to purchase, in addition
Investor Rights Agreement - Page 15
to the Basic Amounts subscribed for, all Undersubscription Amounts it has
subscribed for; provided, however, that should the Undersubscription Amounts
subscribed for exceed the difference between the Offered Securities and the
Basic Amounts subscribed for (the "Available Undersubscription Amount"), each
Offeree who has subscribed for any Undersubscription Amount shall be entitled to
purchase only that portion of the Available Undersubscription Amount as the
Undersubscription Amount subscribed for by such Offeree bears to the total
Undersubscription Amounts subscribed for by all Offerees, subject to rounding by
the Board of Directors to the extent it reasonably deems necessary.
(c) Conditions to Acceptances and Purchase.
(i) Permitted Sales of Refused Securities. In the event that
Notices of Acceptance are not given by the Offerees in respect of all the
Offered Securities, the Company shall have ninety (90) days from the expiration
of the period set forth in Section 12(a) to close the sale of all or any part of
such Offered Securities as to which a Notice of Acceptance has not been given by
the Offerees (the "Refused Securities") to the Person or Persons specified in
the Offer, but only for cash and otherwise in all respects upon terms and
conditions, including, without limitation, unit price and interest rates, which
are no more favorable, in the aggregate, to such other Person or Persons or less
favorable to the Company than those set forth in the Offer.
(ii) Reduction in Amount of Offered Securities. In the event the
Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 12(c)(i) above),
then each Offeree may, at its sole option and in its sole discretion, reduce the
number of, or other units of the Offered Securities specified in its respective
Notices of Acceptance to an amount which shall be not less than the amount of
the Offered Securities which the Offeree elected to purchase pursuant to Section
12(b) multiplied by a fraction, (i) the numerator of which shall be the amount
of Offered Securities which the Company actually proposes to sell, and (ii) the
denominator of which shall be the amount of all Offered Securities. In the event
that any Offeree so elects to reduce the number or amount of Offered Securities
specified in its respective Notices of Acceptance, the Company may not sell or
otherwise dispose of more than the reduced amount of the Offered Securities
until such securities have again been offered to the Offerees in accordance with
Section 12(a).
(iii) Closing. Upon the closing, which shall include full payment
to the Company, of the sale to such other Person or Persons of all or less than
all the Refused Securities, the Offerees shall purchase from the Company, and
the Company shall sell to the Offerees, the number of Offered Securities
specified in the Notices of Acceptance, as reduced pursuant to Section 12(c)(ii)
if the Offerees have so elected, upon the terms and conditions specified in the
Offer. The purchase by the Offerees of any Offered Securities is subject in all
cases to the preparation, execution and delivery by the Company and the Offerees
of a purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Offerees and their respective counsel.
(d) Further Sale. In each case, any Offered Securities not purchased
by the Offerees or other Person or Persons in accordance with Section 12(c) may
not be sold or
Investor Rights Agreement - Page 16
otherwise disposed of until they are again offered to the Offerees under the
procedures specified in Sections 12(a), 12(b) and 12(c).
(e) Waiver of Right of First Refusal. The rights of the Investors
pursuant to this Section 12 may be waived as to all of such Investors by the
affirmative vote or written consent of holders of at least a majority in
interest of the then outstanding Series D Preferred Stock, and any such waiver
shall be binding on all Investors, even if any of such Investors do not execute
such waiver and irrespective of whether one or more Investors participates in
the purchase of the Offered Securities.
(f) Exception. The rights of the Investors under this Section 12 shall
not apply to:
(i) Common Stock issued (a) as a stock dividend to holders of
Common Stock, (b) upon any subdivision or combination of shares of Common Stock,
(c) upon exercise of warrants issued by the Company and outstanding as of the
date of this Agreement, or (d) upon the conversion of the Series B Preferred
Stock,
(ii) Series D Preferred Stock issued (a) as a dividend to holders
of Series D Preferred Stock upon any subdivision or combination of shares of
Series D Preferred Stock, (b) upon the exercise of the Series D Warrants, or (c)
pursuant to the Exchange Agreement,
(iii) the Conversion Shares,
(iv) any Reserved Employee Shares,
(v) any securities issued pursuant to the acquisition of another
entity by the Company by merger (whereby the Company owns no less than 51% of
the voting power of such corporation) or purchase of substantially all of such
entity's stock or assets, if such acquisition is approved by the Board of
Directors (which approval shall include the affirmative vote or consent of at
least one of the directors nominated or designated by the holders of Series D
Preferred Stock),
(vi) any securities issued in connection with a line of credit or
similar bank facility financing with a traditional commercial lender, or a joint
venture, licensing, development, technology, equipment leasing, marketing or
similar customer or strategic relationship, provided that each such agreement or
relationship is approved by a majority of the Board of Directors and such
majority includes at least one of the directors nominated or designated by the
holders of Series D Preferred Stock, and
(vii) any warrants to purchase Common Stock issued in connection
with a bank loan or lease with a financial institution or the issuance of Common
Stock upon the exercise of any such warrant provided that such is approved by a
majority of the Board of
Investor Rights Agreement - Page 17
Directors and such majority includes at least one of the directors nominated or
designated by the holders of the Series D Preferred Stock.
13. Covenants of the Company.
(a) Affirmative Covenants of the Company Other Than Reporting
Requirements. Without limiting any other covenants and provisions hereof, and
except to the extent the following covenants and provisions of this Section
13(a) are waived in any instance by a majority of the Board of Directors,
including at least one (1) director nominated by the holders of the Series D
Preferred Stock, the Company covenants and agrees that it will perform and
observe the following covenants and provisions, and will cause each Subsidiary,
if and when such Subsidiary exists, to perform and observe such of the following
covenants and provisions as are applicable to such Subsidiary:
(i) Payment of Taxes and Trade Debt. Pay and discharge, and cause
each Subsidiary to pay and discharge, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income, profits or business, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a lien or charge
upon any properties of the Company or any Subsidiary; provided, however, that
neither the Company nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and by
appropriate proceedings if the Company or any Subsidiary shall have set aside on
its books sufficient reserves, if any, with respect thereto. Pay and cause each
Subsidiary to pay, when due, or in conformity with customary trade terms, all
lease obligations, all trade debt, and all other Indebtedness incident to the
operations of the Company or its Subsidiaries, except such as are being
contested in good faith and by proper proceedings if the Company or Subsidiary
concerned shall have set aside on its books sufficient reserves, if any, with
respect thereto.
(ii) Maintenance of Insurance. Maintain, and cause each
Subsidiary to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is
customarily carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Company or such
Subsidiary operates.
(iii) Preservation of Corporate Existence. Preserve and maintain,
and, unless the Company deems it not to be in its best interests, cause each
Subsidiary to preserve and maintain, its corporate existence, rights, franchises
and privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
or lease of its properties. Secure, preserve and maintain, and cause each
Subsidiary to secure, preserve and maintain, all licenses and other rights to
use Intellectual Property Rights owned or possessed by it and deemed by the
Company to be necessary to the conduct of its business and the businesses of its
Subsidiaries, taken as a whole.
Investor Rights Agreement - Page 18
(iv) Compliance with Laws. Comply, and cause each Subsidiary to
comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, where noncompliance would have a Material
Adverse Effect.
(v) Inspection. Permit, upon reasonable request and notice, each
of the Investors or any agents or representatives thereof, to examine and make
copies of and extracts from the books of account of, and visit and inspect the
properties of the Company and any Subsidiary, to discuss the affairs, finances
and accounts of the Company and any Subsidiary with any of its officers,
directors or Key Employees and independent accountants, and consult with and
advise the management of the Company and any Subsidiary as to their affairs,
finances and accounts, all at reasonable times during normal business hours.
Subject to the disclosure of information of a non-technical nature, including
financial information, which such Investor discloses to its partners and/or
shareholders generally, each Investor agrees that it will keep confidential and
will not disclose or divulge any confidential, proprietary or secret information
which such Investor may obtain from the Company pursuant to financial
statements, reports and other materials submitted by the Company as required
hereunder, or pursuant to visitation or inspection rights granted hereunder
unless such information is or becomes known to the Investor from a source other
than the Company or is or becomes publicly known, or unless the Company gives
its written consent to such Investor's release of such information, except that
no such written consent shall be required (and the Investor shall be free to
release such information to such recipient) if such information is to be
provided to the Investor's counsel or accountant, or to an officer, director or
partner of such Investor, provided that the Investor shall inform the recipient
of the confidential nature of such information, and shall instruct the recipient
to treat the information as confidential.
(vi) Keeping of Records and Books of Account. Keep, and cause
each Subsidiary to keep, adequate records and books of account in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of the Company and
any Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, returns of merchandise, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its business shall be
made.
(vii) Maintenance of Properties. Maintain and preserve, and cause
each Subsidiary to maintain and preserve, all of its properties and assets,
necessary for the proper conduct of its business, in good repair, working order
and condition, ordinary wear and tear excepted.
(viii) Compliance with ERISA. Comply, and cause each Subsidiary
to comply, with all minimum funding requirements applicable to any pension,
employee benefit plans or employee contribution plans which are subject to ERISA
or to the Code or any similar foreign laws, and comply, and cause each
Subsidiary to comply, in all other material respects with the provisions of
ERISA and the Code and any similar foreign laws, and the rules and regulations
thereunder, which are applicable to any such plan. The Company shall not permit
any event or condition to exist which could permit any such plan to be
terminated under
Investor Rights Agreement - Page 19
circumstances which would cause the lien provided for in
Section 4068 of ERISA or any similar foreign laws to attach to the assets of the
Company or any Subsidiary.
(ix) Budgets Approval. Not later than 30 days prior to the
commencement of each fiscal year, prepare and submit to, and obtain the approval
of a majority of the Board of Directors, including at least on director
nominated or designated by the holders of the Series D Preferred Stock of, a
business plan and monthly operating budgets in detail for the upcoming fiscal
year, including capital and operating expense budgets, cash flow projections and
profit and loss projections, all itemized in reasonable detail (including
itemization of provisions for officers' compensation). Review the budget and
business plan periodically, and resubmit all changes therein and all material
deviations therefrom to the Board of Directors. The Company shall not amend its
budget or enter into any activity not in the ordinary course of business and not
materially envisioned by the budget and business plan, unless approved by the
affirmative vote of a majority of the members of the Board of Directors
including at least one director nominated or designated by the holders of the
Series D Preferred Stock.
(x) Financings. Inform the Board of Directors of any
negotiations, offers or contracts relating to possible financings of any nature
for the Company, whether initiated by the Company or any other Person, except
for (A) arrangements with trade creditors, and (B) utilization by the Company or
any Subsidiary of commercial lending arrangements with financial institutions.
(xi) Bylaws. At all times, cause the Bylaws of the Company to
include provisions so that, unless otherwise required by the laws of the State
of Delaware, (i) any two directors and (ii) any holder or holders of at least a
majority in interest of the outstanding Series D Preferred Stock, shall have the
right to call a meeting of the Board of Directors or stockholders. At all times
maintain provisions in the Bylaws, as amended, or the Amended and Restated
Certificate of Incorporation, of the Company indemnifying all directors against
liability to the maximum extent permitted under the laws of State of Delaware.
(xii) Non-Competition, Non-Solicitation and Non-Disclosure
Agreements. The Company will obtain a duly executed Non-Competition,
Non-Solicitation and Non-Disclosure Agreement (which will endure for a minimum
of one year) in a form agreed upon by all members of the Board of Directors from
each Key Employee of the Company.
(xiii) New Developments. Where reasonably practicable, cause all
technological developments, patentable or unpatentable inventions, discoveries
or improvements by the Company's or any Subsidiary's officers or employees to be
documented in accordance with the appropriate professional standards, cause all
officers and Key Employees and, to the best of the Company's or any Subsidiary's
ability, consultants of the Company or any Subsidiary, to execute Nondisclosure
and Developments Agreements in a form agreed upon by all members of the Board of
Directors in favor of the Company or any Subsidiary and, where possible and
deemed by management to be commercially appropriate based on the advice of legal
counsel and other considerations, to file and prosecute United States and
foreign patent or copyright
Investor Rights Agreement - Page 20
applications relating to and protecting such developments on behalf of the
Company or any Subsidiary.
(xiv) Meetings of Directors. Hold meetings of the Company's Board
of Directors not less than four (4) times a year on a quarterly basis.
(xv) Expenses of Directors. Promptly reimburse in full, each
director of the Company who is not an employee of the Company for all of his
reasonable out-of-pocket expenses incurred in attending each meeting of the
Board of Directors of the Company or any committee thereof.
(xvi) Continued Business Operations. Use commercially reasonable
efforts to cause its officers and Key Employees to refrain from carrying on any
for-profit business activity outside of the Company.
(xvii) Stock Option Plans. Maintain all stock option plans in
form and substance reasonably satisfactory to the Investors, which plans shall
not be amended without the consent of a majority of the Board of Directors,
including at least one (1) director nominated by the holders of the Series D
Preferred Stock. Each option granted pursuant to the Company's stock option
plans shall have an exercise price that is no less than the fair market value of
the Common Stock as of the date of such option grant, as determined in each case
by the Board of Directors.
(b) Negative Covenants of the Company. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that while
this Agreement remains outstanding, it will comply with and observe the
following covenants and provisions, and will cause each Subsidiary, if and when
such Subsidiary exists, to comply with and observe such of the following
covenants and provisions as are applicable to such Subsidiary, and will not,
without the written consent of a majority of the Board of Directors, including
at least one (1) director nominated or designated by the holders of the Series D
Preferred Stock:
(i) Restrictions on Indebtedness. Create, incur, assume or suffer
to exist, or permit any Subsidiary to create, incur, assume or suffer to exist,
any liability with respect to Indebtedness for money borrowed which exceeds, in
the aggregate, $3,000,000.
(ii) Change in Nature of Business. Make, or permit any Subsidiary
to make, any material change in the nature of its business except as
contemplated in the Company's filings with the Commission made prior to the date
hereof.
(iii) Assumptions or Guaranties of Indebtedness of Other Persons.
Assume, guarantee, endorse or otherwise become directly or contingently liable
on, or permit any Subsidiary to assume, guarantee, endorse or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) any Indebtedness of any other Person, except
for
Investor Rights Agreement - Page 21
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business, and except for the guaranties of the permitted
obligations of any wholly-owned Subsidiary.
(iv) Distributions. Declare or pay any dividends, purchase,
redeem, retire, or otherwise acquire for value any of its capital stock (or
rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its stockholders as such, or make any
distribution of assets to its stockholders as such, or permit any Subsidiary to
do any of the foregoing (such transactions being hereinafter referred to as
"Distributions"), except that any such Subsidiary may declare and make payment
of cash and stock dividends, return capital and make distributions of assets to
the Company, and except as specifically provided for in the Company's Amended
and Restated Certificate of Incorporation; provided, however, that nothing
herein contained shall prevent the Company from:
(x) effecting a stock split (except for a reverse stock
split) or declaring or paying any dividend consisting of shares of any class of
capital stock to the holders of shares of such class of capital stock, or
(y) redeeming any stock of a deceased stockholder out of
insurance held by the Company on that stockholder's life, or
(z) repurchasing the shares of Common Stock held by
officers, employees, directors or consultants of the Company which are subject
to restrictive stock purchase agreements under which the Company has the option
to repurchase such shares upon the occurrence of certain events, including the
termination of employment, at a price not in excess of the original purchase
price paid to the Company by such officer, employee, director or consultant for
such shares,
if in the case of any such transaction the payment can be made in compliance
with the other terms of this Agreement.
(v) Appointment or Termination of Chief Executive Officer.
Appoint or terminate (other than for cause) its chief executive officer.
(vi) Ownership of Subsidiaries. Purchase or hold beneficially any
stock, other securities or evidences of Indebtedness in, or make any investment
in any other Person, excluding a wholly-owned Subsidiary of the Company, if the
aggregate financial commitment of the Company related to all such commitments
involves more than $250,000.
(vii) Purchase of Assets. Purchase or otherwise acquire any
interest with respect to the property, assets or operations of any other Person
or business in a transaction or series of related transactions which involve
more than $250,000 in expenditures by the Company.
Investor Rights Agreement - Page 22
(viii) Dealings with Affiliates and Others. Other than as
contemplated by this Agreement, other than transactions in the ordinary course
of business involving less than $250,000, enter into, after the date of this
Agreement, any transaction, including, without limitation, any loans or
extensions of credit or royalty agreements, with any officer, director or
affiliate of the Company or any Subsidiary or any member of their respective
immediate families or any corporation or other entity directly or indirectly
affiliated with one or more of such officers, directors or members of their
immediate families unless such transaction is approved in advance by a majority
of the disinterested members of the Board of Directors.
(ix) Maintenance of Ownership of Subsidiaries. Sell or otherwise
dispose of any shares of capital stock of any Subsidiary, except to another
Subsidiary, or permit any Subsidiary to issue, sell or otherwise dispose of any
shares of its capital stock or the capital stock of any Subsidiary, except to
the Company or another Subsidiary; provided, however, that the Company may
liquidate, merge or consolidate any Subsidiary or Subsidiaries into or with
itself, provided that the Company is the surviving entity, or into or with
another Subsidiary or Subsidiaries.
(x) Transfers of Technology. Sell, transfer, license or otherwise
encumber any ownership or interest in, or material rights relating to, any of
its Intellectual Property Rights to any Person or entity which is not a member
of the consolidated group of the Company and its Subsidiaries; provided,
however, that this Section shall not apply to transfers of Intellectual Property
Rights accomplished in the ordinary course of business.
(c) Additional Negative Covenants of the Company. Without limiting any
other covenants and provisions hereof, the Company covenants and agrees that
while this Agreement remains outstanding, it will comply with and observe the
following additional covenants and provisions, and will cause each Subsidiary,
if and when such Subsidiary exists, to comply with and observe such of the
following covenants and provisions as are applicable to such Subsidiary, and
will not, without written consent of a majority in interest of the holders of
the Series D Preferred Stock, voting as a class:
(i) Sale of the Company or Liquidation Event. Agree to or enter
into any agreement with respect to (x) the Sale of the Company, (y) a
Liquidation Event or (z) any other recapitalization, reorganization, sale of a
significant portion of the assets of the Company or similar event.
(ii) Additional Class of Stock. Create or authorize the creation
of any additional class or series of shares of stock unless the same ranks
junior to the Series D Preferred Stock, as to dividends and the distribution of
assets on the liquidation, dissolution and winding up of the Company and with
respect to the payment of dividends and redemption rights (in all cases, whether
such rights and preferences exist by contract or under the terms of the
Company's Amended and Restated Certificate of Incorporation, or otherwise); or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to Series D Preferred Stock as to dividends
and the distribution of assets on the liquidation, dissolution and winding up of
the Company and with respect to the payment of dividends and redemption
Investor Rights Agreement - Page 23
rights (in all cases, whether such rights and preferences exist by contract or
under the terms of the Company's Amended and Restated Certificate of
Incorporation, or otherwise); or create or authorize any obligation or security
convertible into shares of Series D Preferred Stock or into shares of any other
class or series of stock unless the same ranks junior to the Series D Preferred
Stock as to dividends and the distribution of assets on the liquidation,
dissolution and winding up of the Company and with respect to the payment of
dividends and redemption rights (in all cases, whether such rights and
preferences exist by contract or under the terms of the Company's Amended and
Restated Certificate of Incorporation, or otherwise), whether any such creation,
authorization or increase shall be by means of amendment to the Company's
Amended and Restated Certificate of Incorporation, or by merger, consolidation
or otherwise.
(iii) Issuance of Additional Securities. Issue or sell any equity
securities of the Company or securities that are convertible into equity
securities of the Company, other than any issuance of Reserved Employee Shares
pursuant to options and other rights granted under equity compensation plans
approved by the Company's stockholders.
(iv) Size of the Board of Directors. Increase or decrease the
Board of Directors from seven (7) members.
(v) Certificate of Incorporation, Bylaws and Authorized Shares.
Make any material amendment to or repeal any provision of the Company's Amended
and Restated Certificate of Incorporation or Bylaws, as amended; provided that
the parties hereto agree and acknowledge that each of the following shall be
considered a material amendment for the purposes hereof: (i) any amendment to
the rights, preferences and privileges of any series of the preferred stock of
the Company, (ii) an increase or decrease in the number of authorized shares of
Common Stock or preferred stock of the Company (or any series of preferred stock
of the Company), and (iii) any designation of the rights, preferences or
privileges of shares of the preferred stock of the Company which may from time
to time be undesignated as to series.
(d) Reporting Requirements. As long as there are Series D Preferred
Shares outstanding the Company will furnish the following to the Investors that
hold greater than 25,000,000 Series D Preferred Shares:
(i) Monthly Reports: as soon as available and in any event within
30 days after the end of each calendar month, unaudited financial statements of
the Company and its Subsidiaries as of the end of such month and statements of
income and retained earnings of the Company and its Subsidiaries for such month
and for the period commencing at the end of the previous fiscal year and ending
with the end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
and including comparisons to monthly budgets, a cash flow analysis for such
month, a schedule showing each expenditure of a capital nature during such
month, and a summary discussion of the Company's principal functional areas, all
in reasonable detail;
Investor Rights Agreement - Page 24
(ii) Budgets: as soon as available after approval by the Board of
Directors and in any event within 30 days after the end of each year at the
Company, a business plan and monthly operating budgets for the forthcoming
fiscal year;
(iii) Notice of Adverse Changes: promptly after the occurrence
thereof and in any event within 10 days after each occurrence, notice of any
Material Adverse Change in the operations or financial condition of the Company
or any material default in any other material agreement to which the Company is
a party;
(iv) Written Reports: promptly upon receipt or publication
thereof, any written reports submitted to the Company by independent public
accountants in connection with an annual or interim audit of the books of the
Company and its Subsidiaries made by such accountants or by consultants or other
experts in connection with such consultant's or other expert's review of the
Company's operations or industry, and written reports prepared by the Company to
comply with other investment or loan agreements;
(v) Notice of Proceedings: promptly after the commencement
thereof, notice of all material actions, suits, litigations and proceedings
pending or, to the knowledge of the Company, threatened against the Company
affecting any of its respective properties or assets, or against any officer,
director or Key Employee relating to such person's performance of duties for the
Company or relating to his stock ownership in the Company or otherwise relating
to the business of the Company including, without limiting their generality,
actions pending or, to the knowledge of the Company, threatened involving the
prior employment of any of the Company's officers or Key Employees in their use
in connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or any event or
condition on the basis of which such litigation, proceeding or investigation
might properly be instituted before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company or any Subsidiary where such litigation, proceeding or
investigation would reasonably be expected to cause a Material Adverse Change;
(vi) Stockholders' and SEC Reports: promptly upon sending, making
available, or filing the same, such reports and financial statements as the
Company or any Subsidiary shall send or make available to the stockholders of
the Company or file with the Securities and Exchange Commission; and
(vii) Other Information: such other information respecting the
business, properties or the condition or operations, financial or other, of the
Company or any of its Subsidiaries as any such Investor may from time to time
reasonably request.
The holders of Restricted Stock hereby covenant and agree that all of the
information disclosed to such holders pursuant to the provisions of this Section
13(d) shall be treated in accordance with Section 13(a)(v) of this Agreement.
Investor Rights Agreement - Page 25
14. Representations and Warranties of the Company. The Company represents
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any material provision of law, any order of any court or other agency of
government, the Amended and Restated Certificate of Incorporation or Bylaws, as
amended, of the Company or any provision of any material indenture, agreement or
other instrument to which it or any or its properties or assets is bound,
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by general equitable principles.
15. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Series D Preferred Shares or Restricted Stock),
whether so expressed or not, provided, however, that registration rights
conferred herein on the holders of Series D Preferred Shares, Conversion Shares
or Restricted Stock shall only inure to the benefit of a transferee of Series D
Preferred Shares, Conversion Shares or Restricted Stock if (i) there is
transferred to such transferee at least 25,000,000 shares of Restricted Stock
originally issued pursuant to the Purchase Agreement to the direct or indirect
transferor of such transferee or (ii) such transferee is a partner, shareholder
or affiliate of a party hereto.
(b) All notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or telex,
addressed as follows:
if to the Company or any other party hereto, at the address of such
party set forth in the Purchase Agreement;
if to any subsequent holder of Series D Preferred Shares, Conversion
Shares or Restricted Stock, to it at such address as may have been furnished to
the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Series D Preferred Shares,
Conversion Shares or Restricted
Investor Rights Agreement - Page 26
Stock) or to the holders of Series D Preferred Shares, Conversion Shares or
Restricted Stock (in the case of the Company) in accordance with the provisions
of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the General Corporation Law of the State of Delaware as to matters within
the scope thereof, and as to all other matters shall be governed by and
construed in accordance with the internal laws of the State of New Jersey,
without regard to its principles of conflicts of laws.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the holders
of at least a majority in interest of the Restricted Stock; provided, however,
that the restrictions applicable to and obligations of Castle Creek under
Section 16 of this Agreement may be waived with the written consent of the
Company and Castle Creek; provided further, however, that Castle Creek hereby
acknowledges and agrees that neither the Company, its transfer agent nor any
other agent or Affiliate of the Company shall have any liability with respect to
any such waiver.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) Each of the Investors hereby agrees not to sell any shares of
Common Stock issued upon the conversion of the Series D Preferred Stock now
owned or hereafter acquired by it for a period of one (1) year from the date of
the Closing. Moreover, each of the Investors hereby further agrees for a period
of two (2) years from the date of the Closing that it shall (i) limit its sale
of any shares of Common Stock issued upon conversion of Series D Preferred Stock
to no more than ten percent (10%) of the previous month's trading volume on the
principal securities exchange, automated quotation service or consolidated
reporting system upon which the Company's Common Stock is then listed and (ii)
not to short sell any shares of Common Stock issued upon conversion of Series D
Preferred Stock.
(g) If requested in writing by the underwriters for an underwritten
public offering of securities of the Company, each holder of Restricted Stock
who is a party to this Agreement shall agree not to sell publicly any shares of
Restricted Stock or any other shares of Common Stock (other than shares of
Restricted Stock or other shares of Common Stock being registered in such
offering), without the consent of such underwriters, for a period not to exceed
180 days following the effective date of the registration statement relating to
such offering; provided, however, that all persons entitled to registration
rights with respect to shares of Common Stock who are not parties to this
Agreement, all other persons selling shares of Common Stock in such offering,
all persons holding in excess of 1% of the capital stock of the Company on a
fully diluted basis and all executive officers and directors of the Company
shall also have agreed not to sell publicly their Common Stock under the
circumstances and pursuant to the terms set forth in this Section 15(g); and
provided, further, however, that any such lock-up agreement shall provide that
if the managing underwriter releases any shares from the lock-up with respect to
such offering prior to the scheduled expiration date, the managing underwriter
shall contemporaneously release a pro rata portion of the Restricted Stock from
such lock-up.
Investor Rights Agreement - Page 27
(h) Notwithstanding the provisions of Section 7(a), the Company's
obligation to file a registration statement, or cause such registration
statement to become and remain effective, shall be suspended for a period not to
exceed 90 days in any 12-month period if there exists at the time material
non-public information relating to the Company which, in the reasonable opinion
of the Company, should not be disclosed.
(i) The Company shall not grant to any third party any registration
rights more favorable than or inconsistent with any of those contained herein,
so long as any of the registration rights under this Agreement remains in
effect; provided, however, that the Company may grant to a third party
piggy-back registration rights upon the approval of such grant by the unanimous
consent of the Board of Directors of the Company.
(j) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(k) The parties hereto agree and acknowledge that the terms and
provisions of the Prior Agreements are hereby terminated and shall have no
further force or effect and are superseded in their entirety by this Agreement.
16. Limitations on Conversions of Series D Preferred Stock by Castle
Creek. Subject to the terms of the Company's Amended and Restated Certificate of
Incorporation, Castle Creek hereby covenants and agrees that in it in no event
shall it voluntarily elect to convert any of its shares of Series D Preferred
Stock to the extent (but only to the extent) that, if converted by Castle Creek,
Castle Creek would be the beneficial owner of more than of 4.99% of the shares
of Common Stock. For the purposes of this Section 16, beneficial ownership and
all determinations and calculations related thereto shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and all applicable rules and regulations. Castle Creek acknowledges and
agrees that neither the Company, its transfer agent nor any other agent or
Affiliate of the Company shall have any obligation to monitor or enforce Castle
Creek's compliance with its restrictions or obligations under this Section 16.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
Investor Rights Agreement - Signature Page
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Agreement shall be a
binding agreement between the Company and you.
Very truly yours,
THE COMPANY:
VOXWARE, INC.
By:
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Name:
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Title:
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AGREED TO AND ACCEPTED as of the date first above written.
Purchasers named in Exhibit 1.01 to the Purchase Agreement:
INVESTORS: INVESTORS:
EDISON VENTURE FUND V, L.P. CROSS ATLANTIC TECHNOLOGY FUND II, L.P.
By: EDISON PARTNERS V, L.P., By: CROSS ATLANTIC CAPITAL PARTNERS,
its General Partner INC., its General Partner
By: By:
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Investor Rights Agreement - Signature Page
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DIATHERMI INVESTMENT LTD. BURNBRAE LTD.
By: By:
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JUERGEN ▇. ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇
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Investor Rights Agreement - Signature Page
▇ ▇ ▇▇▇▇▇▇▇▇ LLC
By:
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PICTET PRIVATE EQUITY INVESTORS SA
By:
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SCORPION NOMINEES LIMITED
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Investor Rights Agreement - Signature Page
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▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address: Address:
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Fax: Fax:
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CREAFUND NV CASTLE CREEK TECHNOLOGY PARTNERS LLC
By: By:
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BVBA COM/2/WIZARDS
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AVVISION BVBA
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Investor Rights Agreement - Signature Page
RIDGECREST CAPITAL PARTNERS EURL VAL D'AUSO
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