Exhibit 10.3
EVOKE INCORPORATED
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
March 29, 2000
Table Of Contents
Page
ARTICLE 1 CERTAIN DEFINITIONS............................ 1
ARTICLE 2 REGISTRATION RIGHTS............................ 4
2.1 Demand Registrations............................. 4
2.2 Piggyback Registrations.......................... 5
2.3 Expenses of Registration......................... 6
2.4 Registration Procedures.......................... 7
2.5 Indemnification.................................. 8
2.6 Other Obligations................................ 10
2.7 Termination of Registration Rights............... 10
2.8 Transfer of Registration Rights.................. 11
ARTICLE 3 RESTRICTIONS ON TRANSFER OF MANAGEMENT STOCK... 11
3.1 Rights of First Refusal.......................... 11
3.2 Co-Sale Rights................................... 12
3.3 Exempt Transactions.............................. 12
3.4 Assignment of First Refusal Right................ 13
ARTICLE 5 COVENANTS OF THE COMPANY....................... 14
5.1 Basic Financial Information...................... 14
5.2 Additional Information Rights.................... 15
5.3 Prompt Payment of Taxes, Etc..................... 16
5.4 Maintenance of Properties and Leases............. 16
5.5 Insurance........................................ 16
5.6 Accounts and Records............................. 16
5.7 Independent Accountants.......................... 17
5.8 Compliance with Laws............................. 17
5.9 Maintenance of Corporate Existence, Etc.......... 17
5.10 Transactions with Affiliates..................... 17
5.11 Limited First Refusal Rights..................... 17
ARTICLE 6 CORPORATE GOVERNANCE........................... 18
6.1 Board of Directors............................... 18
6.2 Meetings of the Board............................ 20
i.
6.3 Committees....................................... 21
6.4 Reimbursement of Expenses........................ 21
6.5 Certain Approvals................................ 21
ARTICLE 7 MISCELLANEOUS.................................. 21
7.1 Governing Law.................................... 21
7.2 "Market Stand-Off" Agreement..................... 21
7.3 Successors and Assigns........................... 22
7.4 Entire Agreement; Amendment and Waiver........... 22
7.5 Notices, Etc..................................... 22
7.6 Delays or Omissions.............................. 22
7.7 Severability..................................... 23
7.8 Counterparts..................................... 23
7.9 Termination...................................... 23
7.10 Specific Enforcement............................. 23
7.11 Confidentiality and Non-Disclosure............... 23
ii.
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
Amended and Restated Stockholders Agreement (this "Agreement") dated as of
March 29, 2000 by and among (i) Evoke Incorporated, a Delaware corporation (the
"Company"), (ii) the holders of the Company's Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
identified on the signature pages hereto (the "Investors"), and (iii) the
members of the Company's management identified on the signature pages hereto or
that have otherwise agreed to be bound by the provisions hereof (the "Management
Holders"). The Investors and the Management Holders are referred to
collectively as the "Stockholders."
Whereas, the Company has granted registration rights, information rights
and certain other rights pursuant to that certain Amended and Restated
Stockholders' Agreement, dated as of November 17, 1999 as amended on December
15, 1999 (the "Prior Agreement");
Whereas, the Company proposes to sell and issue shares of its Series E
Preferred Stock pursuant to the Series E Preferred Stock Purchase Agreement of
even date herewith (the "Purchase Agreement"); and
Whereas, as a condition of entering into the Purchase Agreement, the
prospective purchasers have requested that the Company extend to them
registration rights, information rights and other rights as set forth below, and
the Company and the parties to the Prior Agreement are willing to amend the
rights given to them pursuant to the Prior Agreement by replacing such rights in
their entirety with the rights set forth in this Agreement.
Now, Therefore, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Affiliate" shall mean any individual, partnership, corporation,
association, joint stock company, trust, joint venture, unincorporated
organization, governmental entity or any department, agency or political
subdivision thereof, controlling, controlled by or under common control with the
referenced party and any partner of an Investor which is a partnership and any
member of an Investor which is a limited liability company.
1.2 "Certificate" shall mean the Company's Amended and Restated
Certificate of Incorporation setting forth the rights, preferences, privileges
and restrictions of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock.
1.
1.3 "Closing" shall mean the date of the initial sale of shares of the
Company's Series E Preferred Stock pursuant to the Purchase Agreement.
1.4 "Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
1.5 "Common Stock" shall mean the Company's Common Stock, $.001 par value per
share.
1.6 "Exchange Act" shall mean the Securities Exchange Act of 1934 (or any
similar successor federal statute), as amended, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
1.7 "Independent Third Party" means any person who, immediately prior to the
contemplated transaction, does not own in excess of 5 percent (5%) of the
Company's Common Stock, on a fully-diluted basis (a "5% Owner"), who is not
controlling, controlled by or under common control with any such 5% Owner and
who is not the spouse or descendent (by birth or adoption) of any such 5% Owner
or a trust for the benefit of such 5% Owner and/or such other persons.
1.8 "Initiating Holders" shall mean holders of Registrable Securities
representing not less than thirty-three percent (33%) of the then-outstanding
Registrable Securities.
1.9 "Investor Stock" shall mean (i) shares of Common Stock owned by the
Investors or any transferee thereof; (ii) shares of Common Stock issued or
issuable upon the conversion or exercise of any stock (including, without
limitation, the Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock) warrants, options or other
securities of the Company owned by the Investors or any transferee thereof; and
(iii) any shares of Common Stock issued as a dividend or other distribution with
respect to or in exchange for or in replacement of the shares referenced in (i)
and (ii) above.
1.10 "Management Stock" shall mean (i) shares of Common Stock owned by the
Management Holders or any Permitted Transferee thereof; (ii) shares of Common
Stock issued or issuable upon the conversion or exercise of any stock (including
without limitation the Series A Preferred Stock), options or other securities of
the Company owned by the Management Holders; and (iii) any shares of Common
Stock issued as a dividend or other distribution with respect to or in exchange
for or in replacement of the shares referenced in (i) and (ii) above.
1.11 "Permitted Transferee" shall mean with respect to a Management Holder, a
member of such Management Holder's immediate family, a trust established for the
benefit of members of such management Holder's immediate family, an affilitated
entity established for estate planning purposes, or a transferee of such
Management Holder by will or the laws of intestate succession.
1.12 "Preferred Stock" shall mean, collectively, (i) the Series A Preferred
Stock; (ii) the Series B Preferred Stock; (iii) the Series C Preferred Stock;
(iv) the Series D Preferred Stock; and (v) the Series E Preferred Stock.
2.
1.13 "Qualified Public Offering" shall mean an underwritten public offering of
Common Stock resulting in proceeds to the Company of not less than $30 million
(prior to expenses and underwriting commissions) and at an offering price per
share equal to at least $8.00 (as appropriately adjusted for future stock
splits, stock dividends, recapitalizations and similar transactions affecting
the Common Stock).
1.14 "Registrable Securities" shall mean (i) the Investor Stock and (ii) for
purposes of Section 2.2 through and including Section 2.7, shall also include
the Management Stock; provided, however, that Registrable Securities shall not
include any shares of Investor Stock that have previously been registered under
the Securities Act or that have otherwise been sold to the public in an open-
market transaction under Rule 144.
1.15 The terms "registers," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
1.16 "Registration Expenses" shall mean all expenses incurred in effecting any
registration pursuant to this Agreement, including without limitation all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
expenses of any regular or special audits incident to or required by any such
registration, and the fees and expenses of one counsel for the selling holders
of Registrable Securities, but excluding Selling Expenses.
1.17 "Rule 144" shall mean Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor Rule that may be promulgated by the Commission.
1.18 "Rule 145" shall mean Rule 145 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor Rule that may be promulgated by the Commission.
1.19 "Sale of the Company" means the sale of the Company to an Independent
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
1.20 "Securities Act" shall mean the Securities Act of 1933 (or any similar
successor federal statute), as amended, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
1.21 "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
1.22 "Series A Preferred Stock" shall mean the Company's Series A Convertible
Preferred Stock, $.01 par value per share.
3.
1.23 "Series B Preferred Stock" shall mean the Company's Series B Convertible
Preferred Stock, $.01 par value per share.
1.24 "Series C Preferred Stock" shall mean the Company's Series C Convertible
Preferred Stock, $.01 par value per share.
1.25 "Series D Preferred Stock" shall mean the Company's Series D Convertible
Preferred Stock, $.01 par value per share.
1.26 "Series E Preferred Stock" shall mean the Company's Series E Convertible
Preferred Stock, $.01 par value per share.
1.27 "Subsidiary" shall mean any corporation with respect to which a person or
entity owns a majority of the common stock or has the power to vote or direct
the voting of sufficient securities to elect a majority of the directors.
ARTICLE 2
REGISTRATION RIGHTS
2.1 Demand Registrations.
(a) Request for Registration. At any time or times after the
earlier of the third anniversary of the Closing or the effective date of the
first registration statement filed by the Company under the Securities Act, the
Initiating Holders may require that the Company effect a registration under the
Securities Act up to four times utilizing a registration on Form S-1 or any
similar form (a "Long-Form Registration") and as many times as requested by the
Initiating Holders utilizing a Form S-3 or any similar form, if available (a
"Short-Form Registration") (each a "Demand Registration"). Upon receipt of
written notice of such demand, the Company will promptly give written notice of
the proposed registration to all other holders of Registrable Securities and
will include in such registration all Registrable Securities specified in such
demand, together with all Registrable Securities of any other holder of
Registrable Securities joining in such demand as are specified in a written
request received by the Company within twenty (20) days after delivery of the
Company's notice. Demand Registrations will be Short-Form Registrations whenever
the Company is permitted to use any applicable short form.
(b) Deferral of Demand Registration. The Company shall file a
registration statement with respect to each Demand Registration requested
pursuant to Section 2.1(a) as soon as practicable after receipt of the demand of
the Initiating Holders; provided, however, that if in the good faith judgment of
the Board of Directors of the Company, such registration would be seriously
detrimental to the Company and the Board of Directors concludes, as a result,
that it is advisable to defer the filing of such registration statement at such
time (as evidenced by an appropriate resolution of the Board), then the Company
shall have the right to defer such filing for the period during which such
registration would be seriously detrimental; provided, however, that (i) the
Company may not defer the filing for a period of more than one hundred eighty
(180) days after receipt of the demand of the Initiating Holders, (ii) the
Company shall not exercise its right to defer a Demand Registration more than
once, and (iii) if the Company undertakes a primary registration following an
exercise of its deferral right, the holders of Registrable
4.
Securities shall have "piggyback" rights under Section 2.2 hereof with respect
to not less than one-third (1/3) of the number of shares of Common Stock to be
sold in such offering. In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration:
(i) in any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required under the
Securities Act; or
(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 filed pursuant to Section
2.2 hereof; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective.
(c) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by a Demand Registration by means of an
underwriting, they shall so advise the Company as a part of their demand made
pursuant to Section 2.1 and the Company shall include such information in its
written notice to holders of Registrable Securities. The Initiating Holders
shall have the right to select the managing underwriter(s) for an underwritten
Demand Registration, subject to the approval of the Company's Board of Directors
(which will not be unreasonably withheld or delayed). The right of any holder of
Registrable Securities to participate in an underwritten Demand Registration
shall be conditioned upon such holder's participation in such underwriting in
accordance with the terms and conditions thereof, and the Company and such
holders will enter into an underwriting agreement in customary form.
(d) Priorities. The holders of Registrable Securities will have
absolute priority over any other securities included in a Demand Registration.
If other securities are included in any Demand Registration that is not an
underwritten offering, all Registrable Securities included in such offering
shall be sold prior to the sale of any of such other securities. If other
securities are included in any Demand Registration that is an underwritten
offering, and the managing underwriter for such offering advises the Company
that in its opinion the amount of securities to be included exceeds the amount
of securities which can be sold in such offering without adversely affecting the
marketability thereof, the Company will include in such registration all
Registrable Securities requested to be included therein prior to the inclusion
of any other securities. If the number of Registrable Securities requested to be
included in such registration exceeds the amount of securities which in the
opinion of such underwriter can be sold without adversely affecting the
marketability of such offering, such Registrable Securities shall be included
pro rata among the holders thereof based on the percentage of the outstanding
Common Stock held by each such Stockholder (assuming the conversion of the
Preferred Stock and the exercise of all options, warrants and similar rights
held by such Stockholder).
2.2 Piggyback Registrations.
(a) Request for Inclusion. If (but without any obligation to do so)
the Company shall determine to register any of its securities for its own
account or for the account of
5.
other security holders of the Company for cash on any registration form (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan, or a Rule 145 transaction or a registration on any form that does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Registrable Securities)
which permits the inclusion of Registrable Securities (a "Piggyback
Registration"), the Company will promptly give each holder of Registrable
Securities written notice thereof and, subject to Section 2.2(c), shall include
in such registration all the Registrable Securities requested to be included
therein pursuant to the written requests of holders of Registrable Securities
received within twenty (20) days after delivery of the Company's notice.
(b) Underwriting. If the Piggyback Registration relates to an
underwritten public offering, the Company shall so advise the holders of
Registrable Securities as a part of the written notice given pursuant to Section
2.2(a). In such event, the right of any holder of Registrable Securities to
participate in such registration shall be conditioned upon such holder's
participation in such underwriting in accordance with the terms and conditions
thereof. All holders of Registrable Securities proposing to distribute their
securities through such underwriting shall (together with the Company) enter
into an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(c) Priorities. If such proposed Piggyback Registration is an
underwritten offering and the managing underwriter for such offering advises the
Company that the securities requested to be included therein exceeds the amount
of securities that can be sold in such offering, except as provided in Section
2.1(b), any securities to be sold by the Company in such offering shall have
priority over any Registrable Securities, and the number of shares to be
included by a holder of Registrable Securities in such registration shall be
reduced, but only after all shares proposed to be sold by employees, officers or
directors of the Company and any other proposed sellers that do not hold
Registrable Securities have been reduced in their entirety, pro rata on the
basis of the percentage of the outstanding Common Stock held by such Stockholder
(assuming the conversion of the Preferred Stock and the exercise of all options,
warrants and similar rights held by such Stockholder) and all other holders
exercising similar registration rights but in no event shall the amount of
securities of the selling holders included in the offering be reduced below
fifteen percent (15%) of the total amount of securities included in such
offering, unless such offering is the initial public offering of the Company's
securities, in which case all of the Registrable Securities of the selling
holders may be excluded if the underwriters make the determination described
above.
2.3 Expenses of Registration. All Registration Expenses incurred in
connection with up to four Long-Form Registrations and all Short-Form and
Piggyback Registrations (including the expenses of one special counsel for the
holders of Registrable Securities) shall be borne by the Company; provided,
however, that no registration shall count as one of the Company-paid Long Form
Registrations unless the holders of Registrable Securities are able to register
and sell at least 90% of the Registrable Securities requested to be included
therein; and provided, further, that the Company shall not be required to pay
for any expense of any registration proceeding begun pursuant to Section 2.1 if
the registration request is subsequently withdrawn at the request of the holders
of a majority of the Registrable Securities to be registered
6.
(in which case all participating holders of such Registrable Securities to be
registered shall bear such expense), unless the holders of a majority of the
Registrable Securities agree to forfeit their right to one Demand Registration
pursuant to Section 2.1. All Selling Expenses relating to Registrable Securities
included in any Demand or Piggyback Registration shall be borne by the holders
of such securities pro rata on the basis of the number of shares sold by them.
2.4 Registration Procedures. In the case of each registration effected by
the Company pursuant to this Article II, the Company will keep each holder of
Registrable Securities advised in writing as to the initiation of such
registration and as to the completion thereof. At its expense, the Company will
use its best efforts to:
(a) cause such registration to be declared effective by the Commission
and, in the case of a Demand Registration, keep such registration effective for
a period of one hundred eighty (180) days or until the holders of Registrable
Securities included therein have completed the distribution described in the
registration statement relating thereto, whichever first occurs;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement (including post-effective amendments) as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement;
(c) obtain appropriate qualifications of the securities covered by
such registration under state securities or "blue sky" laws in such
jurisdictions as may be requested by the holders of Registrable Securities;
provided, however, that the Company shall not be required to file a general
consent to service of process in any jurisdiction in which it is not otherwise
subject to service in order to obtain any such qualification;
(d) furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a holder
of Registrable Securities from time to time may reasonably request;
(e) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such holder, prepare and
furnish to such holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, 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 or
incomplete in the light of the circumstances then existing;
7.
(f) cause all Registrable Securities covered by such registration to be
listed on each securities exchange or inter-dealer quotation system on which
similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable Securities
covered by such registration and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration;
(h) otherwise comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than 18 months, beginning with the first month after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act; and
(i) in connection with any underwritten Demand Registration, the Company
will enter into an underwriting agreement reasonably satisfactory to the
Initiating Holders containing customary underwriting provisions, including
indemnification and contribution provisions.
2.5 Indemnification.
(a) The Company will indemnify each holder of Registrable Securities, each
of such holders' officers, directors, partners, agents, employees and
representatives, and each person controlling such holder within the meaning of
Section 15 of the Securities Act, with respect to each registration,
qualification or compliance effected pursuant to this Article II, against all
expenses, claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
indemnified person for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such holder
of Registrable Securities and stated to be specifically for use therein. It is
agreed that the indemnity agreement contained in this Section 2.5(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent has not been unreasonably withheld).
(b) Each holder of Registrable Securities included in any registration
effected pursuant to this Article II shall indemnify the Company, each of its
directors, officers, agents, employees and representatives, and each person who
controls the Company within the meaning
8.
of Section 15 of the Securities Act, each other such holder of Registrable
Securities and each of their officers, directors and partners, and each person
controlling such holders, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse such indemnified persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in strict
conformity with written information furnished to the Company by such holder of
Registrable Securities; provided, however, that (x) no holder of Registrable
Securities shall be liable hereunder for any amounts in excess of the net
proceeds received by such holder pursuant to such registration, and (y) the
obligations of such holder of Registrable Securities hereunder shall not apply
to amounts paid in settlement of any such claims, losses, damages or liabilities
(or actions in respect thereof) if such settlement is effected without the
consent of such holder (which consent has not been unreasonably withheld).
(c) Each party entitled to indemnification under this Section 2.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnified Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.5 to the extent such
failure is not prejudicial. No Indemnifying Party in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include an unconditional release of such Indemnified Party from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 2.5 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue
9.
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in an underwriting agreement entered
into in connection with an underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
2.6 Other Obligations. With a view to making available the benefits of
certain rules and regulations of the Commission which may effectuate the
registration of Registrable Securities or permit the sale of Registrable
Securities to the public without registration, the Company agrees to:
(a) after its initial registration under the Securities Act, exercise
best efforts to cause the Company to be eligible to utilize Form S-3 (or any
similar form) for the registration of Registrable Securities;
(b) at such time as any Registrable Securities are eligible for
transfer under Rule 144(k), upon the request of the holder of such Registrable
Securities, remove any restrictive legend from the certificates evidencing such
securities at no cost to such holder;
(c) make and keep available public information as defined in Rule 144
under the Securities Act at all times from and after ninety (90) days following
its initial registration under the Securities Act;
(d) 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
at any time after it has become subject to such reporting requirements; and
(e) furnish any holder of Registrable Securities upon request a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144 (at any time from and after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents as a holder of Registrable Securities may reasonably request in
availing itself of any rule or regulation of the Commission (including Rule
144A) allowing a holder of Registrable Securities to sell any such securities
without registration.
2.7 Termination of Registration Rights. The right of any holder of
Registrable Securities to request inclusion of Registrable Securities in any
registration pursuant to this Article II shall terminate when (i) all
Registrable Securities beneficially owned by such holder of Registrable
Securities may immediately be sold under Rule 144(k), and (ii) the Company's
Common Stock is listed on a national securities exchange or traded in The Nasdaq
Stock Market; provided, however, that the provisions of this Section 2.7 shall
not apply to any holder of
10.
Registrable Securities holding more than five percent (5%) of the Company's
then-outstanding Common Stock.
2.8 Transfer of Registration Rights. The rights to cause the Company to
register securities granted to the holders under Sections 2.1 and 2.2 and
associated obligations including the standoff agreement in ARTICLE VII below may
be assigned to any transferee or assignee in connection with any transfer or
assignment of Registrable Securities by the holder provided that the transferor
provides the Company with written notice of the proposed transfer and the
transferee agrees in writing to be bound by the provisions of this Agreement.
ARTICLE 3
RESTRICTIONS ON TRANSFER OF MANAGEMENT STOCK
3.1 Rights of First Refusal. No shares of Management Stock or any
interest therein may be transferred other than in compliance with the provisions
of this Article III. If at any time a Management Holder receives a bona fide
offer from any person (a "Third Party") to purchase shares of Preferred Stock
and/or Common Stock or any interest therein held by such Management Holder (a
"Third-Party Offer") which such Management Holder wishes to accept, such
Management Holder shall cause such Third-Party Offer to be reduced to writing
and shall notify the Company and each holder of Investor Stock of such
Management Holder's desire to accept the Third-Party Offer. The Management
Stockholder's notice (the "Sale Notice") shall contain an irrevocable offer to
sell such Preferred Stock and/or Common Stock to the Company and/or the
Investors at a purchase price equal to the price contained in, and on the same
terms and conditions of, the Third-Party Offer and shall be accompanied by a
true copy of the Third-Party Offer (which shall identify the offeror) provided,
however, the Company and the Investors may pay cash to the selling Management
Holder equal in amount to the fair market value of any non-cash consideration
offered by the Third Party in the Third-Party Offer. At any time within 10
business days after the date of receipt by the Company of the Sale Notice, the
Company shall have the right to purchase the Preferred Stock and/or Common Stock
covered by the Third-Party Offer at the same price and on the same terms and
conditions as the Third-Party Offer. If at the end of such 10-business day
period the Company has not elected to purchase all Preferred Stock and Common
Stock covered by such Third-Party Notice, the Management Holder shall provide
the Sale Notice to the Investors along with a statement as to the number of
shares to be purchased by the Company (if any). Within 10 business days after
receipt by the Investors of such Sale Notice, each Investor (or any Affiliate
thereof), by providing notice to the Management Holder, shall have the right to
purchase that portion of the shares equal to the Investors Pro Rata Number of
Shares (as defined below) at the same price and on the same terms and conditions
as the Third-Party Offer. In the event any Investor (or an Affiliate thereof)
does not exercise its right to purchase its respective Investors Pro Rata Number
of Shares, the other Investors shall have the right to purchase such shares, and
the purchase of such shares shall be allocated among the participating Investors
(or any participating Affiliates thereof) pro rata in proportion to the Investor
Stock held by such Investors, or in such other proportions as the participating
Investors (and such Affiliates) may agree upon. To the extent the Investors have
not notified the selling Management Holder in writing of a desire to purchase
all of the Preferred Stock and Common Stock as set forth herein, the selling
Management Holder may within 60 days thereafter sell the remaining Management
Stock covered by the Third-Party Offer to the
11.
Third Party on the terms set forth in the original Third-Party Offer. Any
Management Stock covered by the Third Party Offer that is not so transferred
during such 60-day period shall again be subject to this Section 3.1. The
Company may assign its rights to purchase Management Stock pursuant to this
Section 3.1 to one or more third parties subject only to compliance with
applicable securities laws, provided that the Company shall offer to assign such
rights to the Investors pro rata prior to offering such rights to other persons.
For purposes of this Section 3.1 such Investors Pro Rata Number of Shares shall
be equal to that number of shares of Preferred Stock and/or Common Stock derived
by multiplying the total number of shares to be purchased by the Third Party as
set forth in the Sale Notice by a fraction, the numerator of which is the total
number of shares of Investor Stock beneficially owned by such participating
holder of Investor Stock and the denominator of which is the total number of
shares beneficially owned by all holders of Investor Stock.
3.2 Co-Sale Rights. If neither the Company nor the Investors has elected
to purchase all of the Management Stock specified in the Sale Notice pursuant to
Section 3.1 above, each Investor may elect to participate in the contemplated
transfer by delivering written notice to the Management Holder and the Company
within 15 business days after receipt by the Investor of the Sale Notice. If any
Investor has elected to participate in such sale, the Management Holder and the
electing Investors will be entitled to sell in the contemplated sale, at the
same price and on the same terms, a number of shares of the Company's Common
Stock equal to the product of (i) the quotient determined by dividing the
percentage of the Company's Common Stock (on a fully-diluted basis) held by such
person, by the aggregate percentage of the Company's Common Stock (on a fully-
diluted basis) owned by the Management Holder and all electing Investors and
(ii) the number of shares of Common Stock to be sold in the contemplated sale.
For Example, if the Sale Notice contemplated a sale of 100 shares of Common
Stock, and if the Management Holder was at such time the owner of 30% of
the Company's Common Stock (on a fully-diluted basis) and if one Investor
elected to participate and the Investor owned 20% of the Company's Common
Stock (on a fully-diluted basis), the Management Holder would be entitled
to sell 60 shares (30% / 50% x 100 shares) and the Investor would be
entitled to sell 40 shares (20% / 50% x 100 shares).
If the Management Holder is selling Preferred Stock, the calculation set forth
above shall be done assuming conversion of the Preferred Stock. The Investors
participating in such a sale of Preferred Stock by a Management Holder shall
have the option of selling Preferred Stock or Common Stock. The Management
Holder will use his best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Investors in the contemplated transfer
and will not transfer any Management Stock to the prospective transferee(s) if
such transferee(s) refuses to allow the participation of Investors.
3.3 Exempt Transactions. The restrictions set forth in this Article III
shall not apply to transfers of Management Stock to a Permitted Transferee of
the transferring Management Holder; provided, however, that such Permitted
Transferee shall agree in writing to be bound by such restrictions in connection
with subsequent transfers.
12.
3.4 Assignment of First Refusal Right. The Company has (a) adopted its
2000 Equity Incentive Plan (the "Stock Plan") and (b) granted Stock Options to
certain of its employees (the "Optionees") (the documents referred to in (a) and
(b) are collectively defined as the "Stock Plan Agreements"). The Stock Plan
Agreements contain provisions granting the Company certain repurchase rights and
rights of first refusal with respect to Common Stock held by the Optionees. In
the event the Company elects not to exercise such repurchase rights and rights
of first refusal, the Company agrees to assign such unexercised rights to the
Investors (or any Affiliate designated by any Investor). Any unexercised right
shall be assigned at least 10 days prior to its expiration. The Investors shall
be permitted to purchase their Pro Rata Number of Shares of any Common Stock
being offered and the offer shall be conducted in accordance with the procedures
set forth in Section 3.1 of this Agreement. To the extent any of the provisions
of the Stock Plan Agreements and this Section 3.4 are inconsistent with the
provisions of Section 3.1 or 3.2 above, the provisions of Sections 3.1 and 3.2
shall govern.
ARTICLE 4
RIGHT OF FIRST NOTIFICATION
4.1 For so long as Intel Corporation ("Intel") owns at least seventy five
percent (75%) of the Series D Preferred owned by it (including any Common Stock
into which Series D Preferred Stock has been converted) as of the date of this
Agreement, in the event that the Board of Directors of the Company (i) receives
a bona fide offer to be acquired by means of (x) a merger, consolidation or
other business combination pursuant to which the stockholders of the Company
immediately prior to the effective date of such transaction have beneficial
ownership of less than fifty percent (50%) of the total combined voting power
for election of directors of the surviving corporation immediately following
such transaction, or (y) the sale of all or substantially all of the assets of
the Company, or (ii) votes to initiate a sale to any other person or entity of
(xx) fifty (50%) percent or more of the total voting power of the Company, or
(yy) all or substantially all of the Company's assets, prior to accepting such
acquisition proposal or initiating such sale, the Company shall provide to Intel
written notice within 24 hours (the "Notice") of the proposed terms of such
acquisition proposal or sale. The Notice shall set forth the specific terms of
the acquisition proposal or the initiation of a sale of the Company. Further,
the Company shall provide Intel with access to (and copies of, if requested) all
documents containing nonpublic information of the Company that are or have been
supplied to the party making the acquisition proposal. In its discretion, Intel
shall have eight business days (which time period may be extended by mutual
written agreement) following its receipt of the Notice ("the Negotiation
Period") in which to present an offer to acquire the Company (the "Intel
Offer"), which the Company shall be under no obligation to accept. If, however,
the Company elects to pursue the Intel Offer, then the Company will provide
Intel written acknowledgment of such election. The parties agree to negotiate
in good faith for a period of ten (10) business days (which may be extended by
mutual written agreement) after Intel's receipt of the Company's written
acknowledgment to pursue Intel's Offer, to reach agreement on mutually agreeable
terms.
4.2 In the event that (i) Intel does not deliver an Intel Offer to the
Company within eight business days (or other mutually agreed upon time period,
as set forth above), after its receipt of the Notice; (ii) the Company elects
not to accept Intel's Offer; or (iii) within the ten
13.
(10) business days (or other mutually agreed upon time period, as set forth
above) following the Company's acknowledgment of its desire to pursue the Intel
Offer, Intel and the Company do not mutually agree to the terms of an agreement
for an acquisition of the Company, then, and only then, the right of first
negotiation of Intel hereunder shall expire with respect to such acquisition
proposal or initiation of a sale and the Company shall be free thereafter to
enter into a definitive agreement with a third party for an acquisition or sale
of the Company.
4.3 This right is applicable only to Intel and is not transferable or
assignable by Intel.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as any Registrable
Securities are outstanding, as follows:
5.1 Basic Financial Information. The Company will furnish the following
reports to each of the Investors holding at least 500,000 shares(as adjusted
for stock splits, stock dividends and similar transactions) of the outstanding
Registrable Securities and with respect to Microsoft Corporation ("Microsoft")
for so long as Microsoft owns at least 50% of the Series E Preferred owned by it
(including any Common Stock into which Series E Preferred has been converted) as
of the date of this Agreement:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of such
fiscal year, and consolidated statements of income and cash flow of the Company
and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail and certified by independent public accountants of
recognized national standing selected by the Company.
(b) As soon as practicable after the end of each quarterly accounting
period in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such quarterly period, and
consolidated statements of income and cash flow of the Company and its
subsidiaries, if any, for such period and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes resulting
from normal year-end audit adjustments, all in reasonable detail and certified
by the chief financial officer of the Company (or the chief accounting officer
if no chief financial officer is in place), except that such statements need not
contain the notes required by generally accepted accounting principles.
(c) As soon as practicable after the end of each monthly accounting
period and in any event within thirty (30) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of such
month and consolidated statements of income
14.
and of cash flow of the Company and its subsidiaries, if any, for each month and
for the current fiscal year of the Company to date, all subject to normal year-
end audit adjustments, prepared in accordance with generally accepted accounting
principles consistently applied and certified by the chief financial officer of
the Company (or the chief accounting officer if no chief financial officer is in
place), except that such statements need not contain the notes required by
generally accepted accounting principles.
(d) Subsequent to the Company's initial public offering, the Company
will deliver to all holders of greater than or equal to 500,000 shares (as
adjusted for stock splits, stock dividends and similar transactions) of the
Registrable Securities, copies of all reports required to be filed by the
Company pursuant to the requirements of the Securities Exchange Act of 1934, as
amended.
5.2 Additional Information Rights.
(a) The Company will permit each of the Investors for so long as such
Investor beneficially owns greater than or equal to 500,000 shares (as adjusted
for stock splits, stock dividends and similar transactions) of the Registrable
Securities) and with respect to Microsoft Corporation ("Microsoft") for so long
as Microsoft owns at least 50% of the Series E Preferred owed by it (including
any Common Stock into which Series E Preferred has been converted) as of the
date of this Agreement and/or their respective representatives to visit and
inspect any of the properties of the Company, including its books of account and
other records (and make copies thereof and take extracts therefrom), and to
discuss its affairs, finances and accounts with the Company's officers and its
independent public accountants, all at such reasonable times and as often as any
such person may reasonably request during the Company's normal business hours;
provided that any person or persons exercising rights under this Section 5.2(a)
shall (i) use all reasonable efforts to ensure that any such examination or
visit results in a minimum of disruption to the operations of the Company and
(ii) agree in writing to keep any proprietary information of the Company
disclosed to such person in the course of such inspection confidential in a
manner consistent with prudent business practices and treatment of such person's
or persons' own confidential information and not use such proprietary
information for any purpose other than in connection with such Investor's or
such transferee's ownership of an interest in the Company; provided, further,
that the disclosure of confidential information to Intel shall be governed by
the terms of the Corporate Non-Disclosure Agreement No. 2087874 dated March 23,
1999 and any Confidential Information Transmittal Records provided in connection
therewith. Notwithstanding the foregoing, the Company reserves the right to omit
such information as the Company's Board of Directors unanimously deems to be
confidential and the disclosure of which could be to the material detriment of
the Company's best interests.
(b) The Company will deliver the reports described below in this
Section 5.2(b) to each of the Investors:
(i) Annually (but in any event at least thirty (30) days prior
to the commencement of each fiscal year of the Company) the financial plan of
the Company, in such manner and form as approved by the Board of Directors of
the Company, which financial plan shall include an operating budget for such
fiscal year and an updated five-year strategic plan for the Company.
15.
(ii) Concurrently with delivery thereof, copies of all reports and
other written material submitted to the Board of Directors.
(iii) Concurrently with delivery thereof, copies of any reports or
communications delivered to the financial community, including all press
releases.
(c) Each of the Investors hereby agrees to hold in confidence and trust
and not to misuse or disclose any confidential information provided pursuant to
this Section 5.2; provided, however, that an Investor shall not be prohibited
from using any such information for the purpose of generating and delivering
portfolio valuation information to its investors.
5.3 Prompt Payment of Taxes, Etc. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefore. The Company will promptly pay or cause to be paid when due, in
conformance with customary trade terms, all other uncontested obligations
incident to the operations of the Company and material thereto individually or
in the aggregate.
5.4 Maintenance of Properties and Leases . The Company will keep its
properties and those of its subsidiaries, if any, in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries will at all times comply with each
material provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such provision might have a
material and adverse effect on the condition, financial or otherwise, or
operations of the Company.
5.5 Insurance .
(a) The Company will keep its assets, and those of its subsidiaries,
which are of an insurable character insured by financially sound and reputable
insurers against loss or damage by fire, explosion and other risks customarily
insured against by companies in the Company's line of business, and the Company
will maintain, with financially sound and reputable insurers, insurance against
other hazards and risks and liability to persons and property to the extent and
in the manner customary for companies in similar businesses similarly situated.
(b) Within 60 days of the Initial Closing, the Company shall have
obtained from financially sound and reputable insurance companies, life
insurance policies, if available on commercially reasonable terms, on each of
the lives of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇, in the
amount of $2,000,000 each, which policies shall name the Company a loss payee,
and the Company shall maintain such life insurance policies.
16.
5.6 Accounts and Records. The Company will keep true records and books of
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs.
5.7 Independent Accountants. The Company will retain a "Big Five"
national accounting firm as its independent public accountants who shall certify
the Company's financial statements at the end of each fiscal year. Once such
"Big Five" accounting firm is selected, its services shall not be terminated
unless the holders of at least 51% of the Investor Stock consent to such
termination of services. In the event the Company determines to terminate the
services of the independent public accountants so selected, the Company will
promptly thereafter notify the holders of Investor Stock of such termination and
the reasons therefor. In its notice to the holders of Investor Stock the Company
shall state whether the change of accountants was recommended or approved by the
Board of Directors of the Company or any committee thereof. In the event such
termination takes place, the Company will promptly thereafter engage another
"Big Six" national accounting firm as its independent public accountants.
5.8 Compliance with Laws. The Company and all its subsidiaries shall duly
observe and conform to all applicable laws and valid requirements of
governmental authorities relating to the conduct of their businesses or to their
properties or assets.
5.9 Maintenance of Corporate Existence, Etc. The Company shall maintain in
full force and effect its corporate existence, rights and franchises and all
licenses and other rights in or to use patents, processes, licenses, trademarks,
trade names or copyrights owned or possessed by it or any subsidiary and deemed
by the Company to be necessary to the conduct of their business and material
thereto.
5.10 Transactions with Affiliates. The Company shall not and shall not
permit any Subsidiary of the Company to enter into or be a party to any
transaction with any Affiliate of the Company or such Subsidiary, except (i)
transactions expressly permitted hereby, (ii) transactions in the ordinary
course of and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms that are fully
disclosed to the Investors and are no less favorable to the Company or such
Subsidiary than would be obtained in a comparable arm's-length transaction with
a person not an Affiliate of the Company or such Subsidiary, (iii) transactions
between the Company and its wholly-owned Subsidiaries or between such
Subsidiaries and (iv) payment of compensation to employees and directors' fees.
5.11 Limited First Refusal Rights.
(a) Except for the issuance of Common Stock or any securities
containing options or rights to acquire any shares of Common Stock ("Equity
Securities") (i) to the Company's employees, consultants, officers or directors
pursuant to any stock option plan, stock purchase or stock bonus plan,
arrangement or agreement, as approved by the Company's Board of Directors, (ii)
upon the conversion of the Preferred Stock, (iii) pursuant to a Qualified Public
Offering, (iv) pursuant to a merger, consolidation, acquisition or similar
business combination approved by the Company's Board of Directors, (v) in
connection with any stock split, stock dividend, or recapitalization, (vi) to a
lender or equipment lessor in connection with any loan or lease financing
transaction, or (vii) in connection with strategic transactions involving the
17.
Company and other entities (including (x) joint ventures, manufacturing,
marketing or distribution arrangements or (y) technology transfer or development
arrangements; provided, however, that such strategic transactions and the
issuance of shares therein, have been approved by the Company's Board of
Directors), (viii) securities issued to vendors or customers or other persons in
similar commercial situations with the Company if such issuance is approved by
the Board of Directors or (ix) any right, option or warrant to acquire any
security convertible into securities excluded pursuant to (i) through (viii)
above, if the Company authorizes the issuance or sale of any Equity Securities,
the Company shall first offer to sell to each of the holders of Investor Stock
(or any Affiliates designated by such holder) its "pro rata portion" of such
Equity Securities. A holder's "pro rata portion" shall equal the quotient
determined by dividing (1) the number of shares of Investor Stock held by each
such holder by the (2) sum of the total number of shares of Investor Stock held
by all holders of Investor Stock. Each holder of Investor Stock (or such
Affiliates) shall be entitled to purchase such Equity Securities at the most
favorable price and on the most favorable terms as such Equity Securities are to
be offered to any other Persons. The purchase price for all Equity Securities
offered to the holders of the Investor Stock shall be payable in cash or, to the
extent otherwise required hereunder, notes issued by such holders.
(b) In order to exercise its purchase rights hereunder, a holder of
Investor Stock (or such Affiliate) must within 7 business days after receipt of
written notice from the Company describing in reasonable detail the Equity
Securities being offered, the purchase price thereof, the payment terms and such
holder's percentage allotment deliver a written notice to the Company describing
its election hereunder. If all of the Equity Securities offered to the holders
of Investor Stock (or their Affiliates) are not fully subscribed by such
holders, the remaining Equity Securities shall be reoffered by the Company to
the holders of Investor Stock purchasing their full allotment upon the terms set
forth in this paragraph, except that such holders must exercise their purchase
rights within five days after receipt of such reoffer.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such Equity Securities which the holders of
Investor Stock have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any Equity Securities offered or sold by the
Company after such 90-day period must be reoffered to the holders of Investor
Stock pursuant to the terms of this section.
ARTICLE 6
CORPORATE GOVERNANCE
6.1 Board of Directors.
(a) Concurrently with the Closing and at all times thereafter, each
Stockholder agrees to vote all securities of the Company over which such
Stockholder has voting control and to take all other necessary or desirable
actions within its control (whether as a stockholder, director or officer of the
Company or otherwise, and including without limitation attendance at meetings in
person or by proxy for purposes of obtaining a quorum and execution of written
consents in lieu of meetings), and the Company shall take all necessary and
desirable actions
18.
within its control (including, without limitation, calling special board
and stockholder meetings), so that:
(i) the Company shall have a Board of Directors comprised of no more
than seven members;
(ii) the following persons shall be elected to the Board of Directors:
(A) One representative designated by the holders of a majority of the
outstanding Management Stock (the "Management Director"); provided that,
until the next annual meeting of the Company's stockholders, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ shall serve as the Management Director;
(B) One representative designated by the holders of a majority of the
outstanding Series A Preferred Stock (the "Series A Preferred Director");
provided that until the next annual meeting of the Company's
stockholders, ▇▇▇ ▇▇▇▇▇▇ shall serve as the Series A Director;
(C) One representative designated by the holders of a majority of the
outstanding Series B Preferred Stock (the "Series B Preferred Director")
(collectively with the Series C Preferred Director (as defined below),
the "Investor Directors"); provided that, until the next annual meeting
of the Company's stockholders, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. of The Centennial
Funds ("Centennial") shall serve as the Series B Preferred Director; and,
provided further, that in the event that the holders of a majority of the
Series B Preferred Stock do not exercise their right to designate an
Investor Director pursuant to this paragraph (C), Centennial shall have
the right to designate a board observer for so long as Centennial owns,
through one or more of its affiliated entities, at least 500,000 shares
(subject to adjustment for stock splits, stock dividends and similar
transactions) of the Registrable Securities;
(D) One representative designated by the holders of a majority of the
outstanding Series C Preferred Stock (the "Series C Preferred Director");
provided that until the next annual meeting of the Company's
stockholders, ▇▇▇▇▇▇▇ ▇▇▇▇, as a representative of SoftBank, shall serve
as the Series C Director;
(E) One representative designated by the holders of a majority of the
outstanding Series D Preferred Stock subject to the approval of the
entire Board (the "Series D Preferred Director"); provided that the Board
seat to be held by such representative shall be filled by an Outside
Director (as defined below) until such date at which the Company has sold
an aggregate of 33,333,333 shares of Series D Preferred Stock.
Notwithstanding the above, Centennial shall have the right to designate
such Series D Director (who shall not be affiliated with either the
Company, Centennial or any of the Investors) subject to the approval of
the entire Board of Directors, so long as (i) Centennial has purchased an
aggregate of 6,550,000 shares of Series D Preferred Stock on or as of an
Additional Closing (as defined in the Series D Stock Purchase Agreement)
and (ii) Centennial holds at least eighteen percent (18%)of the Series D
Preferred Stock outstanding immediately following such Additional
Closing; and
(F) Three directors designated by a majority of the Board of Directors until
such time as a Series D Director is designated pursuant to paragraph (E)
above,
and thereafter two directors (the "Outside Directors"); provided that no such
Outside Director is a member of the Company's management or an employee of the
Company or its Subsidiaries; and provided further that, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Jr. and ▇▇▇▇▇ dB. ▇▇▇▇▇▇▇▇▇ shall initially serve as the
Outside Directors.
(iii) in the event that any director for any reason ceases to serve
as a member of the Board during his term of office, the resulting vacancy on the
Board shall be filled by a majority vote of the Stockholders entitled to elect
such director as provided in this Section 6.1;
(iv) if the Stockholders fail to designate a representative to fill a
directorship pursuant to the terms of this Section 6.1, the election of such
director shall be accomplished in accordance with the Company's certificate of
incorporation and bylaws and applicable law; and
(v) each of the Stockholders agrees to vote all shares of stock
owned by it for the removal of a director whenever (but only whenever) there
shall be presented to the Board of Directors the written direction that such
director be removed by a majority of the Stockholders entitled to elect the
director.
(vi) Each of Highland Capital Partners III Limited Partnership
("Highland"), Intel Corporation ("Intel"), Excite, Inc. ("Excite") Pequot
Private Equity Fund II, L.P. ("Pequot"), GE Capital Equity Investments, Inc.
("GE") and Matsushita Electric Industrial Co., Ltd. ("Panasonic") for so long as
each of them owns greater than or equal to 500,000 shares (subject to adjustment
for stock dividends, stock splits and similar transactions) of the Registrable
Securities shall be entitled to designate one representative (each an "
Observer" and, collectively, the "Observers") to attend and observe all meetings
of the Company's Board of Directors and all committees thereof (whether in
person, telephonic or otherwise) in a non-voting observer capacity and to
receive all notices and information forwarded by the Company to its directors
and copies of the minutes of all meetings; provided, however, that the Company
may require any such Observer to execute a nondisclosure/confidentiality
agreement prior to disclosing confidential information to such Observer and the
right to omit such information as the Company's Board of Directors unanimously
deems to be confidential and the disclosure of which could be to the material
detriment of the Company and; provided, further, that the disclosure of
confidential information to the Intel Observer shall be governed by the terms of
the Corporate Non-Disclosure Agreement No. 2087874, dated March 23, 1999, and
any Confidential Information Transmittal Records provided in connection
therewith. The Observers may participate in discussions of matters brought to
the Board at the sole discretion of the Board.
(b) To the extent that any provision of the Company's certificate of
incorporation or bylaws is inconsistent with the provisions of this Agreement,
the Stockholders agree to take all actions necessary to effect such amendments
to the certificate of incorporation or bylaws as may be necessary and
appropriate to give full effect to the provisions of this Agreement.
6.2 Meetings of the Board. The Board of Directors will meet at least six
times each calendar year in accordance with an agreed-upon schedule. One such
meeting will be held at the
20.
same time and place that a national trade conference is held for the Company's
industry. Within six months of the Closing, subject to reasonable economic
feasibility, the Company will implement video teleconferencing (specifically,
one which is compatible with Centennial's video teleconferencing system) to
facilitate board, committee and other meetings with the Investors.
6.3 Committees. Promptly after the Closing, the Board of Directors will
establish audit, nominating and compensation committees and shall delegate to
such committees those duties and powers as are customarily performed by
committees of such type. The audit committee shall not include any of the
Management Directors. At least one of the directors appointed pursuant to
Section 6.1(a)(ii)(C), (D) or (E) shall be a member of each such committee.
6.4 Reimbursement of Expenses. The reasonable travel expenses of each
Investor Director (or observer if an Investor is no longer represented on the
Board) and the Observers incurred in attending or observing Board or committee
meetings shall be reimbursed by the Company. If the Company adopts any plan or
arrangement to compensate all of its "outside" or "independent" directors
generally for service as a director either with cash or with stock options, then
the Company will also extend the same compensation to the Investor Directors
and, in the case of stock options, such options shall be freely transferable by
the Investor Directors to their respective firms.
6.5 Certain Approvals. Without the approval of a majority of the
Investor Directors, the Company shall not (i) engage any underwriter or
placement agent for any public or private offering of securities other than an
investment banking firm of recognized national reputation, (ii) issue any stock
or options to employees of the Company that are not subject to vesting and/or
buy-back restrictions, or (iii) waive or accelerate any vesting or buy-back
restrictions with respect to Management Stock.
ARTICLE 7
MISCELLANEOUS
7.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado, except that
the General Corporation Law of the State of Delaware shall govern as to matters
of corporate law. The parties hereto waive all right to trial by jury in any
action or proceeding to enforce or defend any rights under this Agreement.
7.2 "Market Stand-Off" Agreement. Each Stockholder hereby agrees that,
during the period of duration (not to exceed one-hundred eighty (180) days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company following the effective date of the Company's registration
statement in connection with the Company's first Qualified Public Offering , the
Stockholder shall not, to the extent requested by the Company or such
underwriter, directly or indirectly sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by such Stockholder, except Common Stock or other
securities included in such registration; provided that all officers,
21.
directors and holders of 1% or greater of the Company's Common Stock agree to
similar provisions and such provisions are in full force and effect and are not
waived in any respect or have been waived ratably with respect to each holder.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to such securities of each such Investor (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period. This covenant shall survive termination of this
Agreement.
7.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, that such assignee, heir, executor or
administrator of the parties hereto shall then execute a counterpart to this
Agreement.
7.4 Amendment and Restatement of Prior Agreement. The undersigned parties
who constitute the requisite parties necessary to amend the Prior Agreement
hereby agree that, effective upon the date hereof, the Prior Agreement is null
and void and superseded by the rights and obligations set forth in this
Agreement, and any application of first refusal rights (including any notice
requirements) set forth in Section 5.11 of the Prior Agreement as to the
issuance of the Company's Series E Stock is waived by the undersigned Investors
on behalf of each and every Investor.
7.5 Entire Agreement; Amendment and Waiver. This Agreement and the
Purchase Agreement supersede any other agreement, whether written or oral, that
may have been made or entered into by the parties hereto relating to the matters
contemplated hereby and constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof. In particular,
the execution of this Agreement amends and replaces in its entirety that certain
Stockholders' Agreement dated as of May 28th, 1998, as amended, by and between
the Company and certain of the Investors. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated except by a written
instrument signed by the Company and the holders of at least 66 2/3% of the
outstanding Investor Stock, including at least 662/3% of the outstanding Series
D Preferred Stock, and any such amendment, waiver, discharge or termination
shall be binding on all the Stockholders; provided however, that no amendment or
waiver which adversely affects the interests of one Investor without a similar
and proportionate effect on the interests of all Investors may be made without
the consent of the Investor whose interests are so adversely affected; provided,
further, that any amendment or waiver which solely adversely affects the rights
of the holders of either the Management Stock or the Series A Preferred Stock,
respectively, shall require the written consent of a majority of the Holders of
Management Stock or the Series A Preferred Stock, respectively.
7.6 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given:
(i) upon personal delivery to the party to be notified, (ii) when sent by
confirmed telex or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) one (1) day after deposit with a nationally recognized
overnight courier, special next day delivery, with verification of receipt. All
communications shall be sent to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and to a Stockholder at the address
22.
reflected in the Company's stock ledger or at such other address as such
Stockholder shall have furnished to the Company in writing.
7.7 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Stockholder under this Agreement shall impair
any such right, power or remedy of such Stockholder nor shall it be construed to
be a waiver of any such breach or default, or an acquiescence therein, or of or
in any similar breach or default thereafter occurring; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Stockholder of any breach or default
under this Agreement or any waiver on the part of any Stockholder of any
provisions or conditions of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
Stockholder, shall be cumulative and not alternative.
7.8 Severability. Unless otherwise expressly provided herein, a
Stockholder's rights hereunder are several rights, not rights jointly held with
any of the other Stockholders. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.10 Termination. The provisions of this Agreement (other than Article II
hereof) shall terminate upon the earlier to occur of (i) consummation of a
Qualified Public Offering or (ii) a Sale of the Company. The provisions of
Article II shall terminate on the tenth anniversary of the date hereof.
7.11 Specific Enforcement. Any holder of Investor Stock shall be entitled
to specific enforcement of its rights under this Agreement. The parties
acknowledge that money damages would be an inadequate remedy for a breach of
this Agreement and consent to an action for specific performance or other
injunctive relief in the event of any such breach.
7.12 Confidentiality and Non-Disclosure.
(a) Disclosure of Terms. The terms and conditions of this Agreement
and the Transaction Documents (collectively, the "Financing Terms"), including
their existence, shall be considered confidential information and shall not be
disclosed by any party hereto to any third party except in accordance with the
provisions set forth below.
(b) Press Releases, Etc. Neither the Investors nor the Company
shall issue any press release or make any public disclosure regarding the
transactions contemplated hereby unless such press release or public disclosure
is approved by those parties mentioned in such press release or public
disclosure in advance. Notwithstanding the foregoing and subject to subsection
(d) below, each of the parties hereto may, in documents required to be filed by
it with the SEC or other regulatory bodies, make such statements with respect to
the transactions contemplated hereby as each may be advised by counsel is
legally necessary or advisable, and
23.
may make such disclosure as it is advised by its counsel is required by law.
Intel's name and the fact that Intel is an investor in the Company can be
included in a reusable press release boilerplate statement, so long as Intel has
given the Company its initial approval of such boilerplate statement and the
boilerplate statement is reproduced in exactly the form in which it was
approved. No other announcement regarding Intel in a press release, conference,
advertisement, announcement, professional or trade publication, mass marketing
materials or otherwise to the general public may be made without Intel's prior
written consent. No announcement regarding Excite in a press release,
conference, advertisement, announcement, professional or trade publication, mass
marketing materials or otherwise to the general public may be made without
Excite's prior written consent.
(c) Permitted Disclosures. Notwithstanding the foregoing, (i) any party
may disclose any of the Financing Terms to its current or bona fide prospective
investors, employees, investment bankers, lenders, accountants and attorneys, in
each case only where such persons or entities are under appropriate
nondisclosure obligations, (ii) any party may disclose (other than in a press
release or other public announcement described in subsection (b)) solely the
fact that the Investors are investors in the Company to any third parties
without the requirement for the consent of any other party or nondisclosure
obligations, (iii) Intel may disclose its investment in the Company and the
related financing terms to third parties or the public at its sole discretion
and (iv) Centennial may disclose its investment in the Company and the related
financing terms to any of its or their affiliates.
(d) Legally Compelled Disclosure. In the event that any party is
requested or becomes legally compelled (including without limitation, pursuant
to securities laws and regulations) to disclose the existence of this Agreement,
the Stock Purchase Agreement, the Rights Agreement or any of the Financing Terms
hereof in contravention of the provisions of this Section 7.12, such party (the
"Disclosing Party") shall provide the other parties (the "Non-Disclosing
Parties") with prompt written notice of that fact so that the appropriate party
may seek (with the cooperation and reasonable efforts of the other parties) a
protective order, confidential treatment or other appropriate remedy. In such
event, the Disclosing Party shall furnish only that portion of the information
which is legally required and shall exercise reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded such information
to the extent reasonably requested by any Non-Disclosing Party.
(e) Other Information. The provisions of this Section 7.12 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by any of the parties hereto with respect to
the transactions contemplated hereby. Additional disclosures and exchange of
confidential information between the Company and Intel (including without
limitation, any exchanges of information with any Intel Observer) shall be
governed by the terms of the Corporate Non-Disclosure Agreement No. 2087874,
dated March 23, 1999, executed by the Company and Intel, and any Confidential
Information Transmittal Records ("CITR") provided in connection therewith.
(f) All notices required under this section shall be made pursuant to
Section 7.6 of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
25.
In Witness Whereof, the parties hereto have executed this Stockholders
Agreement effective as of the day and year first above written.
COMPANY:
Evoke Incorporated
By:
Title:
PURCHASERS:
Centennial Fund V, L.P.
By: Centennial Holdings V, L.P.,
Its General Partner
By:
a General Partner
Centennial Fund VI, L.P.
By: Centennial Holdings VI, LLC
Its General Partner
By:
Managing Principal
Centennial Entrepreneurs Fund VI, L.P.
By: Centennial Holdings VI, LLC.
Its General Partner
By:
Managing Principal
Centennial Holdings I, LLC
By:
Its:
By:
Title:
Softbank Technology Ventures IV, L.P.
By: STV IV LLC
By:
Managing Director
Softbank Technology Ventures V, L.P.
By: STV IV LLC
By:
Managing Director
Softbank Technology Ventures Advisors Fund V,
L.P.
By: STV IV LLC
By:
Managing Director
Softbank Technology Ventures Entrepreneurs Fund
V, L.P.
By: STV IV LLC
By:
Managing Director
[Signature Page to Stockholders Agreement]
27.
Matsushita Electric Industrial Co., LTD
By:
Title:
Highland Capital Partners III Limited
Partnership
By: Highland Management Partners III Limited
Partnership
Its General Partner
By:
Title:
Highland Entrepreneurs' Fund III Limited
Partnership
By: HEF III, LLC
Its General Partner
By:
Title:
Intel Corporation
By:
Title:
Excite, Inc.
By:
Title:
Nexus Capital Partners II, L.P.
By:
Title:
[Signature Page to Stockholders Agreement]
28.
Porcelain Partners, L.P.
By:
Its General Partner
By:
Title:
GE Capital Equity Investments, Inc.
By:
Title:
Asdale, Ltd.
By:
Title:
Millennial Holdings, LLC
By:
Title:
Whitko & Company
By:
Title:
Pequot Private Equity Fund II, L.P.
By: Pequot Capital Management, Inc.
Its Investment Manager
By:
▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer
[Signature Page to Stockholders Agreement]
29.
Vivendi
By:
Title:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
By:
Title:
Microsoft Corporation
By:
Title:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
University of Colorado Foundation, Inc.
By:
Title:
▇▇▇ N.C. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
[Signature Page to Stockholders Agreement]
30.
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
T. ▇▇▇▇▇▇▇ ▇▇▇▇ TTEE FBO T. ▇▇▇▇▇▇▇ ▇▇▇▇ 1997
Revocable trust DTD 9/30/97
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc. FBO Austin R.
▇▇▇▇▇▇▇ ▇▇▇ Acct. #36500127
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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[Signature Page to Stockholders Agreement]
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[Signature Page to Stockholders Agreement]
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