EXHIBIT 10.01
EXODUS COMMUNICATIONS, INC.
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
June 25, 1997
TABLE OF CONTENTS
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Page
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1. REGISTRATION RIGHTS.................................................. 2
1.1 Definitions.................................................... 2
1.2 Request for Registration....................................... 4
1.3 Company Registration........................................... 5
1.4 Obligations of the Company..................................... 6
1.5 Furnish Information............................................ 8
1.6 Expenses of Demand Registration................................ 8
1.7 Expenses of Company Registration............................... 8
1.8 Underwriting Requirements...................................... 9
1.9 Delay of Registration.......................................... 9
1.10 Indemnification................................................ 9
1.11 Reports Under Securities Exchange Act of 1934.................. 12
1.12 Form S-3 Registration.......................................... 12
1.13 Assignment of Registration Rights.............................. 13
1.14 Limitations on Subsequent Registration Rights.................. 13
1.15 "Market Stand-Off" Agreement................................... 14
1.16 Termination of Registration Rights............................. 14
2. COVENANTS OF THE COMPANY............................................. 15
2.1 Delivery of Financial Statements............................... 15
2.2 Inspection..................................................... 16
2.3 Termination of Information and Inspection Covenants............ 16
2.4 Right of First Offer........................................... 16
2.5 Observer Rights................................................ 18
2.6 Termination of Certain Covenants............................... 18
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3. COVENANTS OF THE INVESTORS, COMMON SHAREHOLDERS AND THE COMPANY...... 18
3.1 Right of First Offer for Common Shares......................... 19
3.2 Right of First Offer for Investor Shares....................... 20
3.3 Restrictive Legend............................................. 22
4. MISCELLANEOUS........................................................ 22
4.1 Successors and Assigns......................................... 22
4.2 Governing Law.................................................. 22
4.3 Counterparts................................................... 22
4.4 Titles and Subtitles........................................... 22
4.5 Notices........................................................ 23
4.6 Expenses....................................................... 23
4.7 Amendments and Waivers......................................... 23
4.8 Severability................................................... 23
4.9 Aggregation of Stock........................................... 23
4.10 Entire Agreement............................................... 23
4.11 Series B Rights Agreement Superseded........................... 23
4.12 Inclusion of Equipment Warrant Holders; Agreement to be Bound.. 24
Schedule A List of Investors
Schedule B List of Equipment Warrant Holders
Schedule C List of Common Shareholders
Schedule D List of Significant Common Shareholders
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SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
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THIS SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this
"AGREEMENT") is made as of the 25th day of June, 1997, by and among Exodus
Communications, Inc., a California corporation (the "COMPANY"), the investors
listed on Schedule A hereto, each of which is herein referred to as an
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"INVESTOR", the holders of warrants to purchase shares of the Company's Series
B-1 Preferred Stock listed on Schedule B hereto (the "EQUIPMENT WARRANT
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HOLDERS") and certain holders of the Company's Common Stock listed on Schedule C
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hereto, each of which is herein referred to as a "COMMON SHAREHOLDER."
RECITALS
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A. Certain of the Investors (the "SERIES A INVESTORS") are holders
of outstanding shares of the Company's Series A Preferred Stock ("SERIES A
STOCK") issued by the Company to such Series A Investors pursuant to a Series A
Preferred Stock Purchase Agreement by and among the Company and the Series A
Investors dated February 29, 1996 (the "SERIES A AGREEMENT"), and originally
were granted certain information and registration rights and rights of first
offer under an Investors' Rights Agreement by and among the Company and the
Series A Investors dated February 29, 1996 (the "SERIES A RIGHTS AGREEMENT").
B. Certain of the Investors (the "SERIES B INVESTORS") are holders
of outstanding shares of the Company's Series B Preferred Stock ("SERIES B
STOCK") issued by the Company to such Series B Investors pursuant to a Series B
Preferred Stock Purchase Agreement by and among the Company and the Series B
Investors dated October 2, 1996 (the "SERIES B AGREEMENT"), and, with the Series
A Investors, have been granted certain information and registration rights and
rights of first offer under an Amended and Restated Investors' Rights Agreement
by and among the Company and the Series A and Series B Investors dated October
2, 1996 (the "SERIES B RIGHTS AGREEMENT").
C. Certain of the Investors (the "LENDERS") are holders of
outstanding warrants to purchase shares of the Company's Series B1 Preferred
Stock (the "SERIES B1 PREFERRED STOCK") issuable by the Company to such Lenders
in the context of equipment lease financings provided to the Company by such
Lenders who were added as Investors to the Series B Rights Agreement except with
regard to rights granted under Section 2.4 thereof in an Amendment dated April
11, 1997.
D. Certain Investors (the "SERIES C INVESTORS") have agreed to
purchase shares of the Company's Series C Preferred Stock ("SERIES C STOCK") and
warrants to purchase Series C Preferred Stock ("THE SERIES C WARRANTS") pursuant
to a certain Series C Preferred Stock and Warrant Purchase Agreement by and
among the Company and such Series C Investors dated of even date herewith (the
"SERIES C AGREEMENT"). The Series C Agreement provides that, as a condition to
the Series C Investors' purchase of Series C Stock thereunder, the Company will
enter into this Agreement and the Series C Investors will be granted the rights
set forth herein.
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E. The Company has issued warrants (the "EQUIPMENT WARRANTS") to
the Equipment Warrant Holders in connection with equipment financing agreements
entered into by the Company whereby the Company has agreed to grant the
Equipment Warrant Holders at the time that the Equipment Warrants are exercised
"piggyback" registration rights and certain information rights which are pari
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passu with the Investors.
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F. It has been agreed that certain Common Shareholders listed on
Schedule D hereto (the "SIGNIFICANT COMMON SHAREHOLDERS") will be granted
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certain registration rights hereunder.
G. The Company and the undersigned parties hereto desire to enter
into this Agreement in order to amend, restate and replace their rights and
obligations under the Series B Rights Agreement with the rights and obligations
set forth in this Agreement. Section 4.7 of the Series B Rights Agreement
provides that the Series B Rights Agreement may be amended by the written
consent of the Company and the holders of two-thirds of the Registrable
Securities (as defined in Section 1.1 of the Series B Rights Agreement) then
outstanding. The undersigned parties to this Agreement comprise the Company and
the holders of two-thirds of the Registrable Securities currently outstanding.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as
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follows:
1.1 Definitions. For purposes of this Section 1:
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(a) The term "1933 ACT" means the Securities Act of 1933, as amended.
(b) The term "FORM S-3" means such form under the 1933 Act as in
effect on the date hereof or any registration form under the 1933 Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
(c) The term "HOLDER" means any person owning or having the right to
acquire Registrable Securities, or any assignee thereof in accordance with
Section 1.13 hereof; provided, however, that a holder of Excluded Shares (as
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defined in Section 1.1(m)) shall not be a Holder with respect to such Excluded
Shares for the purposes of Section 1.2, 1.4, 1.5(b), 1.6, 1.12 and 1.14 of this
Agreement.
(d) The term "1934 ACT" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "PREFERRED STOCK" shall mean the Series A Preferred
Stock, any other series of preferred stock of the Company issued upon conversion
of the Series A Preferred Stock, the Series B Preferred Stock, any other series
of preferred stock issued upon conversion of
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the Series B Preferred Stock, the Series C Preferred Stock and any other series
of preferred stock issued upon conversion of the Series C Preferred Stock.
(f) The term "SERIES A PREFERRED STOCK" shall mean the Series A
Preferred Stock of the Company.
(g) The term "SERIES A1 PREFERRED STOCK" shall mean the Series A1
Preferred Stock of the Company.
(h) The term "SERIES B PREFERRED STOCK" shall mean the Series B
Preferred Stock of the Company.
(i) The term "SERIES B1 PREFERRED STOCK" shall mean the Series B1
Preferred Stock of the Company.
(j) The term "SERIES C PREFERRED STOCK" shall mean the Series C
Preferred Stock of the Company.
(k) The term "SERIES C1 PREFERRED STOCK" shall mean the Series C1
Preferred Stock of the Company.
(l) The terms "REGISTER", "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(m) The term "REGISTRABLE SECURITIES" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, (ii) the
Common Stock issuable or issued upon conversion of the Series B Preferred Stock,
(iii) the Common Stock issuable or issued upon conversion of the Series C
Preferred Stock and the Series C Warrants, (iv) the Common Stock issuable or
issued upon conversion of any shares of preferred stock issued upon conversion
of either the Series A Preferred Stock, the Series B Preferred Stock or the
Series C Preferred Stock, (v) the shares of Common Stock held by the Significant
Common Shareholders (the "SIGNIFICANT COMMON SHAREHOLDER SHARES"), and (vi) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i) through (v) above, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned, provided, however, that notwithstanding
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anything herein to the contrary, the Significant Common Shareholder Shares or
Common Stock issuable upon exercise of the Equipment Warrants and any shares of
Common Stock described in (vi) above that are issued in respect of any
Significant Common Shareholder Shares (collectively, the "EXCLUDED SHARES")
shall not be Registrable Securities for purposes of Sections 1.2 and 1.12 of
this Agreement.
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(n) The number of shares of "REGISTRABLE SECURITIES THEN OUTSTANDING"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities.
(o) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 Request for Registration.
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(a) If the Company shall receive at any time after six (6) months
after the effective date of the first registration statement for a public
offering of securities of the Company (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 SEC Rule 145
transaction), a written request from the Holders of (x) at least 30% of the
Registrable Securities then outstanding or (y) at least 25% of the Registrable
Securities issued upon conversion of the Series C Preferred Stock or any
securities issued upon conversion of the Series C Preferred Stock that the
Company file a registration statement under the 1933 Act for an aggregate
offering price, net of underwriting discounts and commissions, of at least
$7,500,000, then the Company shall:
(i) within ten (10) days after the Company's receipt
thereof, give written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event within
60 days of the receipt of such request, subject to the limitations of subsection
1.2(b), the registration under the 1933 Act of all Registrable Securities which
the Holders request to be registered within twenty (20) days of the mailing of
the notice required by subsection 1.2(a)(i).
(b) If the Holders initiating the registration request hereunder
("INITIATING HOLDERS") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the priority of securities to be included in any registration
effected in accordance with Section 1.2 shall be (i) first, the securities the
Initiating Holders propose to sell on a pro rata basis, based upon the number of
Registrable Securities such Holders desire to include in such registration, (ii)
second,
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Registrable Securities (other than Excluded Shares) held by the Holders other
than the Initiating Holders on a pro rata basis, based upon the number of
Registrable Securities such Holders desire to include in such registration and
(iii) third, other securities, if any are requested to be included in such
registration, including Excluded Shares. In the event the Initiating Holders are
unable to include at least 50% of the Registrable Securities requested by them
to be included in a registration, such registration will not count as a
registration for purposes of Section 1.2(d); provided, however, that the
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foregoing shall not be applicable in the event the Initiating Holders
nonetheless sell securities with an aggregate value of at least $7.5 million.
(c) Notwithstanding the foregoing, if the Company shall furnish to
the Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Company (or, in connection with an underwritten
offering, a certificate signed by the Company and its underwriters) stating that
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
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may not utilize this right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect:
(i) Any registration pursuant to clause 1.2(a)(x) after
the Company has effected a total of two registrations pursuant thereto;
(ii) Any registration pursuant to clause 1.2(a)(y) after
the Company has effected a total of two registrations pursuant thereto; and
(iii) Any registration pursuant to this Section 1.2 during
the period starting with the date thirty (30) days prior to the Company's good
faith estimate of the date of filing of, and ending on a date one hundred eighty
(180) days after the effective date of, a registration subject to Section 1.3
hereof; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;
provided that the Company must file such registration statement within 60 days
of the estimated filing date or the Company's ability to delay such registration
pursuant to this clause shall not apply.
1.3 Company Registration. If (but without any obligation to do so)
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the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration on any form which 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 or a
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registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with Section
4.5, the Company shall, subject to the provisions of Section 1.8, cause to be
registered under the 1933 Act all of the Registrable Securities that each such
Holder has requested to be registered.
1.4 Obligations of the Company. Whenever required under this Section
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1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC as promptly as practicable a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective, and, upon
the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for a period
of up to one hundred twenty (120) days or until the distribution contemplated in
the Registration Statement has been completed, whichever is less; provided,
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however, that (i) such 120-day period shall be extended for a period of time
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equal to the period the Holder refrains from selling any securities included in
such registration at the request of an underwriter of Common Stock (or other
securities) of the Company, and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the 1933 Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the 1933 Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a post-
effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the 1933 Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the 1934 Act in the registration statement; provided,
further, that the Company is not obligated to maintain the effectiveness of the
foregoing registration statements beyond such time where the Holders may sell
their respective registered but unsold Registrable Securities for such
registration statement pursuant to Section 1.16(b) hereof, provided, the Company
shall provide to each such Holder at least twenty (20) days' prior written
notice of the termination of effectiveness of such registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other
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documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the 1933 Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant to this
Agreement to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to this Agreement and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) In the event of the issuance of a stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction in the United States, the Company will promptly notify the holders
of Registrable Securities and will use its best efforts to obtain promptly the
withdrawal of such order.
(j) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
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registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
1.5 Furnish Information.
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(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required (to comply with applicable laws) to effect the registration of such
Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b)(2), whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
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underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders
selected by holders of a majority of the Registrable Securities to be included
in such registration and reasonably acceptable to the Company shall be borne by
the Company; provided, however, that the Company shall not be required to pay
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for any expenses of any registration proceeding begun pursuant to Section 1.2 if
the registration request is subsequently withdrawn at the request of the
Initiating Holders holding a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless such Holders agree to forfeit their right to one demand registration
pursuant to Section 1.2; provided further, however, that if at the time of such
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withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request and have withdrawn the request with reasonable
promptness following disclosure by the Company of such material adverse change,
then the Holders shall not be required to pay any of such expenses and shall
retain their rights pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay
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all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and
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the fees and disbursements of counsel for the Company and the reasonable fees
and disbursements of one counsel for the selling Holders selected by holders of
a majority of the Registrable Securities to be included in such registration and
reasonably acceptable to the Company, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
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involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters) which terms will be customary
for transactions of that type, and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering. The priority of securities to be included in any
registration effected in accordance with Section 1.3 shall be (i) first, the
securities the Company proposes to sell, (ii) second, Registrable Securities
(other than Excluded Shares) pro rata among the holders of Registrable
Securities requesting to include shares in such registration, based upon the
number of Registrable Securities such Holders desire to include in such
registration and (iii) third, other securities, if any are requested to be
included in such registration.
1.9 Delay of Registration. No Holder shall have any right to obtain
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or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
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included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the ▇▇▇▇ ▇▇▇) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the 1933 Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the 1933 Act, the 1934 Act, other federal or state securities laws or any
other applicable federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively a
"VIOLATION"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any state securities law or any rule or
regulation
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promulgated under the 1933 Act, the 1934 Act or any state securities law; and
the Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
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subsection 1.10(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person. The foregoing indemnity
agreements of the Company and Holders are subject to the condition that, insofar
as they relate to any Violation made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL PROSPECTUS"), such
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the 1933 Act.)
(b) To the extent permitted by law, each selling Holder, severally
and not jointly, will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the 1933 Act, any
underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the 1933 Act, the 1934 Act or other
federal or state securities laws, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
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in this subsection 1.10(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
1.10(b) exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however,
10
that an indemnified party (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 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 that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. The Company and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 1.10(d) were
determined by pro rata allocation or by any other method of allocation which
--- ----
does not take into account the equitable considerations referred to above in
this Section 1.10(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 1.10(d) shall include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇
▇▇▇) shall be entitled to indemnification or contribution from any person who
was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
11
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
1933 Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) use its best efforts to take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the 1933 Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders of (i) at least twenty percent (20%) of the Registrable
Securities then outstanding or (ii) at least 15% of the Registrable Securities
issued upon conversion of the Series C Preferred Stock or any securities issued
upon conversion of the Series C Preferred Stock a written request or requests
that the Company effect a registration on Form S-3 and any related qualification
or compliance with respect to all or a part of the Registrable Securities owned
by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any
12
other Holder or Holders joining in such request as are specified in a written
request given within 15 days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
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any such registration, qualification or compliance, pursuant to this section
1.12: (1) if Form S-3 is not available for such offering by the Holders; (2) if
the Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$500,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than 60 days
after receipt of the request of the Holder or Holders under this Section 1.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve month period; (4) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two registrations on
Form S-3 for the Holders pursuant to this Section 1.12; or (5) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with the first registration
requested pursuant to Section 1.12(i) and the first registration requested
pursuant to Section 1.12(ii), including (without limitation) all registration,
filing, qualification, printer's and accounting fees and the reasonable fees and
disbursements of counsel for the selling Holder or Holders and counsel for the
Company, but excluding any underwriters' discounts or commissions, shall be
borne by the Company and thereafter pro rata by the Holder or Holders, provided
that registrations effected pursuant to this Section 1.12 shall not be counted
as demands for registration or registrations effected pursuant to Sections 1.2
or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities, provided: (a) the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.15 below;
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act.
1.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of at
13
least two-thirds (2/3) of the then outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.2 hereof, unless under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not reduce the amount of the Registrable Securities of the
Holders which is included, or (b) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of either of the dates set forth in subsection 1.2(a) or within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
----------------------------
during the period of duration specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the 1933 Act, it shall not,
to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to 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 it at any time during such period except common stock included
in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements; and
(c) such market stand-off time period shall not exceed one hundred
and eighty (180) days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-l or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-14 or Form S-15 or similar forms which may be promulgated
in the future.
1.16 Termination of Registration Rights.
----------------------------------
14
(a) No Holder shall be entitled to exercise any right provided for in
this Section 1 after seven (7) years following the sale of securities pursuant
to a registration statement filed by the Company under the 1933 Act in
connection with the Minimum Offering.
(b) In addition, the right of any Holder to request registration or
inclusion in any registration pursuant to Section 1 shall terminate on the
closing of the first Company-initiated registered public offering of Common
Stock of the Company if all shares of Registrable Securities held or entitled to
be held upon conversion by such Holder may be sold under Rule 144 during any 90-
day period, or on such date after the closing of the first Company-initiated
registered public offering of Common Stock of the Company as all shares of
Registrable Securities held or entitled to be held upon conversion by such
Holder may be sold under Rule 144 during any 90-day period.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. As long as an Investor and its
--------------------------------
affiliates owns not less than 400,000 shares of the Company's Preferred Stock
(or an equivalent amount of Common Stock issued upon conversion thereof), the
Company shall deliver to such Investor the following:
(a) as soon as practicable, but in any event within one hundred and
five (105) days after the end of each fiscal year of the Company, an income
statement for such fiscal year and a balance sheet of the Company and statement
of cash flows and of shareholders' equity as of the end of such year, such year-
end financial reports to be in reasonable detail, prepared in accordance with
generally accepted accounting principles ("GAAP"), and audited and certified by
independent public accountants of nationally recognized standing selected by the
Company;
(b) as soon as practicable, but in any event within forty-five (45)
days after the end of each of the first three (3) quarters of each fiscal year
of the Company, an unaudited profit or loss statement, and an unaudited balance
sheet as of the end of such fiscal quarter together with a compilation of the
Company's actual results versus the results projected in the Company's approved
budget;
(c) if requested by an Investor on a month by month basis, within
thirty (30) days of the end of such month, an unaudited income statement and
balance sheet for and as of the end of such month together with a monthly
operating report in a form satisfactory to the Investors and a compilation of
the Company's actual results versus the results projected in the Company's
approved budget, in reasonable detail;
(d) as soon as practicable, but in any event thirty (30) days prior
to the end of each fiscal year, a budget and business plan for the next fiscal
year, prepared on a monthly basis, including balance sheets for such months and,
as soon as prepared, any other budgets or revised budgets prepared by the
Company;
15
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Executive Officer and the Chief Financial Officer of the Company certifying that
such financials were prepared in accordance with GAAP consistently applied with
prior practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment; and
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
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the Company shall not be obligated under this subsection (f) or any other
subsection of Section 2.1 to provide information which it deems in good faith to
be a trade secret or similar confidential information, unless such Investor or
assignee of such Investor has signed an agreement to keep such information
confidential.
2.2 Inspection. As long as an Investor and its affiliates owns not
----------
less than 400,000 shares of the Company's Preferred Stock (or an equivalent
amount of Common Stock issued upon conversion thereof), the Company shall permit
such Investor, at such Investor's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Investor; provided, however, that
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the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information, unless such Investor has signed an agreement
to keep such information confidential.
2.3 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in subsections 2.1(b), (c), (d) and (f) shall terminate as
to Investors and be of no further force or effect upon the consummation of an
initial public offering of the Company's Common Stock underwritten by a
nationally recognized investment bank pursuant to a registration statement filed
and declared effective under the 1933 Act at a public offering price of at least
$5.00 per share (as adjusted for stock splits, stock dividends and like events)
that results in gross proceeds to the Company of not less than $30 million
(prior to expenses and underwriting commissions) and such Common Stock shall be
listed in the Nasdaq National Market, the American Stock Exhcange or the New
York Stock Exchange or other national securities market or exchange (a
"QUALIFIED IPO"), provided that, in the event the covenants set forth in
subsections 2.1(c), (d) and (f) have not terminated and the Company is complying
with the reporting requirements of the Securities and Exchange Commission for
public companies, the Investors agree to take reasonable steps to maintain the
confidentiality of non-public information. The covenants set forth in Section
2.2 shall terminate as to Investors and be of no further force or effect upon
the consummation of a sale of securities pursuant to a registration statement
filed by the Company under the 1933 Act in connection with an offering of its
securities to the general public.
2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to each Investor a
right of first offer with respect to
16
future sales by the Company of its Shares (as hereinafter defined). For purposes
of this Section 2.4, Investor includes any general partners and affiliates of an
Investor. An Investor shall be entitled to apportion the right of first offer
hereby granted it among itself and its partners and affiliates in such
proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("SHARES"), the Company shall first make an offering of such Shares to
each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice ("NOTICE") to the Investors
stating (i) its bona fide intention to offer such Shares, (ii) the number of
such Shares to be offered, and (iii) the price and terms, if any, upon which it
proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the Investor
may elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares which equals the proportion that the
number of shares of common stock issued and held, or issuable upon conversion of
the Preferred Stock and warrants to purchase Preferred Stock, then held by such
Investor bears to the total number of shares of outstanding common stock of the
Company (assuming conversion of all outstanding securities which are, by their
terms, convertible into or exchangeable for, common stock). The Company shall
promptly, in writing, inform each Investor which purchases all the shares
available to it ("FULLY-EXERCISING INVESTOR") of any other Investor's failure to
do likewise. During the twenty-day period commencing after receipt of such
information, each Fully-Exercising Investor shall be entitled to obtain that
portion of the Shares for which Investors were entitled to subscribe but which
were not subscribed for by the Investors which is equal to the proportion that
the number of shares of common stock issued and held, or issuable upon
conversion of the Preferred Stock and warrants to purchase Preferred Stock then
held, by such Fully-Exercising Investor bears to the total number of shares of
common stock issued and held, or issuable upon conversion of the Preferred Stock
and warrants to purchase Preferred Stock, then held, by all Fully-Exercising
Investors who wish to purchase some of the unsubscribed shares.
(c) If all Shares referred to in the Notice which the Investors are
entitled to purchase are not elected to be obtained as provided in subsection
2.4(b) hereof, the Company may, during the 60-day period following the
expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such period, or if such agreement is not
consummated within 60 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Investors in accordance herewith.
(d) The right of first offer in this Section 2.4 shall not be
applicable (i) to the issuance or sale of up to 3,438,900 shares of common stock
(or options therefor) under the 1995 Stock Option and 1997 Equity Incentive
Plans (the "PLANS") of the Company (in addition to the
17
number of options granted and exercised to date or canceled hereafter) to
employees, officers and directors for the primary purpose of soliciting or
retaining their employment and/or services, and as such number may be increased
hereafter by affirmative vote of a least 75% of the Board of Directors, (ii) to
or after consummation of a Qualified IPO, (iii) to the issuance of securities
pursuant to the conversion or exercise of convertible or exercisable securities
which were, when originally issued, not subject to the right of first offer
effected by this Section 2.4, (iv) to the issuance of securities in connection
with a bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise, or (v) to
the issuance of stock, warrants or other securities or rights to persons or
entities with which the Company has business relationships provided such
issuances are for other than primarily equity financing purposes and are
approved by the Board of Directors.
(e) The right of first offer set forth in this Section 2.4 may not be
assigned or transferred, except that (i) such right is assignable by each Holder
to any wholly owned subsidiary or parent of, or to any corporation or entity
that is, within the meaning of the 1933 Act, controlling, controlled by or under
common control with (for example, the same investment manager or advisor), any
such Holder, and (ii) such right is assignable between and among any of the
Holders.
2.5 Observer Rights. As long as an Investor and its affiliates owns
---------------
not less than 500,000 shares of the Company's Preferred Stock (or an equivalent
amount of Common Stock issued upon conversion thereof) and does not have a
representative on the Board of Directors of the Company and so long as Fleet
Equity Partners or its affiliates ("FLEET") owns 500,000 shares of Preferred
Stock, the Company shall invite one representative of each of such Investor and
Fleet to attend all meetings of its Board of Directors and any annual strategic
planning sessions in a nonvoting observer capacity and, in this respect, shall
give such representative copies of all notices, minutes, consents, and other
materials that it provides to its directors with respect to such meeting;
provided, however, that such representative shall agree to hold in confidence
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and trust and to act in a fiduciary manner with respect to all information so
provided; and, provided further, that the Company reserves the right to withhold
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any information and to exclude such representative from any meeting or portion
thereof if access to such information or attendance at such meeting could
adversely affect the attorney-client privilege between the Company and its
counsel or would result in disclosure of trade secrets to such representative or
if such Investor or its representative is a direct competitor of the Company.
2.6 Termination of Certain Covenants. The covenants set forth in
--------------------------------
Sections 2.4 and 2.5 shall terminate as to Investors and be of no further force
or effect upon a Qualified IPO. In the event that the Company becomes subject
to the reporting requirements of the Securities and Exchange Commission through
some mechanism other than a Qualified IPO, the covenants set forth in Sections
2.4 and 2.5 shall continue in full force and effect provided that the Investors
sign an agreement to maintain the confidentiality of confidential information.
3. Covenants of the Investors, Common Shareholders and the Company.
---------------------------------------------------------------
18
3.1 Right of First Offer for Common Shares. Subject to the terms and
--------------------------------------
conditions specified in this Section 3.1, each Common Shareholder hereby grants
to the Company and each Investor a right of first offer with respect to future
sales by such Common Shareholder of shares of the Company's Common Stock
registered in their respective names or beneficially now or hereafter owned by
them ("COMMON SHARES"). An Investor shall be entitled to apportion the right of
first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time a Common Shareholder proposes to offer any Common Shares,
such Common Shareholder shall first make an offering of such Common Shares to
the Company and the Investors in accordance with the following provisions:
(a) The Common Shareholder shall deliver a notice ("COMMON NOTICE") to
the Company stating (i) its bona fide intention to offer such Common Shares,
(ii) the number of such Common Shares to be offered, and (iii) the price and
terms, if any, upon which it proposes to offer such Common Shares.
(b) Within 20 calendar days after receipt of the Common Notice, the
Company may elect to purchase or obtain, at the price and on the terms specified
in the Common Notice, such Common Shares.
(c) If all Common Shares referred to in the Common Notice which the
Company is entitled to purchase are not elected to be obtained as provided in
subsection (b) hereof, the Common Shareholder shall offer the unsubscribed
portion of such Common Shares to the Investors at the price and upon the terms
specified in the Common Notice. Within 20 calendar days after the Company
provides the Common Shareholder and the Investors notice (the "COMPANY NOTICE")
of its intention not to purchase all of the Common Shares, the Investors may
elect to purchase or obtain, at the price and on the terms specified in the
Common Notice, such Common Shares.
(d) The Company Notice shall state (i) the Company's intention not to
purchase all the Common Shares being offered, (ii) the number of such Common
Shares to be offered to the Investors, and (iii) the price and terms, if any,
upon which such Common Shares are being offered. Within 20 calendar days after
receiving the Company Notice, each Investor may elect to purchase or obtain, at
the price and on the terms specified in the Company Notice, up to that portion
of the Common Shares which equals the proportion that the number of shares of
common stock issued and held or issuable upon conversion of the Preferred Stock,
then held by such Investor bears to the total number of shares of outstanding
common stock of the Company (assuming full conversion of all outstanding
securities which are, by their terms, convertible into or exchangeable for,
common stock). The Company shall promptly inform each Investor which purchases
all the shares available to it ("SECTION 3 FULLY-EXERCISING INVESTOR") of any
other Investor's failure to do likewise. During the 10 calendar day period
commencing after giving of such information, each Section 3 Fully-Exercising
Investor shall be entitled to obtain that portion of the Common Shares for which
Investors were entitled to subscribe but which were not subscribed for by the
Investors which is equal to the proportion that the number
19
of shares of common stock issued and held, or issuable upon conversion of the
Preferred Stock then held, by such Section 3 Fully-Exercising Investor bears to
the total number of shares of common stock issued and held, or issuable upon
conversion of the Preferred Stock, then held, by all Section 3 Fully-Exercising
Investors who wish to purchase some of the unsubscribed shares.
(e) If all Common Shares referred to in the Notice which the Company
and the Investors are entitled to purchase are not elected to be obtained as
provided in subsections (b) and (d) hereof, the Common Shareholder may, during
the 60-day period following the expiration of the period provided in subsection
(d) hereof, offer the remaining unsubscribed portion of such Shares to any
person or persons at a price not less than, and upon terms substantially the
same as those specified in the Common Notice. If the Common Shareholder does
not enter into an agreement for the sale of the Common Shares within such
period, or if such agreement is not consummated within 60 days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Common Shares shall not be offered unless first reoffered to the Company and the
Major Investors in accordance herewith.
(f) The right of first offer in this Section 3.1 shall terminate
after consummation of a Qualified IPO.
(g) The right of first offer set forth in this Section 3.1 may not be
assigned or transferred, except that (i) such right is assignable by each Holder
to any wholly owned subsidiary or parent of, or to any corporation or entity
that is, within the meaning of the 1933 Act, controlling, controlled by or under
common control with, any such Holder, (ii) such right is assignable between and
among any of the Holders and (iii) such right is assignable in connection with
the transfer of Investor shares made in accordance with this Agreement.
(h) The right of first offer in this Section 3.1 shall not apply to
any transfers of Common Shares to any affiliates of any Common Shareholder, bona
fide gifts by any Common Shareholder, any distribution in kind to the equity
holders of such Common Shareholder, any disposition by a Common Shareholder in
connection with the liquidation, dissolution or winding up of such Investor or
any transfer pursuant to that certain Contingent Share Transfer Agreement, dated
as of even date herewith, by and among certain holders of Series A Preferred
Stock, Series B Preferred Stock and Common Shares (the "CONTINGENT SHARE
TRANSFER AGREEMENT").
3.2 Right of First Offer for Investor Shares. Subject to the terms
----------------------------------------
and conditions specified in this Section 3.2, each Investor hereby grants to
each other Investor a right of first offer with respect to future sales by such
Investor of shares of the Company's Preferred Stock and Common Stock registered
in their respective names or beneficially now or hereafter owned by them
("INVESTOR SHARES"). An Investor shall be entitled to apportion the right of
first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time an Investor proposes to offer any Investor Shares, such
Investor shall first make an offering of such Investor Shares to the other
Investors in accordance with the following provisions:
20
(a) The Investor shall deliver a notice ("INVESTOR NOTICE") to each
Investor stating (i) its bona fide intention to offer such Investor Shares, (ii)
the number of such Investor Shares to be offered, and (iii) the price and terms,
if any, upon which it proposes to offer such Investor Shares.
(b) Within 20 calendar days after receipt of the Investor Notice,
each Investor may elect to purchase or obtain, at the price and on the terms
specified in the Investor Notice, up to that portion of the Investor Shares
which equals the proportion that the number of shares of common stock issued and
held or issuable upon conversion of the Preferred Stock or warrants to purchase
Preferred Stock, then held by such Investor bears to the total number of shares
of outstanding common stock of the Company (assuming full conversion of all
outstanding securities which are, by their terms, convertible into or
exchangeable for common stock. The Company shall promptly, in writing, inform
each Investor which purchases all the shares available to it ("FULLY-EXERCISING
INVESTOR") of any other Investor's failure to do likewise. During the twenty-day
period commencing after receipt of such information, each Fully-Exercising
Investor shall be entitled to obtain that portion of the Shares for which Major
Investors were entitled to subscribe but which were not subscribed for by the
Investors which is equal to the proportion that the number of shares of common
stock issued and held, or issuable upon conversion of the Preferred Stock then
held, by such Fully-Exercising Investor bears to the total number of shares of
common stock issued and held, or issuable upon conversion of the Preferred
Stock, then held, by all Fully-Exercising Investors who wish to purchase some of
the unsubscribed shares.
(c) If all Investor Shares referred to in the Investor Notice which
the Investors are entitled to purchase are not elected to be obtained as
provided in subsection (b) hereof, the Investor may offer the remaining
unsubscribed portion of such Shares to any person or persons at a price not less
than, and upon terms substantially the same as those specified in the Investor
Notice.
(d) The right of first offer in this Section 3.2 shall terminate
after consummation of a Qualified IPO.
(e) The right of first offer set forth in this Section 3.2 may not be
assigned or transferred, except that (i) such right is assignable by each Holder
to any wholly owned subsidiary or parent of, or to any corporation or entity
that is, within the meaning of the 1933 Act, controlling, controlled by or under
common control with, any such Holder, (ii) such right is assignable between and
among any of the Holders and (iii) such right is assignable in connection with
the transfer of Investor Shares made in accordance with this Agreement.
(f) The right of first offer in this Section 3.2 shall not apply to
any transfers of Investors Shares to any affiliates of any Investors, bona fide
gifts by any Investor, any distribution in kind to the equity holders of such
Investor, any disposition by an Investor in connection with the liquidation,
dissolution or winding up of such Investor or any transfer pursuant to the
Contingent Share Transfer Agreement.
21
3.3 Restrictive Legend. Each certificate representing (i) the
------------------
Shares, (ii) the Conversion Shares, and (iii) any other securities issued in
respect of the securities referenced in clauses (i) and (ii) upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 1.4 below) be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable laws or other agreements between the
Holder of such securities and the Company):
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AGREEMENTS BETWEEN THE COMPANY AND THE
STOCKHOLDER, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE
COMPANY."
Each Investor consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Restricted Securities in
order to implement the restrictions on transfer established in this Section.
4. Miscellaneous.
-------------
4.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
benefits, terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns (including
transferees of any shares of Registrable Securities) any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. The provisions of this Agreement that are
for the benefit of the Investors as the holders of capital stock of the Company
are also for the benefit of, and enforceable by and upon, all subsequent holders
of such capital stock.
4.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
4.3 Counterparts. 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.
4.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
22
4.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with Federal Express or other overnight courier or the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties.
4.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
4.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
two-thirds (2/3) of the Registrable Securities, not including Excluded Shares,
then outstanding provided, however, that the registration rights granted to
-------- -------
Significant Common Shareholders under Section 1 of this Agreement may not be
eliminated or materially and adversely changed without the written consent of
each applicable Significant Investor; and provided, further that the grant to
-------- -------
third parties of registration rights under Section 1.3 hereof on a pari passu
basis with the registration rights of the Significant Common Shareholder Shares
under Section 1.3 shall not be deemed to be a material and adverse change to the
registration rights of the Significant Common Shareholders under this Agreement.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Registrable Securities then outstanding, each
future holder of all such Registrable Securities, and the Company.
4.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
4.9 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
4.10 Entire Agreement. This Agreement (including the Schedules
----------------
hereto) constitutes the full and entire understanding and agreement between the
parties with regard to the subject matter hereof and thereof and supersedes the
Series B Rights Agreement and any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting
the subject matter hereof and thereof.
4.11 Series B Rights Agreement Superseded. Pursuant to Section 4.7 of
------------------------------------
the Series B Rights Agreement, the undersigned parties who are parties to such
Series B Rights
23
Agreement hereby amend and restate the Series B Rights Agreement to read in its
entirety as set forth in this Agreement, all with the intent and effect that the
Series B Rights Agreement shall be hereby terminated and entirely replaced and
superseded by this Agreement.
4.12 Inclusion of Equipment Warrant Holders; Agreement to be Bound.
-------------------------------------------------------------
Upon the partial or full exercise of an Equipment Warrant by an Equipment
Warrant Holder, Schedule A attached hereto shall automatically be amended to
----------
include the name of such Equipment Warrant Holder as an Investor solely for
purposes of the registration rights granted pursuant to Section 1.3 of this
Agreement and all relevant Sections thereto. Upon the partial or full exercise
of an Equipment Warrant by an Equipment Warrant Holder, such Equipment Warrant
Holder hereby assumes the obligations of an Investor under, and agrees to be
bound by the terms of, this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EXODUS: INVESTORS:
By:_________________________________________ By:_______________________________
Name:_______________________________________ Name:_____________________________
Title :____________________________________ Title :__________________________
Address:____________________________________ Address:__________________________
____________________________________________ __________________________________
COMMON SHAREHOLDERS: EQUIPMENT WARRANT HOLDERS:
By:_________________________________________ By:_______________________________
Name:_______________________________________ Name:_____________________________
Title :____________________________________ Title :__________________________
Address:____________________________________ Address:__________________________
____________________________________________ __________________________________
[SIGNATURE PAGE TO SECOND AMENDED
AND RESTATED INVESTORS' RIGHTS AGREEMENT]
25
SCHEDULE A
----------
LIST OF INVESTORS
Information Technology Ventures, L.P.
ITV Affiliates Fund, L.P.
Apex Investment Fund III, L.P.
Apex Strategic Partners, L.L.C.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Bay Partners SBIC, L.P.
DMG Technology Ventures
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Ram ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇. ▇. ▇▇▇▇ & Co. as Nominee 1996-11
The Productivity Fund II, LP
The Productivity Fund III, ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Interactive Media, L.P.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
The ▇▇▇▇▇ Family Trust dated 12/15/89
▇▇▇▇▇ ▇▇▇▇▇
Goel Family Partnership
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Living trust dated 7/29/92
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
S-C Phoenix Holdings, L.L.C.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Trust
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Tenants in Common (ID####-##-####)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Trust dated 7/3/93 (ID#94-660733)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Trust dated 6/12/93 (ID#94-
660097)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ Trust dated ▇/▇/▇▇ (▇▇ #▇▇-
▇▇▇▇▇▇▇)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of Rolapp Trust (ID #▇▇-▇▇▇▇▇▇▇)
Fleet Equity Partners VI, L.P.
Fleet Venture Resources, Inc.
JK&B Capital L.P.
JK&B Capital II ▇.▇.
▇▇▇▇▇▇▇ Plaza Partners
Oak Investment Partners VII
Oak VII Affiliate Fund
▇▇▇▇▇▇▇ Partners III, ▇.▇.
▇▇▇▇▇▇▇ Partners II LDC
Winston Partners II LLC
SCHEDULE B
----------
LIST OF EQUIPMENT WARRANT HOLDERS
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Venture Lending and Leasing, Inc.
First Portland Leasing
Semi Custom Logic, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ MMC/GATX Partnerhip No. 1
Silicon Valley Bank
Venture Lending & Leasing, Inc.
All paticipants in the Company's two Bridge Financings
SCHEDULE C
----------
LIST OF COMMON SHAREHOLDERS
HOLDERS OF COMMON STOCK
-----------------------
K.B. ▇▇▇▇▇▇▇▇▇▇▇▇▇
B. V. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ S. and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, H & W CP
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. & ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, H & W CP
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ H & W CP
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III
▇▇▇▇▇▇▇▇ Embar
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇
as Trustees of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust dated 12/15/89
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Del ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Trust dated 7/3/93 (ID#94-660733)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Trust dated 6/12/93 (ID#94-660097)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ Trust dated 7/5/93 (ID#▇▇-▇▇▇▇▇▇▇)
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
SCHEDULE D
----------
LIST OF SIGNIFICANT COMMON SHAREHOLDERS
K. B. ▇▇▇▇▇▇▇▇▇▇▇▇▇
B. V. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ S. and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, H & W CP
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. & ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, H & W ▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇
as Trustees of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust dated 12/15/89
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Trust dated 7/3/93 (ID#94-660733)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Trust dated 6/12/93 (ID#94-660097)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ Trust dated 7/5/93 (ID#▇▇-▇▇▇▇▇▇▇)
AMENDMENT TO THE SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
This Amendment, dated as of December 15, 1997 (the "AMENDMENT"), is to the
Second Amended and Restated Investors' Rights Agreement dated as of June 25,
1997 (the "RIGHTS AGREEMENT"), among Exodus Communications, Inc., a California
corporation (the "COMPANY") and certain of the Company's shareholders and
warrant holders ("RIGHTS AGREEMENT PARTIES").
WHEREAS, concurrently with the execution of this Amendment, the Company is
entering into that certain Series D Preferred Stock Purchase Agreement with
certain of the Company's existing shareholders (the "SERIES D INVESTORS").
WHEREAS, the Company and the Rights Agreement Parties desire to amend the
Rights Agreement in connection with the Series D Financing to provide the
holders of Series D Preferred Stock with the same rights, privileges and
obligations granted to the Rights Agreement Parties.
WHEREAS, the parties desire to clarify the rights of certain Warrant
Holders of the Company as set forth in the Rights Agreement.
WHEREAS, the holders of two-thirds (2/3) of the Registrable Securities (as
the term is defined in Section 1.1 of the Rights Agreement) hereby consent to
this Amendment, as required by Section 4.7 of the Rights Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. The Rights Agreement is hereby amended as follows:
(a) The first paragraph is hereby amended to read in its entirety as
follows:
THIS SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
(this "AGREEMENT") is made as of the 25th day of June, 1997, by
and among Exodus Communications, Inc., a California corporation
(the "COMPANY"), the investors listed on Schedule A hereto, each
----------
of which is herein referred to as an "INVESTOR", the holders of
warrants to purchase shares of the Company's stock listed on
Schedule B hereto (THE "EQUIPMENT WARRANT HOLDERS") and certain
----------
holders of the Company's Common Stock listed on Schedule C
----------
hereto, each of which is herein referred to as a "COMMON
SHAREHOLDER."
(b) Recital E is hereby amended to read in its entirety as follows:
E. The Company has issued warrants (the "EQUIPMENT WARRANTS") to
the Equipment Warrant Holders granting such Equipment Warrant
Holders at the time that the Equipment Warrants are exercised
"piggyback"
registration rights and certain information rights which are pari
----
passu with the Investors.
-----
(c) Section 1.1(e) is hereby amended to read in its entirety as
follows:
The term "PREFERRED STOCK" shall mean the Series A Preferred
Stock, any other series of preferred stock of the Company issued
upon conversion of the Series A Preferred Stock, the Series B
Preferred Stock, any other series of preferred stock of the
Company issued upon conversion of the Series B Preferred Stock,
the Series C Preferred Stock, any other series of preferred stock
of the Company issued upon conversion of the Series C Preferred
Stock, the Series D Preferred Stock and any other series of
preferred stock of the Company issued upon conversion of the
Series D Preferred Stock.
(d) Section 1.1(m) is hereby amended to read as follows:
1.1(m) The term "REGISTRABLE SECURITIES" means (i) the Common
Stock issuable or issued upon conversion of the Series A
Preferred stock, (ii) the Common Stock issuable or issued upon
conversion of the Series B Preferred Stock, (iii) the Common
Stock issuable or issued upon conversion of the Series C
Preferred Stock and the Series C Warrants, (iv) the Common Stock
issuable or issued upon conversion of the Series D Preferred
Stock, (v) the Common Stock issuable or issued upon conversion of
any shares of preferred stock issued upon conversion of either
the Series A Preferred Stock, the Series B Preferred Stock,
Series C Preferred Stock or the Series D Preferred Stock; (vi)
the shares of Common Stock held by the Significant Common
Shareholders (the "Significant Common Shareholder Shares"), (vii)
the Common Stock issuable upon the exercise of the warrants to
purchase Common Stock held by the Equipment Warrant Holders,
(viii) the Common Stock issuable upon the exercise of the
warrants to purchase Series B, Series B1, Series C1 and Series D1
Preferred Stock, as applicable, held by the Equipment Warrant
Holders, (ix) the Common Stock issuable or issued upon conversion
of any shares of Series B Preferred Stock issuable upon
conversion of the Series B Preferred Stock issued upon the
exercise of the warrants to purchase Series B Preferred Stock;
(x) any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of the
shares referenced in (i) through (ix) above, excluding in all
cases, however, any Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not
assigned, provided, however, that notwithstanding anything herein
-------- -------
to the contrary, the Significant Common Shareholder Shares or
Common Stock issuable upon the exercise of the Equipment Warrants
and any shares of Common Stock described in
2
(vi) - (ix) above that are issued in respect of any Significant
Common Shareholder Shares (collectively, the "EXCLUDED SHARES")
shall not be Registrable Securities for purposes of Sections 1.2
and 1.12 of this Agreement.
(e) Section 1.1(p) is hereby added to read as follows:
The term "SERIES D PREFERRED STOCK" shall mean the Series D
Preferred Stock of the Company.
(f) Section 1.1(q) is hereby added to read as follows:
The term "SERIES D1 PREFERRED STOCK" shall mean the Series D1
Preferred Stock of the Company.
(g) The fourth and fifth lines of Section 1.12 are hereby amended to
read as follows:
C Preferred Stock or Series D Preferred Stock or any securities
issued upon conversion of the Series C Preferred Stock or Series
D Preferred Stock a
(h) The sixth and seventh lines of Section 2.3 are hereby amended to
read as follows:
$3.25 per share (as adjusted for stock splits, stock dividends
and like events), provided that such offering is priced for sale
to the general public not later than April 30, 1998 (the public
offering price per share will be $5.00 if pricing does not occur
by such date), that results in gross proceeds to the Company of
not less than $30 million (prior to expenses and underwriting
(i) Section 2.4(d)(i) is hereby amended to read as follows:
(i) to the issuance or sale of up to 7,438,900 shares of common
stock (or options therefore) under the 1995 Stock Option and 1997
Equity Incentive Plans (the "PLANS"), of the Company (in addition
to the number of options granted and exercised to date or
canceled hereafter) to employees, officers and directors for the
primary purpose of soliciting or retaining their employment
and/or services, and as such number may be increased hereafter by
the affirmative vote of at least 75% of the Board of Directors,
(j) The first line of Section 4.7 is hereby amended to read as
follows:
Amendments and Waivers. Except as provided in Section 4.12,
----------------------
any term of this Agreement may be amended
3
(k) The eighth line of Section 4.7 is hereby amended to read as
follows:
Common Shareholder; and provided, further that the grant to
-------- -------
third parties of registration rights under Section
4
(l) Section 4.12 is hereby amended to read as follows:
Inclusion of Additional Equipment Warrant Holders. The Company
-------------------------------------------------
shall have the authority to add as parties to this Rights
Agreement, without the approval of the parties hereto, those
entities who are granted warrants to purchase shares of the
Company's Series D1 Preferred Stock in connection with debt
financings of the Company that are approved by the Company's
Board of Directors.
(m) Schedule B is hereby deleted and replaced with the Schedule B
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attached hereto.
2. The parties hereto agree that the sale by each of Significant Common
Shareholders K.B. ▇▇▇▇▇▇▇▇▇▇▇▇▇ and B. V. ▇▇▇▇▇▇▇▇▇ of up to $400,000 worth of
their Registrable Securities as selling shareholders in the Company's initial
public offering (which is contemplated to be closed no later than June 30, 1998)
will not trigger any rights of any other parties under Sections 1.3, 1.8 or any
other provisions of this Rights Agreement and the other parties hereto hereby
waive all rights under Sections 1.3, 1.8 and any other provisions of this Rights
Agreement with respect to such amount of Registrable Securities being included
in the Company's initial public offering.
3. Except as set forth in this Amendment, all of the provisions, terms
and conditions of the Rights Agreement shall remain in full force and effect.
4. This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
5. This Amendment shall be governed by and construed in accordance with
the laws of the state of California, excluding that body of law known as
conflicts of law.
5
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
THE COMPANY:
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EXODUS COMMUNICATIONS, INC.
By:___________________________________________
K.B. ▇▇▇▇▇▇▇▇▇▇▇▇▇, CEO and President
[SIGNATURE PAGE TO THE AMENDMENT TO THE
SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
7
THE INVESTORS:
DMG TECHNOLOGY VENTURES
By:_______________________________
Name:_____________________________
Title:____________________________
[Signature Page to Amendment to Second Amended and Restated Investors' Rights
Agreement]
SCHEDULE B
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EQUIPMENT WARRANT HOLDERS
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Venture Lending and Leasing, Inc.
First Portland Leasing
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ MMC/GATX Partnership No. 1
Silicon Valley Bank
All participants in the Company's two Bridge Financings
Transamerica Business Credit Corporation