EXHIBIT 10.10
▇▇▇▇.▇▇▇ INC.
THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
This Third Amended and Restated Investor Rights Agreement (this
"Agreement") is made and entered into as of February 1, 2000 by and among
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▇▇▇▇.▇▇▇ Inc., a Delaware corporation (the "Company") formerly known as Internet
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Technologies China Incorporated, and the persons and entities who are
signatories hereto and listed on Exhibit A hereto (individually, an "Investor"
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and, collectively, the "Investors").
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R E C I T A L S
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A. The Investors have purchased from the Company, and the Company has sold
to the Investors, shares of the Company's Series B Convertible Preferred Stock
("Series B Preferred Stock"), the Company's Series B-1 Convertible Preferred
Stock ("Series B-1 Preferred Stock"), the Company's Series C Convertible
Preferred Stock ("Series C Preferred Stock") or the Company's Series D
Convertible Preferred Stock ("Series D Preferred Stock") (Series B Preferred
Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock together, "Preferred Stock") on the terms and conditions set
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forth in (a) a Series B Preferred Stock Purchase Agreement (the "Series B
Purchase Agreement") dated as of March 10, 1998 between the Company and the
Investors named therein, (b) a Series B-1 Preferred Stock Purchase Agreement
(the "Series B-1 Purchase Agreement") dated as of August 18, 1998 between the
Company and the Investor named therein, (c) a Series C Preferred Stock Purchase
Agreement (the "Series C Purchase Agreement") dated as of October 18, 1999
between the Company and the Investors named therein and (d) one or more Series D
Preferred Stock Purchase Agreements between the Company and the Investors named
therein (the "Series D Purchase Agreements", together with the Series B Purchase
Agreement, the Series B-1 Purchase Agreement and the Series C Purchase
Agreement, the "Purchase Agreements").
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B. The Company and the Investors which are parties to the Series B
Purchase Agreement, the Series B-1 Purchase Agreement and the Series C Purchase
Agreement (the "Initial Investors") are parties to a Second Amended and Restated
Investor Rights Agreement dated as of October 18, 1999 (the "Second Amended and
Restated Investor Rights Agreement");
C. Certain of the obligations of the Company and of the Investors which
are parties thereto under the Series D Purchase Agreements (the "Additional
Investors") are conditioned upon the amendment and restatement of the Second
Amended and Restated Investor Rights Agreement to add the Additional Investors
as parties and to make such additional changes as are set forth.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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1. INFORMATION RIGHTS.
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1.1 Information and Inspection Rights. The Company covenants and agrees
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that for so long as an Investor holds any shares of Preferred Stock issued under
this Agreement or any of the Purchase Agreements, the Company will deliver to
such Investor: (a) audited annual financial statements within 90 days after the
end of each fiscal year; (b) unaudited quarterly financial statements within 45
days of the end of each fiscal quarter; (c) unaudited monthly financial
statements within 30 days of the end of each month; (d) an annual budget for the
following fiscal year within 30 days prior to the end of each fiscal year; and
(e) upon the written request by the Investor, such other information as the
Investor shall reasonably request, including without limitation tables of stock
ownership in the Company not less frequently than quarterly. The Company
further covenants and agrees that for so long as an Investor holds any shares of
Preferred Stock issued under this Agreement or the Purchase Agreements, such
Investor shall have standard inspection rights. These information and
inspection rights shall terminate upon consummation of an underwritten initial
public offering of shares of Common Stock of the Company (the "IPO"). Following
the IPO, the Company shall deliver to the Investor copies of the Company's 10-
K's, 10-Q's, 8-K's and Annual Reports to Shareholders promptly after such
documents are filed with the SEC.
1.2 Board Observer. So long as an Investor holds at least 190,000 shares
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of Preferred Stock (such number to be proportionately adjusted for stock splits,
stock dividends, and similar events), the Company will permit a representative
of such Investor (the "Observer") to attend all meetings of the Company's Board
of Directors (the "Board") and all committees thereof (whether in person,
telephonic or other) in a non-voting, observer capacity and shall provide to the
Investor, concurrently with the members of the Board, and in the same manner,
notice of such meeting and a copy of all materials provided to such members;
provided, that if a representative of an Investor is a member of the Board, such
Investor shall not have the right to appoint an Observer.
The Company acknowledges that any Investor will likely have, from time to
time, information that may be of interest to the Company ("Information")
regarding a wide variety of matters including, by way of example only, (1)
Investor's technologies, plans and services, and plans and strategies relating
thereto, (2) current and future investments Investor has made, may make, may
consider or may become aware of with respect to other companies and other
technologies, products and services, including, without limitation,
technologies, products and services that may be competitive with the Company's,
and (3) developments with respect to the technologies, products and services,
and plans and strategies relating thereto, of other companies, including,
without limitation, companies that may be competitive with the Company. The
Company recognizes that a portion of such Information may be of interest to the
Company. Such Information may or may not be known by the Observer. The
Company, as a material part of the consideration for this Agreement, agrees that
each Investor and its Observer shall have no duty to disclose any Information to
the Company or permit the Company to participate in any projects or investments
based on any Information, or to otherwise take advantage of any opportunity that
may be of interest to the Company if it were aware of such Information, and
hereby waives, to the extent permitted by law, any claim based on the corporate
opportunity doctrine or otherwise that could limit such Investor's ability to
pursue opportunities based on such Information or that
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would require Investor or Observer to disclose any such Information to the
Company or offer any opportunity relating thereto to the Company.
1.3 GAAP Financial Statements. From and after the date hereof, all
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audited and unaudited financial statements prepared by the Company shall be
prepared in accordance with United States generally accepted accounting
principles (GAAP), and all audits of the Company's financial statements shall be
conducted by one of the United States based "Big Five" accounting firms.
2. REGISTRATION RIGHTS.
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2.1 Definitions. For purposes of this Section 2:
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(a) Registration. The terms "register," "registered," and
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"registration" refer to a registration effected by preparing and filing a
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registration statement in compliance with the Securities Act of 1933, as
amended, (the "Securities Act"), and the declaration or ordering of
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effectiveness of such registration statement by the SEC.
(b) Registrable Securities. The term "Registrable Securities" means:
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(1) any Common Stock of the Company issued or to be issued pursuant to
conversion of any shares of Preferred Stock issued (A) under the Purchase
Agreements, and (B) pursuant to the Right of Participation (defined in Section 3
hereof), (2) any shares of 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, any shares of Preferred Stock described in clause (1) of
this subsection (b) and (3) any other Common Stock of the Company owned or
hereafter acquired by the Investor, provided, however, that shares of Common
Stock of the Company now owned or hereafter acquired by any of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ upon the exercise of options or
warrants or upon the conversion into Common Stock of shares of Series A
Convertible Preferred Stock of the Company owned by him shall not be Registrable
Securities. Notwithstanding the foregoing, "Registrable Securities" shall
exclude any Registrable Securities sold by a person in a transaction in which
rights under this Section 2 are not assigned in accordance with this Agreement
or any Registrable Securities sold in a public offering, whether sold pursuant
to Rule 144 promulgated under the Securities Act, or in a registered offering,
or otherwise.
(c) Registrable Securities Then Outstanding. The number of shares of
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"Registrable Securities then outstanding" shall mean the number of shares of
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Common Stock of the Company that are Registrable Securities and are then issued
and outstanding.
(d) Holder. For purposes of this Section 2, the term "Holder" means
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any person owning of record Registrable Securities that have not been sold to
the public or pursuant to Rule 144 promulgated under the Securities Act or any
permitted assignee of record of such Registrable Securities to whom rights under
this Section 2 have been duly assigned in accordance with this Agreement.
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(e) Form S-3. The term "Form S-3" means such form under the
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Securities Act as is in effect on the date hereof or any successor registration
form under the Securities 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.
(f) SEC. The term "SEC" or "Commission" means the U.S. Securities
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and Exchange Commission.
2.2 Demand Registration.
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(a) Request by Holders. If the Company shall at any time after the
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Company's IPO receive a written request from the Holders of at least twenty
percent (20%) of the Registrable Securities then outstanding that the Company
file a registration statement under the Securities Act covering the registration
of Registrable Securities pursuant to this Section 2.2, then the Company shall,
within ten (10) business days of the receipt of such written request, give
written notice of such request ("Request Notice") to all Holders, and use its
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best efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that Holders request to be
registered and included in such registration by written notice given by such
Holders to the Company within twenty (20) days after receipt of the Request
Notice, subject only to the limitations of this Section 2.2; provided that the
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Registrable Securities requested by all Holders to be registered pursuant to
such request must be at least twelve percent (12%) of all Registrable Securities
then outstanding; and provided further that the Company shall not be obligated
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to effect any such registration if the Company has, within the six (6) month
period preceding the date of such request, already effected a registration under
the Securities Act pursuant to this Section 2.2, or in which the Holders had an
opportunity to participate pursuant to the provisions of Section 2.3, other than
a registration from which the Registrable Securities of Holders have been
excluded (with respect to all or any portion of the Registrable Securities the
Holders requested be included in such registration) pursuant to the provisions
of Section 2.3(a).
(b) Underwriting. If the Holders initiating the registration request
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under this Section 2.2 ("Initiating Holders") intend to distribute the
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Registrable Securities covered by their request by means of an underwriting,
then they shall so advise the Company as a part of their request made pursuant
to this Section 2.2 and the Company shall include such information in the
written notice referred to in subsection 2.2(a). 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 enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Holders of a majority of the
Registrable Securities being registered and reasonably acceptable to the Company
(including a market stand-off agreement, as to any shares held by such Holders
which are not being registered, of up to 180 days if required by such
underwriter or underwriters). Notwithstanding any other provision of this
Section 2.2, if the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten then the Company shall so advise all Holders of Registrable
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Securities which would otherwise be registered and underwritten pursuant hereto,
and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities on a pro rata basis according to the
number of Registrable Securities then outstanding held by each Holder requesting
registration (including the initiating Holders); provided, however, that the
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number of shares of Registrable Securities to be included in such underwriting
and registration shall not be reduced unless all other securities of the Company
are first entirely excluded from the underwriting and registration. Any
Registrable Securities excluded and withdrawn from such underwriting shall be
withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The Company shall be
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obligated to effect only two (2) such registrations pursuant to this Section
2.2.
(d) Deferral. Notwithstanding the foregoing, if the Company shall
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furnish to Holders requesting the filing of a registration statement pursuant to
this Section 2.2, a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board, it
would be materially detrimental to the Company and its stockholders for such
registration statement to be filed, then the Company shall have the right to
defer such filing for a period of not more than ninety (90) 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 (12) month period.
(e) Expenses. All expenses incurred in connection with any
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registration pursuant to this Section 2.2, including without limitation all
federal and "blue sky" registration, filing and qualification fees, printer's
and accounting fees, and fees and disbursements of counsel for the Company (but
excluding underwriters' discounts and commissions relating to shares sold by the
Holders and legal fees of counsel for the Holders), shall be borne by the
Company. Each Holder participating in a registration pursuant to this Section
2.2 shall bear such Holder's proportionate share (based on the total number of
shares sold in such registration other than for the account of the Company) of
all discounts, commissions or other amounts payable to underwriter(s) or
brokers, and the Holders' legal fees, in connection with such offering by the
Holders. Notwithstanding the foregoing, the Company shall not be required to
pay for any expenses of any registration proceeding begun pursuant to this
Section 2.2 if the registration request is subsequently withdrawn at the request
of the Holders of a majority of the Registrable Securities to be registered,
unless the Holders of a majority of the Registrable Securities then outstanding
agree that such registration constitutes the use by the Holders of one (1)
demand registration pursuant to this Section 2.2 (in which case such
registration shall also constitute the use by all Holders of Registrable
Securities of one (1) such demand registration); provided, further, however,
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that if at the time of such withdrawal, the Holders have learned of a material
adverse change in the condition, business, or prospects of the Company not known
to the Holders at the time of their request for such registration and have
withdrawn their request for registration with reasonable promptness after
learning of such material adverse change, then the Holders shall not be required
to pay any of such expenses and such registration shall not constitute the use
of a demand registration pursuant to this Section 2.2.
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2.3 Piggyback Registrations. The Company shall notify all Holders of
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Registrable Securities in writing at least thirty (30) days prior to filing any
registration statement, after the Company's IPO, under the Securities Act for
purposes of effecting a public offering of securities of the Company (including,
but not limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to any
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registration under Section 2.2 or Section 2.4 of this Agreement or to any
employee benefit plan or a corporate reorganization) and will afford each such
Holder an opportunity to include in such registration statement all or any part
of the Registrable Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by such Holder shall within twenty (20) days after receipt of
the above-described notice from the Company, so notify the Company in writing,
and in such notice shall inform the Company of the number of Registrable
Securities such Holder wishes to include in such registration statement. If a
Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) Underwriting. If a registration statement under which the Company
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gives notice under this Section 2.3 is for an underwritten offering, then the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriters selected for such underwriting
(including a market stand-off agreement of up to 180 days if required by such
underwriter or underwriters, but in no event more restrictive than any agreement
required to be signed by the officers, directors and other major stockholders of
the Company). Notwithstanding any other provision of this Agreement, if the
managing underwriter(s) determine(s) in good faith that marketing factors
require a limitation of the number of shares to be underwritten, then the
managing underwriter(s) may exclude shares (including up to eighty percent (80%)
of the Registrable Securities) from the registration and the underwriting, and
the number of shares that may be included in the registration and the
underwriting shall be allocated, first to the Company, and second, to each of
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the Holders requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the total number of
Registrable Securities then held by each such Holder; provided, however, that
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the right of the underwriter(s) to exclude shares (including Registrable
Securities) from the registration and underwriting as described above shall be
restricted so that (i) the number of Registrable Securities included in any such
registration is not reduced below twenty-five percent (25%) of the aggregate
number of Registrable Securities for which inclusion has been requested; and
(ii) all shares that are not Registrable Securities and are held by any other
person, including, without limitation, any person who is an employee, officer or
director of the Company (or any subsidiary of the Company) shall first be
excluded from such registration and underwriting before any Registrable
Securities are so excluded. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter(s), delivered at
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least ten (10) business days prior to the effective date of the registration
statement. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration. For any
Holder that is a partnership, the Holder and the partners and retired partners
of such Holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing persons,
and for any Holder that is a corporation, the Holder and all corporations that
are affiliates of such Holder shall be deemed to be a single "Holder," and any
pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(b) Expenses. All expenses incurred in connection with a
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registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions relating to shares sold by the Holders and legal fees
of counsel for the Holders), including, without limitation all federal and "blue
sky" registration, filing and qualification fees, printers' and accounting fees,
and fees and disbursements of counsel for the Company, shall be borne by the
Company.
(c) Not Demand Registration. Registration pursuant to this Section
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2.3 shall not be deemed to be a demand registration as described in Section 2.2
above. Except as otherwise provided herein, there shall be no limit on the
number of times the Holders may request registration of Registrable Securities
under this Section 2.3.
2.4 Form S-3 Registration. In case the Company shall at any time after
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the first anniversary of the date hereof receive from any Holder of Registrable
Securities 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, then the
Company will:
(a) Notice. Promptly give written notice of the proposed
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registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders of Registrable Securities; and
(b) Registration. As soon as practicable, effect such registration
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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 other
Holder or Holders joining in such request as are specified in a written request
given within twenty (20) days after the Company provides the notice contemplated
by Section 2.4(a); provided, however, that the Company shall not be obligated to
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effect any such registration, qualification or compliance pursuant to this
Section 2.4:
(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 of less than $500,000;
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(3) if the Company shall furnish to the Holders a certificate
signed by the President or Chief Executive Officer of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it would be
materially 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 no more
than once during any twelve month period for a period of not more than ninety
(90) days after receipt of the request of the Holder or Holders under this
Section 2.4;
(4) if the Company has, within the six (6) month period
preceding the date of such request, already effected a registration under the
Securities Act other than a registration from which the Registrable Securities
of Holders have been excluded (with respect to all or any portion of the
Registrable Securities the Holders requested be included in such registration)
pursuant to the provisions of Section 2.3(a); 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) Expenses. The Company shall pay all expenses incurred in
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connection with each registration requested pursuant to this Section 2.4,
(excluding underwriters' or brokers' discounts and commissions relating to
shares sold by the Holders and legal fees of counsel for the Holders), including
without limitation federal and "blue sky" registration, filing and qualification
fees, printers' and accounting fees, and fees and disbursements of counsel.
(d) Deferral. Notwithstanding the foregoing, if the Company shall
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furnish to Holders requesting the filing of a registration statement pursuant to
this Section 2.4, a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board, it
would be materially detrimental to the Company and its stockholders for such
registration statement to be filed, then the Company shall have the right to
defer such filing for a period of not more than ninety (90) 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 (12) month period.
(e) Not Demand Registration. Form S-3 registrations shall not be
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deemed to be demand registrations as described in Section 2.2 above. Except as
otherwise provided herein, there shall be no limit on the number of times the
Holders may request registration of Registrable Securities under this Section
2.4.
2.5 Obligations of the Company. Whenever required to effect the
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registration of any Registrable Securities under this Agreement the Company
shall, as expeditiously as reasonably possible:
(a) Registration Statement. Prepare and file with the SEC a
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registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective, provided,
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however, that the Company shall not be required to keep any such registration
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statement effective for more than one hundred eighty (180) days.
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(b) Amendments and Supplements. Prepare and file with the SEC such
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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 Securities Act with respect to the disposition
of all securities covered by such registration statement.
(c) Prospectuses. Furnish to the Holders such number of copies of a
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prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Blue Sky. Use its best efforts to register and qualify the
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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.
(e) Underwriting. In the event of any underwritten public offering,
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enter into and perform its obligations under an underwriting agreement in usual
and customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notification. Notify each Holder of Registrable Securities
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covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Opinion and Comfort Letter. Furnish, at the request of any
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Holder requesting registration of Registrable Securities, on the date that such
Registrable Securities are delivered to the underwriter(s) for sale, 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 as of
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 and reasonably satisfactory to a majority in
interest of the Holders requesting registration, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a "comfort" letter dated as of 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 and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
(h) Exchange or Nasdaq National Market. Use reasonable efforts to
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list such Registrable Securities on any securities exchange or other self-
regulatory organization, such as
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the Nasdaq National Market, on which the Company's Common Stock is then listed,
and to comply with all applicable regulations of the SEC.
2.6 Furnish Information. It shall be a condition precedent to the
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obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the Registration of their Registrable Securities.
2.7 Indemnification. In the event any Registrable Securities are included
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in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law; the Company will
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indemnify and hold harmless each Holder, the partners, officers and directors of
each Holder, any underwriter (as determined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended, (the "1934 Act"), against any losses, claims, damages, or liabilities
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(joint or several) to which they may become subject under the Securities Act,
the 1934 Act or other 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"):
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(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
Securities Act, the 1934 Act, any federal or state securities law or
any rule or regulation promulgated under the Securities Act, the 1934
Act or any federal or state securities law in connection with the
offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
-------- -------
indemnity agreement contained in this subsection 2.7(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 such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
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(b) By Selling Holders. To the extent permitted by law, each selling
------------------
Holder (if Registrable Securities held by such Holder are included in the
securities as to which such registration, qualification or compliance is being
effected) will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the registration statement, each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such other Holder within the meaning of the Securities Act
or the 1934 Act, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer, controlling person,
underwriter or such other Holder, partner or director, officer or controlling
person of such other Holder may become subject under the Securities Act, the
1934 Act or other federal or state law, 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 reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
underwriter or other Holder, partner, officer, director or controlling person of
such other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action: provided, however, that the indemnity
-------- -------
agreement contained in this subsection 2.7(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; and provided, further, that the total amounts
-------- -------
payable in indemnity by a Holder under this Section 2.7(b) in respect of any
Violation shall not exceed the net proceeds received by such Holder in the
registered offering out of which such Violation arises.
(c) Notice. Promptly after receipt by an indemnified party under this
------
Section 2.7 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 2.7, 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, that an indemnified party shall
-------- -------
have the right to retain its own 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 conflict of 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 shall relieve such indemnifying party of
liability to the indemnified party under this Section 2.7 to the extent the
indemnifying party is prejudiced as a result thereof, but the omission so to
deliver written notice to the indemnified party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 2.7.
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
-------------------------------------
agreements of the Company and Holders are subject to the condition that, insofar
as they relate to
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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 timely 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 Securities Act.
(e) Contribution. In order to provide for just and equitable
------------
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 2.7 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 2.7 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
2.7; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
-------- -------
that, in any such case: (A) no such Holder will be required to contribute any
amount in excess of net proceeds of all such Registrable Securities offered and
sold by such Holder pursuant to such registration statement; and (B) no person
or entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and Holders under this
--------
Section 2.7 shall survive until the sixth anniversary of the completion of any
offering of Registrable Securities in a registration statement, regardless of
the expiration of any statutes of limitation or extensions of such statutes.
2.8 Termination of the Company's Obligations. The Company shall have no
----------------------------------------
obligations pursuant to Sections 2.2 through 2.4 with respect to any Registrable
Securities proposed to be sold by a Holder in a registration pursuant to Section
2.2, 2.3 or 2.4 if, in the opinion of counsel to the Company, all such
Registrable Securities proposed to be sold by a Holder may then be sold under
Rule 144 in one transaction without exceeding the volume limitations thereunder.
2.9 No Registration Rights to Third Parties. Without the prior written
---------------------------------------
consent of the Holders of at least eighty percent (80%) of the Registrable
Securities then outstanding, the Company covenants and agrees that it shall not
grant, or cause or permit to be created, for the benefit of any person or entity
any registration rights of any kind (whether similar to the demand,
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"piggyback" or Form S-3 registration rights described in this Article 2, or
otherwise) relating to any other voting securities of the Company, other than
rights that are subordinate in right to the Investors as to cutbacks.
3. RIGHT OF PARTICIPATION.
----------------------
3.1 General. Each Investor and any permitted assign of an Investor (each,
-------
a "Participation Rights Holder") shall have the right of first refusal to
---------------------------
purchase such Participation Rights Holder's Pro Rata Share (as defined below),
of all (or any part) of any New Securities (as defined in Section 3.3) that the
Company may from time to time issue after the date of this Agreement (the "Right
-----
of Participation").
----------------
3.2 Pro Rata Share. A Participation Rights Holder's "Pro Rata Share" for
-------------- --------------
purposes of the Right of Participation is the ratio of (a) the number of
Registrable Securities held by such Participation Rights Holder, to (b) the
total number of outstanding shares of Common Stock of the Company on a fully-
diluted, as-converted basis. Each Holder shall have a right of over-
subscription such that if any Holder fails to exercise its right hereunder to
purchase its pro rata share of New Securities, the other Holders may purchase
the non-purchasing Holder's portion on a pro rata basis within ten (10) days
from the date such non-purchasing Holder fails to exercise its rights hereunder
to purchase its pro rata share of New Securities.
3.3 New Securities. "New Securities" shall mean any Preferred Stock,
-------------- --------------
other preferred stock of the Company, Common Stock or other voting capital stock
of the Company, whether now authorized or not, and rights, options or warrants
to purchase any such securities, and securities of any other type whatsoever
that are, or may become, convertible or exchangeable into such Preferred Stock,
other preferred stock, Common Stock or other capital stock, provided, however,
-------- -------
that the term "New Securities" shall not include:
(a) up to 830,625 shares of the Company's Common Stock (and/or options or
warrants therefor) issued to employees, officers, directors,
contractors, advisors or consultants of the Company pursuant to
incentive agreements or incentive plans approved by the Board;
(b) any shares of Preferred Stock issued under any of the Purchase
Agreements, as such agreement may be amended;
(c) any securities issued upon conversion of shares of Preferred Stock
issued under any of the Purchase Agreements;
(d) any securities issued in connection with any stock split stock,
dividend or other similar event in which all Participation Rights
Holders are entitled to participate on a pro rata basis;
(e) any securities issued upon the exercise, conversion or exchange of any
outstanding security if such outstanding security constituted a New
Security;
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(f) any securities issued pursuant to the acquisition of another
corporation or entity by the Company by consolidation, merger,
purchase of assets, or other reorganization in which the Company
acquires, in a single transaction or series of related transactions,
assets of such other corporation or entity or fifty percent (50%) or
more of the voting power of such other corporation or entity or fifty
percent (50%) or more of the equity ownership of such other entity; or
(g) any securities offered by the Company in a transaction registered
under the Securities Act.
3.4 Procedures. In the event that the Company proposes to undertake an
----------
issuance of New Securities (in a single transaction or a series of related
transactions), it shall give to each Participation Rights Holder written notice
of its intention to issue New Securities (the "Participation Notice"),
--------------------
describing the amount and the type of New Securities and the price and the
general terms upon which the Company proposes to issue such New Securities.
Each Participation Rights Holder shall have fifteen (15) business days from the
date of receipt of any such Participation Notice to agree in writing to purchase
such Participation Rights Holder's Pro Rata Share of such New Securities for the
price and upon the terms and conditions specified in the Participation Notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased (not to exceed such Participation Rights Holder's Pro
Rata Share). If any Participation Rights Holder fails to so agree in writing
within such fifteen (15) business day period to purchase such Participation
Rights Holder's full Pro Rata Share of an offering of New Securities, then such
Participation Rights Holder shall forfeit the right hereunder to purchase that
part of its Pro Rata Share of such New Securities that it did not so agree to
purchase. Such Participation Rights Holder shall purchase the portion elected
by such Participation Rights Holder concurrently with the closing of the
transaction triggering the Right of Participation.
3.5 Failure to Exercise. Upon the expiration of such ten (10) day period,
-------------------
the Company shall have 60 days thereafter to sell the New Securities described
in the Participation Notice (with respect to which the Participation Rights
Holders' rights of first refusal hereunder were not exercised) at the same or
higher price and upon non-price terms not materially more favorable to the
purchasers thereof than specified in the Participation Notice. In the event
that the Company has not issued and sold such New Securities within such 60 day
period, then the Company shall not thereafter issue or sell any New Securities
without again first offering such New Securities to the Participation Rights
Holders pursuant to this Section 3.
3.6 Termination. The Right of Participation for the Holders shall
-----------
terminate upon the first date that Investors and their Affiliates (as defined in
Rule 144 under the Securities Act) collectively hold neither (i) more than
250,000 shares of Series B Preferred Stock of the Company (such number to be
proportionately adjusted for stock splits, stock dividends and similar events),
(ii) more than 200,000 shares of Series C Preferred Stock of the Company (such
number to be proportionately adjusted for stock splits, stock dividends and
similar events) nor (iii) more than 100,000 shares of Series D Preferred Stock
of the Company (such number to be proportionately adjusted for stock splits,
stock dividends and similar events).
-14-
4. ASSIGNMENT AND AMENDMENT.
------------------------
4.1 Assignment. Notwithstanding anything herein to the contrary:
----------
(a) Information Rights. The rights of the Investor under Section 1.1
------------------
are transferable to any Holder (including the parent, affiliate or subsidiary of
the Investor); provided, however, that no party may be assigned any of the
-------- --------
foregoing rights unless the Company is given written notice by the assigning
party at the time of such assignment stating the name and address of the
assignee and identifying the securities of the Company as to which the rights in
question are being assigned; provided further that any such assignee shall
-------- -------
receive such assigned rights subject to all the terms and conditions of this
Agreement, including without limitation the provisions of this Section 4; and
provided further that no party may assign any of the foregoing rights to any
-------- -------
entity that is organized or domiciled in the PRC.
(b) Registration Rights. The registration rights of the Investor
-------------------
under Section 2 hereof may be assigned or transferred to any Holder (including
the parent, affiliate or subsidiary of the Investor); provided, however, that no
-------- -------
party may be assigned any of the foregoing rights unless the Company is given
written notice by the assigning party at the time of such assignment stating the
name and address of the assignee and identifying the securities of the Company
as to which the rights in question are being assigned; provided further that any
----------------
such assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of
this Section 4; and provided further that no party may assign any of the
-------- -------
foregoing rights to any entity that is organized or domiciled in the PRC.
(c) Rights of Participation. The rights of the Investor under
-----------------------
Sections 3 hereof are fully assignable and transferable to any Holder (including
the parent, affiliate or subsidiary of the Investor); provided, however, that no
-------- -------
party may be assigned any of the foregoing rights unless the Company is given
written notice by the Investor at the time of such assignment stating the name
and address of the assignee and identifying the securities of the Company as to
which the rights in question are being assigned; provided further that any such
----------------
assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement; and provided further that no party may assign any
-------- -------
of the foregoing rights to any entity that is organized or domiciled in the PRC.
4.2 Amendment of Rights. Any provision of this Agreement may be amended
-------------------
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Holders of eighty percent (80%) of the
Registrable Securities then outstanding and entitled to the registration rights
set forth in Section 2 hereof; provided, however, that, subject to compliance
with the provisions of the Series D Purchase Agreement dated as of January 29,
2000, this Agreement may be amended with the written consent of the Company to
add as "Additional Investors" parties hereto any subsequent purchasers of Series
D Preferred Stock that is authorized but unissued as of the date hereof. Any
amendment or waiver effected in accordance with this Section 4.2 shall be
binding upon all of the Investors, each Holder, each permitted transferee,
successor or assignee of such Investor or Holder and the Company.
-15-
5. GENERAL PROVISIONS.
------------------
5.1. Notices. Except as may be otherwise provided herein, all notices,
-------
requests, waivers and other communications made pursuant to this Agreement shall
be in writing and shall be conclusively deemed to have been duly given (a) when
hand delivered to the other party; (b) when received when sent by facsimile at
the address and number set forth below; (c) for notices between parties both of
which are located in the United States, three business days after deposit in the
U.S. mail with first class or certified mail return receipt requested postage
prepaid and addressed to the other party as set forth below; or (d) when
received, if sent by a national overnight delivery service, postage prepaid,
addressed to the parties as set forth below, provided that the sending party
receives a confirmation of delivery from the delivery service provider.
To an Investor: To the Company:
At the Address Listed on Exhibit A ▇▇▇▇.▇▇▇ Inc.
7 Jianguomen Nei Avenue
Bright China ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇
Phone: ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Fax: ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
with a copy to:
Goulston & Storrs, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Each person making a communication hereunder by facsimile shall promptly confirm
by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication. A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section 5.1 by giving the other party written
notice of the new address in the manner set forth above.
5.2 Entire Agreement. This Agreement, together with all the Exhibits
----------------
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
5.3 Market Standoff. In connection with the initial underwritten public
---------------
offering of the Company's Common Stock, no Investor which has signed this
Amended and Restated Investor
-16-
Rights Agreement will, without the prior written consent of the Company, sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of or transfer his, her, or its economic risk with respect to any shares
of capital stock, or securities exercisable for or convertible into shares of
capital stock, of the Company for a period of 180 days after the date of the
final prospectus used in connection with such offering. This provision shall be
enforceable only to the extent that all directors and executive officers of the
Company and of any subsidiary of the Company and all stockholders of the
Company, other than stockholders who hold less than 1% of the outstanding
capital stock of the Company on a fully-diluted basis (as shown on a certain pro
forma capitalization table as of January 25, 2000 made available to each
Investor who has signed this Agreement) as of the date hereof after giving
effect to the sale of the Shares, ▇▇▇▇▇▇▇▇ Enterprises, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, or any transferee of any of the foregoing, have agreed in
writing to a similar provision prior to the effectiveness of the registration
statement filed with the SEC in connection with such offering.
5.3A Governing Law. This Agreement shall be governed by and construed
-------------
exclusively in accordance with the internal laws of the State of Delaware as
applied to agreements among Delaware residents entered into and to be performed
entirely within Delaware, excluding that body of law relating to conflict of
laws and choice of law.
5.4 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, then such provision(s) shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision(s) were so excluded and shall be enforceable in accordance with
its terms.
5.5 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any person, other than the parties hereto and their
permitted successors and assigns, any rights or remedies under or by reason of
this Agreement.
5.6 Successors and Assigns. Subject to the provisions of Section 4.1, the
----------------------
provisions of this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and permitted assigns of the parties hereto.
5.7 Captions. The captions to sections of this Agreement have been
--------
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
5.8 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5.9 Adjustments for Stock Splits, Etc. Wherever in this Agreement there
---------------------------------
is a reference to a specific number of shares of Preferred Stock, then, upon the
occurrence of any subdivision, combination or stock dividend of Preferred Stock,
the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class or series of stock by such subdivision,
combination or stock dividend.
-17-
5.10 Termination of Second Amended and Restated Investor Rights Agreement.
--------------------------------------------------------------------
The Second Amended and Restated Investor Rights Agreement is hereby terminated
in its entirety and replaced by this Agreement.
[SIGNATURE PAGE FOLLOWS]
-18-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
INVESTOR
▇▇▇▇.▇▇▇ INC.
_____________________________________
(Name of Investor)
By: _________________________________ By: _________________________________
Name: Name:
Title: Title:
[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]
-19-