Exhibit 4.3
CASCADE MICROTECH, INC.
INVESTORS' RIGHTS AGREEMENT
DECEMBER 16, 1999
TABLE OF CONTENTS
SECTION 1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS..............................2
1.1 CERTAIN DEFINITIONS....................................................................2
1.2 REQUESTED REGISTRATION.................................................................4
1.3 COMPANY REGISTRATION...................................................................7
1.4 EXPENSES OF REGISTRATION...............................................................8
1.5 REGISTRATION ON FORM S-3...............................................................8
1.6 REGISTRATION PROCEDURES................................................................9
1.7 INDEMNIFICATION.......................................................................10
1.8 INFORMATION BY HOLDER.................................................................13
1.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES...................................13
1.10 RULE 144 REPORTING....................................................................13
1.11 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS.........................................13
1.12 "MARKET STAND-OFF" AGREEMENT..........................................................14
1.13 ALLOCATION OF REGISTRATION OPPORTUNITIES..............................................14
1.14 DELAY OF REGISTRATION.................................................................15
1.15 TERMINATION OF REGISTRATION RIGHTS....................................................15
1.16 RULE 144A.............................................................................15
SECTION 2. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS..................................................16
2.1 BASIC FINANCIAL INFORMATION...........................................................16
2.2 ADDITIONAL INFORMATION AND RIGHTS.....................................................16
2.3 RIGHT OF FIRST REFUSAL................................................................18
2.4 RIGHT TO REMAIN EQUAL TO THE LARGEST OUTSIDE SHAREHOLDER..............................19
2.5 RIGHT TO MAKE COMPETING OFFER.........................................................20
2.6 COMPANY REPURCHASE OPTION.............................................................21
2.7 RIGHT OF CO-SALE......................................................................23
2.8 PROMPT PAYMENT OF TAXES, ETC..........................................................26
2.9 MAINTENANCE OF PROPERTIES AND LEASES..................................................26
2.10 INSURANCE.............................................................................26
2.11 KEY PERSON LIFE INSURANCE.............................................................26
2.12 ACCOUNTS AND RECORDS..................................................................27
2.13 INDEPENDENT ACCOUNTANTS...............................................................27
2.14 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES..............................27
2.15 MAINTENANCE OF CORPORATE EXISTENCE, ETC...............................................27
2.16 EMPLOYEE INVENTION AND CONFIDENTIALITY AGREEMENT......................................27
2.17 EMPLOYEE AND OTHER STOCK ARRANGEMENTS.................................................27
2.18 BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD........................................27
2.19 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS............................................28
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2.20 INDEBTEDNESS..........................................................................28
2.21 EXTENSION OF CREDIT...................................................................28
2.22 COMPENSATION OF EMPLOYEES.............................................................28
2.23 TRANSACTIONS WITH AFFILIATES..........................................................28
2.24 CONFIDENTIAL DISCLOSURE AGREEMENT.....................................................29
2.25 SERIES C PREFERRED STOCK PUT RIGHT....................................................29
2.26 AMENDMENT OF RESTATED ARTICLES OF INCORPORATION;
VOTING AGREEMENT......................................................................31
2.27 PROTECTIVE COVENANT...................................................................31
2.28 TERMINATION OF COVENANTS..............................................................31
SECTION 3. MISCELLANEOUS..................................................................................32
3.1 GOVERNING LAW.........................................................................32
3.2 SUCCESSORS AND ASSIGNS................................................................32
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER...................................................32
3.4 NOTICES...............................................................................32
3.5 DELAYS OR OMISSIONS...................................................................33
3.6 RIGHTS; SEVERABILITY..................................................................33
3.7 TITLES AND SUBTITLES..................................................................33
3.8 COUNTERPARTS..........................................................................33
3.9 TERMINATION OF JULY 1999 INVESTORS' RIGHTS AGREEMENT..................................33
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SCHEDULES:
----------
SCHEDULE 1 LIST OF SHAREHOLDERS
EXHIBITS:
---------
EXHIBIT A EMPLOYEE INVENTION AND CONFIDENTIALITY AGREEMENT
EXHIBIT B NONDISCLOSURE AND RESTRICTED USE AGREEMENT
EXHIBIT C INSTALLMENT NOTE
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CASCADE MICROTECH, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (the "Agreement") is made as of the
16th day of December, 1999, by and among Cascade Microtech, Inc., an Oregon
corporation (the "Company"), each of the parties listed on SCHEDULE 1 hereto
(the "Shareholders"), and each of ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and K. ▇▇▇▇
▇▇▇▇▇▇▇.
RECITALS:
WHEREAS, Agilent Technologies, Inc. (formerly known as
Hewlett-Packard Company) ("Agilent Technologies"), Maristeth Fund III, LLC
("Maristeth"), and Electroglas, Inc. ("Electroglas") are the holders of the
currently outstanding Series A and B Preferred Stock of the Company (the "Series
A and B Preferred Stock") and possesses registration rights, information rights,
rights of first refusal, and other rights pursuant to an Investors' Rights
Agreement dated as of July 21, 1999, between the Company, Agilent Technologies,
Maristeth, Electroglas and the Founders (as defined herein) (the "July 1999
Investors' Rights Agreement"); and
WHEREAS, the Founders hold shares of the Company's Common
Stock and possess registration rights pursuant to the July 1999 Investors'
Rights Agreement; and
WHEREAS, the Company has negotiated the sale of (i) 1,250,000
shares of its Series C Preferred Stock, and (ii) warrants to purchase 250,000
shares of its Series C Preferred Stock to Teachers Insurance & Annuity
Association of America, a New York corporation ("TIAA") subject to the execution
of this Agreement; and
WHEREAS, the Company and TIAA are parties to that certain
Series C Preferred Stock and Warrant Purchase Agreement, dated of even date
herewith (the "Series C Preferred Stock Purchase Agreement"), which provides
that as a condition to the closing of the sale of the Series C Preferred Stock
to TIAA, this Agreement must be executed and delivered by the Shareholders, each
of ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and K. ▇▇▇▇ ▇▇▇▇▇▇▇, and the Company; and
WHEREAS, in exchange for TIAA's willingness to make the
investment in the Company as provided in the Series C Preferred Stock and
Warrant Purchase Agreement, Agilent Technologies, Maristeth, Electroglas, ▇▇▇▇
▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and K. ▇▇▇▇ ▇▇▇▇▇▇▇ agree to terminate the July 1999
Investors' Rights Agreement and accept the additional rights and obligations, as
the case may be, created pursuant to this Agreement in lieu of the rights and
obligations created under the July 1999 Investors' Rights Agreement.
1 - Investors' Rights Agreement
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants set forth herein, Agilent Technologies, Maristeth,
Electroglas, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and K. ▇▇▇▇ ▇▇▇▇▇▇▇ hereby agree that
the July 1999 Investors' Rights Agreement shall be superseded and replaced in
its entirety by this Agreement, and the parties hereto further agree as follows:
SECTION 1.
RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES; REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the meanings set forth below:
(a) "CLOSING" shall mean the date of the initial sale of the
Company's Series C Preferred Stock.
(b) "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(c) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(d) "FOUNDER" shall mean ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇.
(e) "FOUNDER SHARES" shall mean any shares of the Company's
Common Stock held by any Founder.
(f) "HOLDER" shall mean (i) the Shareholders, (ii) any holder
of the Series C Preferred Stock Warrant, (iii) any holder of Registrable
Securities to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 1.11 hereof, and (iv) except with respect
to Section 2.3 hereof, the Founders.
(g) "INITIAL PUBLIC OFFERING" shall mean consummation of the
sale of securities pursuant to a registration statement filed by the Company
under the Securities Act in connection with the firm commitment underwritten
offering of its securities to the general public.
(h) "INITIATING HOLDERS" shall mean any holder or holders who
in the aggregate hold not less than fifty percent (50%) of the outstanding
shares of the Company's
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Series A, Series B or Series C Preferred Stock, including the shares of Common
Stock issued upon conversion of such Preferred Stock.
(i) "QUALIFIED PUBLIC OFFERING" shall mean consummation of the
sale of securities pursuant to a registration statement filed by the Company
under the Securities Act in connection with the firm commitment underwritten
offering of shares of common stock at an offering price of at least 125 percent
of the then applicable conversion price of the Series C Preferred Stock
(appropriately adjusted for any stock split, dividend, combination or other
recapitalization) and resulting in net proceeds to the Company of at least
$20,000,000.
(j) "REGISTRABLE SECURITIES" shall mean (i) shares of Common
Stock issued or issuable pursuant to the conversion of the Shares, (ii) Founder
Shares, and (iii) any Common Stock issued as a dividend or other distribution
with respect to or in exchange for or in replacement of the shares referred to
in clauses (i) or (ii) above; provided, however, that Registrable Securities
shall not include any shares of Common Stock which have previously been
registered or which have been sold to the public.
(k) The terms "REGISTER," "REGISTERED" and "REGISTRATION"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder and the declaration or ordering of the effectiveness of
such registration statement.
(l) "REGISTRATION EXPENSES" shall mean all expenses incurred
in effecting any registration pursuant to this Agreement, including without
limitation all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, fees and
expenses under applicable state securities laws and expenses of any regular or
special audits incident to or required by any such registration, but shall not
include Selling Expenses and fees and disbursements of counsel for the Holders
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
(m) "RULE 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(n) "RULE 144A" shall mean Rule 144A as promulgated by the
Commission under the Securities Act, as such rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(o) "RULE 145" shall mean Rule 145 as promulgated by the
Commission under the Securities Act, as such rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
3 - Investors' Rights Agreement
(p) "SECURITIES ACT" shall mean the Securities Act of 1933,
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(q) "SELLING EXPENSES" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder (other than the fees and
disbursements of counsel included in Registration Expenses).
(r) "SERIES C PREFERRED STOCK WARRANT" shall mean that certain
Series C Preferred Stock Purchase Warrant of the Company to purchase up to
250,000 shares of the Company's Series C Preferred Stock issued to TIAA and
dated of even date herewith.
(s) "SHARES" shall mean the Company's Series A, Series B and
Series C Preferred Stock, including shares of Series C Preferred Stock if and
when issued upon exercise of the Series C Preferred Stock Warrant.
(t) "SIGNIFICANT HOLDER" shall mean (i) any Shareholder that
holds at least 50,000 Shares, or such number of shares of Common Stock issued
upon conversion of 50,000 or more Shares, or any combination thereof (as
adjusted for stock splits, stock dividends, combinations and other
recapitalizations), (ii) any holder of Series C Preferred Stock Warrant(s) that
represents the right to acquire at least 50,000 Shares, or (iii) any transferee
of the foregoing, provided such transferee acquires at least 50,000 Shares, or
such number of Shares of Common Stock issued upon conversion of 50,000 or more
Shares, or Series C Preferred Stock Warrants to acquire at least 50,000 Shares,
or any combination thereof.
1.2 REQUESTED REGISTRATION.
(a) If the Company shall receive from the Initiating Holders
at any time or times not earlier than the earlier of (x) four years after the
date of this Agreement and (y) six months after the effective date of the first
registration statement filed by the Company covering an underwritten offering of
any of its securities to the general public, a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities having an aggregate offering price, net of underwriting discounts and
expenses, equal to or exceeding 150 percent of the then applicable conversion
price of the Series B Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) and the aggregate proceeds
of which (after deduction for underwriter's discounts and expenses related to
the issuance) exceed $10,000,000 the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
4 - Investors' Rights Agreement
(ii) as soon as practicable, use its best efforts to
effect such registration (including without limitation filing post-effective
amendments, appropriate qualifications under applicable state securities laws
and appropriate compliance with the Securities Act) and as would permit or
facilitate the sale and distribution of all or such number of such Registrable
Securities as are specified in such request, together with all or such number of
the Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request received by the Company within 20 days after
such written notice from the Company is effective.
The Company shall not be obligated to effect or to take any
action to effect, any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(B) After the holders of the Series A,
Series B and Series C Preferred Stock have each initiated one such registration
pursuant to this Section 1.2(a) (three registrations in total, counting for
these purposes only (i) registrations which have been declared or ordered
effective and pursuant to which Registrable Securities have been sold, and (ii)
registrations which have been withdrawn by the Holders as to which the Holders
have not elected to bear the Registration Expenses pursuant to Section 1.4
hereof and would, absent such election, have been required to bear such
expenses);
(C) During the period starting with the date
60 days prior to the Company's good faith estimate of the date of filing of, and
ending on a date 180 days after the effective date of, a Company-initiated
registration; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;
(D) If the Initiating Holders propose to
dispose of shares of Registrable Securities which may be immediately registered
on Form S-3 pursuant to a request made under Section 1.5 hereof;
(E) If the Initiating Holders do not request
that such offering be firmly underwritten by underwriters selected by the
Initiating Holders (subject to the consent of the Company, which consent will
not be unreasonably withheld); or
(F) If the Company and the Initiating
Holders are unable to obtain the commitment of the underwriter described in
clause (E) above to a firmly underwritten offer.
5 - Investors' Rights Agreement
(b) Subject to the foregoing clauses (A) through (F), the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Initiating Holders; provided, however, that if (i) in
the good faith judgment of the Board of Directors of the Company such
registration would be seriously detrimental to the Company and the Board of
Directors of the Company concludes, as a result, that it is essential to defer
the filing of such registration statement at such time, and (ii) the Company
shall furnish to all participating 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 for such
registration statement to be filed in the near future and that it is therefore
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for the period during which such
disclosure would be seriously detrimental; and, provided further, that (except
as provided in clause (C) above) the Company may not defer the filing for a
period of more than 120 days after receipt of the request of the Initiating
Holders; and, provided further, that the Company shall not defer its obligation
in this manner more than once in any 12-month period.
Subject to the provisions of Sections 1.2(b) and 1.13 hereof,
the registration statement filed pursuant to the request of the Initiating
Holders may include other securities of the Company with respect to which
registration rights have been granted and may include securities of the Company
being sold for the account of the Company.
(c) The right of any Holder to registration pursuant to
Section 1.2 shall be conditioned upon the participation of such Holder 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 with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities held by the Holder.
(d) If the Company shall request inclusion in any registration
pursuant to Section 1.2 of securities being sold for its own account or if other
persons shall request inclusion in any registration pursuant to Section 1.2, the
Initiating Holders shall offer to include such securities in the underwriting on
behalf of all Holders and may condition such offer on their acceptance of the
further applicable provisions of this Section 1 (including Section 1.12). The
Company (together with all Holders and other persons proposing to distribute
their securities through such underwriting) shall enter into an underwriting
agreement in customary form with the representative of the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders, which underwriters shall be reasonably acceptable to the
Company. Notwithstanding any other provision of this Section 1.2, if the
representative of the underwriters advises the Initiating Holders in writing
that marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 1.13 hereof. If a person
who has requested inclusion in such registration as provided above does not
agree to the terms
6 - Investors' Rights Agreement
of any such underwriting, such person shall be excluded therefrom by written
notice from the Company, the underwriter or the Initiating Holders. Any
Registrable Securities or other securities so excluded shall also be withdrawn
from such registration. If shares are so withdrawn from the registration and if
the number of shares to be included in such registration was previously reduced
as a result of marketing factors pursuant to this Section 1.2(d), then the
Company shall offer to all Holders who have retained rights to include
securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so withdrawn,
with such shares to be allocated among such Holders requesting additional
inclusion in accordance with Section 1.13.
1.3 COMPANY REGISTRATION.
(a) If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising their respective demand registration rights (other than
pursuant to Sections 1.2 or 1.5 hereof), other than a registration relating
solely to employee benefit plans, a registration relating solely to a Rule 145
transaction or a registration on any registration form that does not permit
secondary sales, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) use its best efforts to include in such
registration (and any related qualification under applicable state securities
laws or other compliance), except as set forth in Section 1.3(b) below and in
any underwriting involved therein, all the Registrable Securities specified in a
written request or requests made by any Holder within 20 days after the written
notice from the Company described in clause (i) above is given. Such written
request may specify all or any number of a Holder's Registrable Securities.
(b) If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
1.3(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 1.3 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 securities through such underwriting (together with the Company and the
other Holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting)
shall enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by the Company.
7 - Investors' Rights Agreement
Notwithstanding any other provision of this Section 1.3, if
the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may exclude all Registrable Securities from or
limit the number of Registrable Securities to be included in the registration
and underwriting (subject to the limitations set forth below). The Company shall
so advise all Holders of securities requesting registration and the number of
shares of securities that are entitled to be included in the registration and
underwriting shall be allocated first to the Company for securities being sold
for its own account and thereafter as set forth in Section 1.13. If any person
does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company or the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the
number of shares of Registrable Securities to be included in such registration
was previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.13 hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.3 and 1.5 hereof and all Registration Expenses and reasonable fees of
one counsel for the selling Shareholders in the case of registrations pursuant
to Section 1.2 shall be borne by the Company; provided, however, that if the
Holders bear the Registration Expenses for any registration proceeding begun
pursuant to Section 1.2 and subsequently withdrawn by the Holders registering
shares therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 1.2 hereof. Furthermore, in the event that such
withdrawal is based upon material adverse information relating to the Company
that is different from the information known or reasonably available (upon
request from the Company or otherwise) to the Holders requesting registration at
the time of their request for registration under Section 1.2, such registration
shall not be treated as a counted registration for purposes of Section 1.2
hereof, even though the Holders do not bear the Registration Expenses for such
registration. All Selling Expenses relating to securities so registered shall be
borne by the Holders of such securities pro rata on the basis of the number of
shares of securities so registered on their behalf.
1.5 REGISTRATION ON FORM S-3.
(a) After its Initial Public Offering, the Company shall use
its best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms. After the Company has qualified for the use of Form
S-3, the Holders of Registrable Securities shall have the right, in addition to
the rights contained in the foregoing provisions of this Section 1, to
8 - Investors' Rights Agreement
request registrations on Form S-3 (such requests to be in writing and to state
the number of shares of Registrable Securities to be disposed of and the
intended methods of disposition of such shares by such Holder or Holders);
provided, however, that the Company shall not be obligated to effect any such
registration (i) 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) on Form S-3 at an
aggregate price to the public of less than $1,000,000, (ii) if the Company shall
furnish the certification described in Section 1.2(b)(ii) (but subject to the
limitations set forth therein), (iii) if in a given 12-month period the Company
has effected one such registration in any such period, or (iv) if it is to be
effected more than five years after the Company's Initial Public Offering, (v)
if Form S-3 is not available for such offering by the Holders, or (vi) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(b) If a request complying with the requirements of Section
1.5(a) hereof is delivered to the Company, the provisions of Sections 1.2(a)(i)
and (ii) and 1.2(b) hereof shall apply to such registration. If the registration
is for an underwritten offering, the provisions of Sections 1.2(c) and 1.2(d)
hereof shall apply to such registration.
1.6 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to Section 1, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of 120 days
or until the Holder or Holders shall have completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that (i) such 120-day period shall be extended for a period
of time 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 145 or any successor rule
under the Securities Act permits an offering on a continuous or delayed basis
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (A) includes any prospectus required by Section
10(a)(3) of the Securities Act, or (B) 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 clauses (A) and (B) above to be contained in periodic reports filed pursuant
to Section 13 or 15(d) of the Exchange Act in the registration statement;
9 - Investors' Rights Agreement
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement 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) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in light of the circumstances
then existing and, at the request of any such seller, prepare and furnish to
such seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities market on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration; and
(g) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first month after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act; and
(h) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, enter into an
underwriting agreement reasonably necessary to effect the offer and sale of
Common Stock, provided such underwriting agreement contains customary
underwriting provisions and provided further that, if the underwriter so
requests, the underwriting agreement will contain customary contribution
provisions.
1.7 INDEMNIFICATION.
10 - Investors' Rights Agreement
(a) The Company will indemnify each Holder, each of its
officers, directors, members, partners, legal counsel and accountants and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Section 1 and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act against all expenses, claims, losses, damages and liabilities (or
actions, proceedings or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance and will
reimburse each such Holder, each of its officers, directors, members, partners,
legal counsel and accountants and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter for any legal and
other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or underwriter and stated to be
specifically for use therein. It is agreed that the indemnity agreement
contained in this Section 1.7(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 has not been
unreasonably withheld).
(b) Each Holder, if any Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, will indemnify the Company, each
of its directors, officers, partners, legal counsel and accountants and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, each other Holder and each of its
officers, directors, members and partners and each person controlling such
Holder, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading and
will reimburse the Company and other Holders and each of their respective
directors, officers, members, partners, legal counsel and accountants, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus,
11 - Investors' Rights Agreement
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by such Holder; provided, however,
that the obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld); and provided that in
no event shall any indemnity under this Section 1.7 exceed the gross proceeds
received by the Holder from the sale of Registrable Securities in the offering.
(c) Each party entitled to indemnification under this Section
1.7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, however, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld) and the Indemnified Party
may participate in such defense at such party's expense; and, provided further,
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
1.7 to the extent such failure is not prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, shall consent, except with the consent
of each Indemnified Party, to the entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 1.7 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.
12 - Investors' Rights Agreement
(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.
1.8 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.9 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and after
the date of this Agreement, the Company, without the prior written consent of
the Holders of a majority of the outstanding Registrable Securities, shall not
enter into any agreement with any holder or prospective holder of any securities
of the Company giving such holder or prospective holder any registration rights
the terms of which are more favorable than the registration rights granted to
the Holders hereunder.
1.10 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission that may permit the sale of
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after 90 days following the effective date
of the first registration under the Securities Act filed by the Company for an
offering of its securities to the general public;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements;
(c) As long as a Holder owns any Registrable Securities
furnish to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public) and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
1.11 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS.
13 - Investors' Rights Agreement
(a) Except as provided in Section 1.11(b) below, the rights to
cause the Company to register securities granted to a Holder by the Company
under this Section 1 may be transferred or assigned by a Holder only to a
transferee or assignee of not fewer than 50,000 shares of Registrable Securities
(as presently constituted and subject to subsequent adjustments for stock
splits, stock dividends, reverse stock splits and the like); provided, however,
that the Company shall be given written notice at the time of or within a
reasonable time after such transfer or assignment, stating the name and address
of the transferee or assignee and identifying the securities with respect to
which such registration rights are being transferred or assigned; and, provided
further, that the transferee or assignee of such rights shall assume the
obligations of such Holder under this Section 1.
(b) The rights to cause the Company to register securities
granted to a Holder by the Company under this Section 1 may not be transferred
or assigned by any Founder.
1.12 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Holder shall
not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (other than those included in the
registration) during the 120-day period following the effective date of a
registration statement of the Company filed under the Securities Act, provided
that:
(a) such agreement shall only apply to the first such
registration statement of the Company, including securities to be sold on its
behalf to the public in an underwritten offering; and
(b) all Holders and officers and directors of the Company
enter into similar agreements.
The obligations described in this Section 1.12 shall not apply
to a registration relating solely to employee benefit plans on Form S-1 or Form
S-8 or similar forms that may be promulgated in the future or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of such 120-day period.
1.13 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Registrable Securities requested to be included in a
registration on behalf of the Holders and all of the shares held by any other
Shareholders cannot be so included as a result of limitations of the aggregate
number of shares of Registrable Securities and other shares that may be so
included, the number of shares of Registrable Securities and other shares that
may be so included shall be allocated as follows:
14 - Investors' Rights Agreement
(a) first, among the Holders other than the Founders (the
"Non-founding Holders") requesting inclusion of shares pro rata on the basis of
the number of shares of Registrable Securities other than Founder Shares (the
"Non-founder Registrable Securities") that would be held by the Non-founding
Holders, assuming conversion; provided, however, that, in order that such
allocation shall not operate so as to reduce the aggregate number of Non-founder
Registrable Securities to be included in such registration, if any Non-founding
Holder does not request inclusion of the maximum number of shares of Non-founder
Registrable Securities allocated to such Non-founding Holder pursuant to the
procedure described in this Section 1.13, the remaining portion of such
Non-founding Holder's allocation shall be reallocated among those requesting
Non-founding Holders whose allocations did not satisfy their requests pro rata
on the basis of the number of shares of Non-founder Registrable Securities which
would be held by such Non-founding Holders, assuming conversion; and, provided
further, that this procedure shall be repeated until all of the shares of the
Non-founder Registrable Securities which may be included in the registration on
behalf of the Non-founding Holders have been so allocated;
(b) second, among the Founders requesting inclusion of shares
pro rata on the basis of the number of Founder Shares' that would be held by
such Founders; and
(c) finally, among any other Shareholders requesting inclusion
of their shares of the Company's Common Stock pro rata on the basis of the
number of such shares that would be held by such Shareholders.
In no event shall the Company limit the number of Non-founder Registrable
Securities to be included in a registration pursuant to this Agreement in
order to include shares held by Founders or Shareholders with no registration
rights, or, except with respect to a registration pursuant to Sections 1.3
and 1.5 above, shares for the Company's own account.
1.14 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.15 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request registration or inclusion in any registration pursuant to Section 1.2,
1.3 or 1.5 shall terminate on, or on such date after, 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 (and any affiliate of the Holder with whom such Holder must
aggregate its sales under Rule 144) can be sold in any three (3)-month period
without registration in compliance with Rule 144.
1.16 RULE 144A. At the request of a Significant Holder, the Company
will deliver to the Significant Holder (or a prospective transferee thereof)
such information as is required under Rule 144A in order to permit compliance by
the Significant Holder with Rule 144A in connection with a transfer of any
Registrable Securities.
15 - Investors' Rights Agreement
SECTION 2.
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
The Company hereby covenants and agrees, as long as any Holder
owns any Registrable Shares, as follows:
2.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to each Holder:
(a) As soon as practicable after the end of each fiscal year
of the Company and in any event within 90 days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as at the end of such
fiscal year and consolidated statements of income and cash flows of the Company
and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail and certified by independent public accountants of
recognized national standing selected by the Company;
(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Company and in
any event within 45 days thereafter, a consolidated balance sheet of the Company
and its subsidiaries, if any, as of the end of each such quarterly period and
consolidated statements of income and cash flows of the Company and its
subsidiaries for such period and for the current fiscal year to date, prepared
in accordance with generally accepted accounting principles consistently applied
and setting forth in comparative form the figures for the corresponding periods
of the previous fiscal year subject to changes resulting from normal year-end
audit adjustments, all in reasonable detail and certified by the principal
financial or accounting officer of the Company, except that such financial
statements need not contain the notes required by generally accepted accounting
principles; and
2.2 ADDITIONAL INFORMATION AND RIGHTS.
(a) The Company will permit any Significant Holder (or its
representative) to visit and inspect any of the properties of the Company,
including its books of account and other records (and make copies thereof and
take extracts therefrom) and to discuss its affairs, finances and accounts with
the Company's officers and its independent public accountants, all at such
reasonable times and as often as any such person may reasonably request.
(b) The Company will deliver the reports described below in
this Section 2.2 to each Significant Holder:
(i) As soon as practical after the end of each month
and in any event within 30 days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if
16 - Investors' Rights Agreement
any, as at the end of such month and consolidated statements of income and cash
flows of the Company and its subsidiaries, for each month and for the current
fiscal year of the Company to date, all subject to normal year-end audit
adjustments, prepared in accordance with generally accepted accounting
principles consistently applied and certified by the principal financial or
accounting officer of the Company, together with a comparison of such statements
to the corresponding periods of the prior fiscal year and to the Company's
operating plan then in effect and approved by its Board of Directors;
(ii) Not later than 30 days after the commencement of
each fiscal year of the Company, the business plan of the Company, in such
manner and form as approved by the Board of Directors of the Company, which
business plan shall include a projection of income and a projected cash flow
statement for such fiscal year and a projected balance sheet as of the end of
such fiscal year. Any material changes in such business plan shall be submitted
as promptly as practicable after such changes have been approved by the Board of
Directors of the Company;
(iii) With reasonable promptness, notice of any
material adverse change in the Company's business, assets or financial
condition, including, but not limited to, notice of any material litigation
involving the Company;
(iv) With reasonable promptness, such other
information and data with respect to the Company and its subsidiaries as any
Holder may from time to time reasonably request;
(v) As soon as practicable after the end of each
fiscal year and in any event within 90 days thereafter, a copy of the annual
management review letter of the Company's independent public accountants; and
(vi) As soon as practicable after transmission or
occurrence and in any event within 10 days thereof, copies of any reports or
communications delivered to any class of the Company's security holders.
(c) The provisions of Section 2.1 and this Section 2.2 shall
not be in limitation of any rights which any Holder may have with respect to the
books and records of the Company and its subsidiaries or to inspect their
properties or discuss their affairs, finances and accounts, under the laws of
the jurisdictions in which they are incorporated.
(d) Anything in Section 2 to the contrary notwithstanding, no
Holder or Significant Holder by reason of this Agreement shall have access to
any trade secrets or classified information of the Company; provided, however,
that a Holder or Significant Holder shall have access to such information so
long as the Holder or Significant Holder is a member of the Board of Directors
of the Company or has designated a representative of such Holder or Significant
Holder to the Board of Directors pursuant to Section 5.2(B)(3)(b) of the
Company's
17 - Investor's Rights Agreement
Restated Articles of Incorporation. Each Holder hereby agrees to hold in
confidence and trust and not to misuse or disclose any confidential information
provided pursuant to this Section 2.2.
2.3 RIGHT OF FIRST REFUSAL.
(a) The Company hereby grants to each Significant Holder a
right of first refusal to purchase its pro rata share of New Securities (as
defined below) which the Company, from time to time, may propose to sell and
issue. A Significant Holder's pro rata share, for purposes of this right of
first refusal, is the ratio of the number of shares of Common Stock owned by the
Significant Holder immediately prior to the issuance of New Securities, assuming
full conversion of the Shares, to the total number of shares of Common Stock
outstanding immediately prior to the issuance of New Securities, assuming full
conversion of the Shares and exercise of all outstanding rights, options and
warrants to acquire Common Stock of the Company. This right of first refusal
shall be subject to the following provisions:
(b) "NEW SECURITIES" shall mean any capital stock (including
Common Stock or Preferred Stock) of the Company, whether now authorized or not,
any rights, options or warrants to purchase such capital stock and securities of
any type whatsoever that are or may become, convertible into capital stock;
provided, however, that the term "New Securities" does not include (i)
securities purchased under the Series C Preferred Stock Purchase Agreement; (ii)
securities issued upon conversion of the Shares; (iii) any borrowings, direct or
indirect, from financial institutions or other persons by the Company, whether
or not presently authorized, including any type of loan or payment evidenced by
any type of debt instrument, provided such borrowings do not have any equity
features including warrants, options or other rights to purchase capital stock
and are not convertible into capital stock of the Company; (iv) securities
issued to employees, consultants, officers or directors of the Company pursuant
to any stock option, stock purchase or stock bonus plan, agreement or
arrangement approved by the Board of Directors; (v) securities issued in
connection with obtaining lease financing, whether issued to a lessor, guarantor
or other person; (vi) securities issued in a firmly underwritten public offering
pursuant to a registration under the Securities Act; (vii) securities issued in
connection with any stock split, stock dividend or recapitalization of the
Company; (viii) securities issued for a consideration less than $500,000 in any
single transaction where the purchase price per share is not less than the then
applicable conversion price of the Series C Preferred Stock, provided that the
aggregate amount of all such transactions shall not exceed $1,500,000, (ix)
Series C Preferred Stock issued upon the exercise of the Series C Preferred
Stock Warrant, and (x) any right, option or warrant to acquire any security
convertible into the securities excluded from the definition of New Securities
pursuant to clauses (i) through (viii) above.
(c) In the event the Company proposes to undertake an issuance
of New Securities, it shall give each Significant Holder written notice of its
intention, describing the type of New Securities and their price and the general
terms upon which the Company proposes to issue the same. Each Significant Holder
shall have 30 days after any such notice is effective to agree to purchase its
pro rata share of such New Securities for the price and upon the terms
18 - Investors' Rights Agreement
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased, including the number of
New Securities the Significant Holder will purchase if one or more other
Significant Holders fail to notify the Company of their intention to purchase
any New Securities or elects not to purchase their full pro rata share of New
Securities as determined in accordance with Section 2.3(a). Failure to respond
in writing to the Company's notice shall be deemed a rejection by the
Significant Shareholder of the right to acquire its pro rata share of the New
Securities. In the event one or more Significant Holders elects not to purchase
the New Securities available to them, such New Securities shall be allocated on
a pro rata basis to the other Significant Shareholders who requested New
Securities in addition to their pro rata allotment.
(d) Following expiration of both the 30-day notice period
referred to in Section 2.3(c) and the 10-day period for the exercise of the
overallotment provisions of Section 2.3(a), the Company shall have 120 days
thereafter to sell or enter into an agreement (pursuant to which the sale of New
Securities covered thereby shall be closed, if at all, within 120 days from the
date of such agreement) to sell the New Securities with respect to which the
Significant Holders' right of first refusal option set forth in this Section 2.3
was not exercised, at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice to the Significant Holders
pursuant to Section 2.3(c). In the event the Company has not sold all of the New
Securities within such 120-day period or entered into an agreement to sell the
New Securities in accordance with the foregoing within 120 days from the date of
such agreement, the Company shall not thereafter issue or sell any New
Securities, without first again offering such securities to the Significant
Holders in the manner provided in Section 2.3(c) above.
(e) The right of first refusal granted hereunder shall expire
upon, and shall not be applicable to, the Qualified Public Offering.
(f) The right of first refusal set forth in this Section 2.3
may not be assigned or transferred, except that such right is assignable by a
Significant Holder to any wholly owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Securities Act,
controlling, controlled by or under common control with, any Significant Holder.
2.4 RIGHT TO REMAIN EQUAL TO THE LARGEST OUTSIDE SHAREHOLDER.
Agilent Technologies shall have the right at any time to purchase, at a price
per share equal to its then fair market value as determined in good faith by
the Company's Board of Directors, such number of shares of the Company's
Common Stock so as to hold, following such purchase, a total number of shares
on an as-converted basis that is at least equal to the total number of shares
on an as-converted basis that is held by the Company's largest outside
Shareholder. Notwithstanding the foregoing sentence, if Agilent Technologies
disputes the good faith valuation by the Company's Board of Directors, then
the per share fair market value shall be determined by a nationally
recognized independent investment banking firm selected unanimously by the
Board of Directors in good faith. In the event that the investment banking
19 - Investors' Rights Agreement
firm's valuation is 90% or less than the valuation established by the Board
of Directors, then all costs of such independent valuation shall be borne by
the Company. Otherwise, all cost of the independent valuation shall be borne
by Agilent Technologies.
2.5 RIGHT TO MAKE COMPETING OFFER.
(a) In the event that the Company proposes (i) to merge or
consolidate the Company with or into any other corporation or any other entity
or person, other than to merge the Company into a wholly-owned subsidiary
corporation solely for the purpose of reincorporating the Company in another
state, (ii) to merge, consolidate or undertake any other corporate
reorganization, reclassification or other change of any stock or any
recapitalization of the Company or any of its subsidiaries as a result of which
the Company shall not be the surviving entity or the holders of the outstanding
capital stock of the Company immediately prior to any such event shall own less
than a majority of the outstanding capital stock of the Company on an
as-converted basis immediately after the consummation of any such event, (iii)
to sell, lease, assign, transfer or otherwise convey all or substantially all of
the assets of the Company, including without limitation a sale of all or
substantially all of the assets of the Company to any of its subsidiaries, or
(iv) to undertake a reorganization of the Company as defined in Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, or in which more
than a majority of the outstanding stock of the Company is exchanged in any
three-month period (each of such proposed transactions shall be referred to
herein as a "Change of Control"), the Company shall notify Agilent Technologies
in writing within seven days of receiving a good faith written offer from a
corporation, entity or person (a "Proposing Party") to engage in any such Change
of Control, which notice shall include, to the full extent known to the Company,
the terms and conditions of the proposed Change of Control and the name or names
of the Proposing Party.
(b) Following delivery of such notice, Agilent Technologies
shall have 15 days to notify the Company in writing whether it intends to submit
a written competing offer (a "Competing Offer") within the next 30 days for
consideration by the Company and its Board of Directors and, if applicable, its
other Shareholders.
(c) If Agilent Technologies so notifies the Company that it
intends to submit a Competing offer, the Company, without the prior written
consent of Agilent Technologies, shall not consummate any Change of Control with
any other corporation, entity or person until Agilent Technologies has delivered
its Competing Offer to the Company or notified the Company in writing that it
does not intend to submit a Competing Offer.
(d) If Agilent Technologies delivers a Competing Offer to the
Company within such 30-day period, the Company and its Board of Directors shall
be obligated to consider the Competing Offer in good faith. If the Competing
Offer is a cash offer at a higher price than a cash offer by the Proposing
Party, the Company and its Board of Directors shall be obligated to accept the
Competing Offer or, if the Proposing Party's offer is to the Company's
Shareholders, to recommend that such Shareholders accept the Competing Offer. If
(i) the
20 - Investors' Rights Agreement
Proposing Party's offer includes, in whole or in part, securities or assets
other than cash as part of the consideration to be paid to the Company or its
Shareholders, and (ii) the Competing Offer is determined to be of value equal to
or greater than the value of the Proposing Party's offer, as determined by one
or more nationally recognized independent investment banking firms selected
unanimously by the Company's Board of Directors to advise it in connection with
such transaction, then the Company shall be obligated to accept the Competing
Offer or, if the Proposing Party's offer is to the Company's Shareholders, to
recommend that such Shareholders accept the Competing Offer. All costs of such
independent valuation shall be borne by the Company.
(e) Each party shall bear its own costs and expenses in
connection with the operation of this Section 2.5.
(f) The Company's Board of Directors shall be obligated to
comply with the provisions of this Section 2.5 with respect to each subsequent
counteroffer by the Proposing Party or any other corporation, entity or person
following the submission of a Competing Offer.
2.6 COMPANY REPURCHASE OPTION.
(a) As provided in this Section 2.6, the Company or the
Designee (as defined below) shall have an option to repurchase (the "Repurchase
Option") all, but not fewer than all, Registrable Securities that a Shareholder
proposes to sell, assign, pledge, encumber, transfer or otherwise dispose of for
value (the "Offered Shares") to any party that (i) is in the business of
manufacturing, distributing or selling any product or service which competes
with any product or service of the Company, (ii) is in the business of
manufacturing, distributing or selling any semiconductor test or measurement
product or service to any party that manufactures semiconductors or integrated
circuits, whether or not such semiconductor test or measurement product or
service competes with any products or services of the Company, (iii) is in the
business of manufacturing, distributing or selling semiconductors or integrated
circuits, or (iv) is an affiliate of any of the foregoing unless the affiliate
is a "qualified institutional buyer" as that term is defined in Rule 144A(a)(1)
of the Securities Act.
(b) In the event a Shareholder desires to accept a bona fide
third party offer for any or all of the Offered Shares, the Shareholder shall
promptly deliver to the Secretary of the Company, or such designee as the
Company shall indicate to the Shareholder by prompt written notice (the
"Designee"), written notice (the "Disposition Notice") of the offer and the
basic terms and conditions thereof, including without limitation the proposed
purchase price and the identity of the third party.
(c) The Company or the Designee, as the case may be, shall
have 30 days following receipt of the Disposition Notice to exercise the
Repurchase Option to repurchase all of the Offered Shares, which repurchase,
except as provided in Section 2.6(d) below, shall be upon the same terms and
conditions specified in the Disposition Notice. In order to exercise the
21 - Investors' Rights Agreement
Repurchase Option, the Company or the Designee, as the case may be, shall
deliver a written notice (the "Exercise Notice") to the Shareholder prior to the
expiration of such 30-day period. If the Company or the Designee, as the case
may be, exercises the Repurchase option with respect to all of the Offered
Shares specified in the Disposition Notice, then the Company or the Designee, as
the case may be, shall repurchase the Offered Shares within seven days after
delivery of the Exercise Notice; and at such time the Shareholder shall deliver
to the Company or the Designee, as the case may be, the certificate(s)
representing the Offered Shares to be repurchased, each certificate properly
endorsed for transfer.
(d) If the purchase price specified in the Disposition Notice
is payable in the form of property other than cash or in the form of
indebtedness or cancellation of indebtedness, the Company or the Designee, as
the case may be, shall pay the Shareholder, in lieu of such property,
indebtedness or cancellation of indebtedness, an equal amount of cash as
provided herein. If the Company or the Designee, as the case may be, and the
Shareholder cannot agree on such cash value within 10 days after the receipt by
the Company or the Designee, as the case may be, of the Disposition Notice, the
valuation shall be made by one nationally recognized independent investment
banking firm selected jointly and unanimously by the Company's Board of
Directors or the Designee, as the case may be, and the Shareholder to advise the
Company or the Designee, as the case may be, and the Shareholder in connection
with the exercise of the Repurchase Option. In the event that the Company's
Board of Directors or the Designee, as the case may be, and the Shareholder
cannot agree on the selection of such firm, the Company's Board of Directors or
the Designee, as the case may be, and the Shareholder shall each select one
firm, and the two firms so selected shall jointly select a third firm, which
firm alone shall complete the valuation required by this Section 2.6(d). The
Company or the Designee, as the case may be, and the Shareholder shall share
equally any fees charged by any such firm or firms and any other related
expenses.
(e) In the event that the Company or the Designee, as the case
may be, does not provide the Shareholder with the Exercise Notice within 30 days
after the receipt by the Company or the Designee, as the case may be, of the
Disposition Notice or otherwise fails to comply with the requirements of this
Section 2.6, the Shareholder shall have 30 days from the expiration of such
30-day period in which to sell or otherwise dispose of the Offered Shares upon
terms or conditions (including without limitation the purchase price) no more
favorable to the third party purchaser than those specified in the Disposition
Notice, and the third party purchaser shall then own the Offered Shares free and
clear of the Repurchase Option. In the event that the Shareholder does not sell
or otherwise dispose of the Offered Shares within such latter 30-day period, the
Repurchase Option shall continue to apply to any subsequent proposed sale or
disposition of the Offered Shares by the Shareholder.
(f) All certificates representing Registrable Securities held
by the Shareholders that are subject to the Repurchase Option shall be endorsed
with the following legend:
22 - Investors' Rights Agreement
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, PLEDGED, ENCUMBERED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE
SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH
AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST
REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. THE
SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A
COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."
(g) In the event (i) a Shareholder desires to accept a bona
fide third party offer for fewer than seventy-five percent (75%) of the
Registrable Securities then held by such Shareholder, and (ii) the Company
desires to indicate a Designee as provided in Section 2.6(b) above, the
Shareholder shall have the right to approve the Designee, which approval shall
not be unreasonably withheld. The Shareholder must deliver such approval in
writing to the Company, and the 30 day period described in Section 2.6(c) above
shall not commence until the Shareholder has delivered such approval.
2.7 RIGHT OF CO-SALE. No Founder will sell, assign, pledge or in any
manner transfer any Founder Shares, whether voluntarily or by operation of law,
or by gift or otherwise, except by a transfer that meets the requirements set
forth in this Section 2.7.
(a) If a Founder desires to sell or otherwise transfer any
Founder Shares, then the Founder will first give written notice thereof to the
Company and to each Significant Holder. The notice will name the proposed
transferee and state the number and type of Founder Shares to be transferred,
the proposed consideration and all other terms and conditions of the proposed
transfer.
(b) Each Significant Holder will have the right, exercisable
upon written notice to the Founder within 30 days after receipt of the Founder's
notice pursuant to Section 2.5(a), to participate in such sale of shares by the
Founder on a pro rata basis on the same terms and conditions. Such notice will
indicate the number of shares such Significant Holder wishes to transfer
pursuant to this Section 2.7. To the extent one or more of the Significant
Holders exercise such co-sale right, the number of Founder Shares the Founder
may transfer in the transaction will be correspondingly reduced. For purposes of
this Section 2.7, "participate on a pro rata basis" means that a Significant
Holder may sell such proportion of the shares described in the Founder's notice
equal to the ratio of (x) the number of shares of the Company's Common Stock
(including all shares of Common Stock issued or issuable upon conversion of the
Shares) held by such Significant Holder to (y) the total number of shares of the
Company's Common stock (including all shares issued or issuable upon conversion
of the
23 - Investors' Rights Agreement
Shares) deemed to be held by the participating Significant Holders and the
selling Founder as a whole at the close of business on the 10th day following
the date of the Founder's notice described above.
(c) Each Significant Holder will effect its participation in
the sale by promptly delivering to the Founder for transfer to the prospective
transferee one or more certificates, properly endorsed for transfer, that
represent the number of shares that such Significant Holder elects to transfer.
The certificate or certificates that each Significant Holder delivers to the
Founder will be transferred to the prospective transferee in consummation of the
transfer of shares pursuant to the terms and subject to the conditions specified
in the Founder's notice, and the Founder will concurrently therewith remit to
such Significant Holder that portion of the sale proceeds to which such
Significant Holder is entitled by reason of its participation in such sale. To
the extent that any prospective transferee prohibits such assignment or
otherwise refuses to purchase shares from a Significant Holder exercising its
right of co-sale hereunder, the Founder will not transfer to such prospective
transferee Founder Shares unless and until, simultaneously with such sale, the
Founder purchases from such Significant Holder the shares such Significant
Holder proposed to transfer hereunder.
(d) If, after the exercise of the right of co-sale (or failure
to do so) by the Significant Holder(s), there is an unsubscribed number of
shares, the Founder will have 90 days thereafter to sell that number of his or
her Founder Shares equal to all of such unsubscribed shares subject to such
Founder's notice at a price and upon general terms and conditions materially no
more favorable to the purchasers thereof than specified in the Founder's notice.
If the Founder has not sold such Founder Shares within said 90-day period, the
Founder will not thereafter issue or sell such Founder Shares without first
offering such securities to the Company and, if applicable, the Significant
Holders in the manner provided in this Section 2.7.
(e) In the event that any Founder makes a transfer in
contravention of this Section 2.7 (a "Prohibited Transfer"), each Significant
Holder, in addition to such other remedies as may be available at law, in equity
or hereunder, will have the put option provided below, and the Founder will be
bound by the applicable provisions of such option. In the event of a Prohibited
Transfer, each Significant Holder will have the right to sell to the Founder the
type and number of shares equal to the type and number of shares such
Significant Holder would have been entitled to transfer to the transferee had
the Prohibited Transfer been effected in compliance with this Agreement. Such
sale will be made on the following terms and subject to the following
conditions:
(i) The price at which the Founder Shares are to be
sold to the Founder will be equal to the price paid by the transferee to the
Founder in the Prohibited Transfer. The Founder will also reimburse each
Significant Holder for any and all fees and expenses, including reasonable legal
fees and expenses, incurred pursuant to the exercise or the attempted exercise
of the Significant Holder's rights hereunder.
24 - Investors' Rights Agreement
(ii) Within 30 days after the later of (1) the date
on which a Significant Holder received notice of the Prohibited Transfer or (2)
the date on which such Significant Holder otherwise became aware of the
Prohibited Transfer, such Significant Holder will, if exercising the put option
created hereby, deliver to the Founders the certificate or certificates
representing shares to be sold, each certificate to be properly endorsed for
transfer.
(f) Anything to the contrary contained herein notwithstanding,
the following transfers will be exempt from the provisions of this Section 2.7:
(i) a transfer of Founder Shares by a Founder to his or her spouse or one or
more of such Founder's family members, or a family trust, limited liability
company or partnership for the benefit of one or more of such Founder's family
members, (ii) a transfer of Founder Shares that is not exempt under (i) above
and where the amount of Founder Shares transferred constitutes, when aggregated
with other transfers made by such Founder not exempt under (i), less than 10% of
the total number of shares held by the Founder as of the date of this Agreement,
and (iii) as to K. ▇▇▇▇ ▇▇▇▇▇▇▇ only, in addition to transfers under (ii) above,
the sale of Founder's Shares for an amount up to $1,000,000 to the Company on
terms approved by the Board of Directors, provided, however, that such sale is
completed not more than six months from the date of this Agreement. In the case
of any transfer under (i) above, the transferee of the Founder Shares will
receive and hold such Founder Shares subject to the provisions of this
Agreement, and there will be no further transfer of such Founder Shares except
in accord with this Agreement. In the case of a transfer under (ii) or (iii)
above, the transferee will receive and hold the Founder Shares free and clear of
the obligations of this Agreement.
(g) Any certificates or other documents representing Founder
Shares held by Founder will bear on their face the following legend so long as
the foregoing right of co-sale remains in effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF CO-SALE IN FAVOR OF CERTAIN SHAREHOLDERS OF THE
CORPORATION AS SET FORTH IN THAT CERTAIN INVESTORS' RIGHTS
AGREEMENT, DATED AS OF JULY 21, 1999, AND AS AMENDED FROM TIME
TO TIME, AMONG THE CORPORATION AND CERTAIN OF ITS
SHAREHOLDERS, A COPY OF WHICH IS AVAILABLE UPON WRITTEN
REQUEST TO THE SECRETARY OF THE CORPORATION.
(h) The right of co-sale established by this Section 2.7 will
terminate upon the effective date of the registration statement pertaining to
the Qualified Public Offering.
(i) The co-sale right set forth in this Section 2.7 may not be
assigned or transferred, except that such right is assignable by a Significant
Holder to any wholly owned
25 - Investors' Rights Agreement
subsidiary or parent of, or to any corporation or entity that is, within the
meaning of the Securities Act, controlling, controlled by or under common
control with, any Significant Holder.
2.8 PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay and
discharge or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and, provided further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due or in
conformance with customary trade terms or otherwise in accordance with policies
related thereto adopted by the Company's Board of Directors, all other
indebtedness incident to the operations of the Company.
2.9 MAINTENANCE OF PROPERTIES AND LEASES. The Company will keep its
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear excepted and from time to time will make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries will at all times comply with each
material provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such provision might have a
material and adverse effect on the condition, financial or otherwise, or
operations of the Company.
2.10 INSURANCE. Except as otherwise decided in accordance with policies
adopted by the Company's Board of Directors, the Company will keep its assets
and those of its subsidiaries which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
explosion and other risks customarily insured against by companies in the
Company's line of business and the Company will maintain, with financially sound
and reputable insurers, insurance against other hazards and risks and liability
to persons and property to the extent and in the manner customary for companies
in similar businesses similarly situated.
2.11 KEY PERSON LIFE INSURANCE. The Company has obtained, from
financially sound and reputable insurers, and shall maintain at all times, term
life insurance on the lives of ▇▇▇▇ ▇. ▇▇▇▇▇ in the amount of $1,000,000 and K.
▇▇▇▇ ▇▇▇▇▇▇▇ in the amount of $900,000. Such policies shall name the Company as
loss payee and shall not be cancelable by the Company without prior approval of
the Board of Directors.
2.12 ACCOUNTS AND RECORDS. The Company will keep true records and books
of account in which full, true and correct entries will be made of all dealings
or transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
26 - Investors' Rights Agreement
2.13 INDEPENDENT ACCOUNTANTS. The Company will retain independent
public accountants of recognized national standing who shall (i) provide an
unqualified opinion on the Company's financial statements at the end of each
fiscal year or set forth in writing the reasons for any qualification of such
opinion; and (ii) deliver, to the Holders, a copy of any notice of termination
of such accountants' engagement as the Company's public auditors, together with
a description of the reasons for such termination.
2.14 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The
Company and all its subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets, the violation of which may have a
material and adverse effect on the financial condition or operations of the
Company.
2.15 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights in or to use patents, processes, licenses,
trademarks, trade names, or copyrights and similar rights owned or possessed by
it or any subsidiary and deemed by the Company to be necessary to the conduct of
their business.
2.16 EMPLOYEE INVENTION AND CONFIDENTIALITY AGREEMENT. The Company will
cause each employee or consultant now or hereafter employed or engaged by it or
any subsidiary with access to confidential information to enter into an Employee
Invention and Confidentiality Agreement substantially in the form attached as
EXHIBIT A hereto.
2.17 EMPLOYEE AND OTHER STOCK ARRANGEMENTS. Without the approval of the
Board of Directors, the Company will not issue any of its capital stock, or
grant an option or rights to subscribe for, purchase or acquire any of its
capital stock, to any director, officer or employee of, or consultant to, the
Company or any subsidiary thereof except for the issuance of up to an aggregate
of 2,200,000 shares of Common Stock pursuant to stock purchase agreements or the
exercise of stock options granted or to be granted, under the Company's 1993
Stock Incentive Plan, as amended. Each acquisition of any shares of capital
stock of the Company or any option or right to acquire any shares of capital
stock of the Company by any such person will be conditioned upon the execution
and delivery by the Company and such person of an agreement substantially in a
form approved by the Board of Directors of the Company.
2.18 BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD. The Company shall
use its best efforts to cause the election to its Board of Director of the
persons designated by the holders of Series A, Series B and Series C Preferred
Stock pursuant to the Company's Restated Articles of Incorporation, as amended
from time to time. The person designated as a director by the holders of the
Series C Preferred Stock shall have the right to attend each and every committee
of the Board of Directors which may be established from time to time.
27 - Investors' Rights Agreement
2.19 ATTENDANCE AT BOARD AND COMMITTEE MEETINGS. In the event that the
holders of Series A, Series B or Series C Preferred Stock shall fail for any
reason to designate a representative to be elected to the Company's Board of
Directors pursuant to the Company's Restated Articles of Incorporation, as
amended from time to time, or the person so designated by the holders of Series
A, Series B or Series C Preferred Stock shall not be elected to the Company's
Board of Directors for any reason, then, and in either such event, the holders
of not less than a majority of the shares of Series A, Series B or Series C
Preferred Stock, as the case may be, may designate a person (and in the case of
the holders of Series C Preferred Stock, three persons) who, upon approval by
the Company of his or her designation, which approval shall not be unreasonably
withheld, shall have the right to attend all meetings of the Board of Directors
and any committee thereof in a nonvoting observer capacity, to receive notice of
such meetings and to receive the information provided by the Company to the
Board of Directors and its committees at the same time as such Board or
Committee members shall receive such information or as soon thereafter as
practicable; provided, however, that in the case of the three designees of the
holders of the Series C Preferred Stock, their attendance at the meetings of the
Board of Directors and its committees is limited to any two of such three
designees. The holders of Series A, Series B and Series C Preferred Stock may
change their respective persons designated under this Section 2.19 upon 10 days
advance written notice to the Company.
2.20 INDEBTEDNESS. The Company shall not, without the prior approval of
the Board of Directors of the Company, incur any indebtedness in excess of
$250,000, other than trade credit incurred in the ordinary course of business.
2.21 EXTENSION OF CREDIT. The Company shall not, without the prior
approval of the Board of Directors of the Company, extend credit by any method
or in any form or manner in excess of $250,000, other than open account credit
extended to customers in the ordinary course of business.
2.22 COMPENSATION OF EMPLOYEES. The Company shall not, without the
prior approval of the Board of Directors of the Company, compensate any of its
employees, including officers, in an amount greater than $150,000, which amount
shall include the employee's base salary and bonus, as well as the fair market
value, as of the date of grant or issuance, of any shares of the Company's
Common Stock granted or issued to the employee by option or otherwise.
2.23 TRANSACTIONS WITH AFFILIATES. The Company, without the approval of
the disinterested members of the Company's Board of Directors, shall not engage
in any loans, leases, contracts or other transactions with any director, officer
or key employee of the Company or any member of any such person's immediate
family, including the parents, spouse, children and other relatives of any such
person, on terms less favorable than the Company would obtain in a transaction
with an unrelated party, as determined in good faith by the Board of Directors.
28 - Investors' Rights Agreement
2.24 CONFIDENTIAL DISCLOSURE AGREEMENT. Prior to and as a condition to
the fulfillment by the Company of any of the covenants, or the exercise by the
Shareholders of any of the rights, set forth in Sections 2.1(a) and (b), 2.2 and
2.18 above, the Shareholders shall execute and deliver to the Company a
Nondisclosure and Restricted Use Agreement in substantially the form attached
hereto as EXHIBIT B.
2.25 SERIES C PREFERRED STOCK PUT RIGHT.
(a) At any time after the fifth anniversary of the date of
this Agreement, holders of 50% or more of the Series C Preferred Stock then
outstanding, upon notice to the Company (the "Put Notice"), shall be entitled to
sell, and the Company shall be obligated to purchase from such holders, all, but
not less than all, of the Series C Preferred Stock held by such holders at a per
share purchase price (the "Put Option Purchase Price") equal to the greater of
the Fair Market Value (as defined below) or $8.00 per share of Series C
Preferred Stock (as adjusted for any stock splits, stock dividends,
recapitalizations or the like) plus all declared but unpaid dividends on such
share. For purposes of this Section 2.25, the Fair Market Value shall be the
fair value of a share of Common Stock of the Company calculated on a
fully-diluted basis as if all shares of Preferred Stock and all convertible
securities had been fully converted into shares of Common Stock and any
outstanding warrants, options or other rights for the purchase of shares of
stock or convertible securities had been fully exercised as of the date of such
valuation and all consideration paid upon such exercise had been received by the
Company. The Fair Market Value shall be determined in good faith by the Board of
Directors as of the date of receipt of a Put Notice. Notwithstanding the
foregoing sentence, if the holders of not less than a majority of the Series C
Preferred Stock dispute the good faith valuation by the Company's Board of
Directors, then the Fair Market Value shall be determined by a nationally
recognized independent investment banking firm selected unanimously by the Board
of Directors in good faith. In the event that the investment banking firm's
valuation is 110% or more than the valuation established by the Board of
Directors, then all costs of such independent valuation shall be borne by the
Company. Otherwise, all costs of the independent valuation shall be borne pro
rata based on share holdings by those holders of the Series C Preferred Stock
who elect to dispute the good faith valuation by the Company's Board of
Directors.
(b) Upon receipt of the Put Notice, the Company shall be
obligated to purchase the shares of Series C Preferred Stock specified therein,
at the Put Option Purchase Price therefor, and shall, subject to Section 2.25(c)
hereof, pay to each of the holders of the Series C Preferred Stock, against
delivery of the securities evidencing any such Series C Preferred Stock, an
amount equal to the Put Option Purchase Price multiplied by the number of shares
of Series C Preferred Stock held by such holder, such amount to be payable in
immediately available funds on such date as the Company shall specify to such
holders, but in any event not later than 180 days after the receipt by the
Company of the Put Notice. Any Series C Preferred Stock purchased by the Company
pursuant to this Section 2.25 shall be canceled and shall not be reissued.
29 - Investors' Rights Agreement
(c) In lieu of paying all or any portion of the Put Option
Purchase Price in immediately available funds, the Company may, at its sole
election, pay any portion of the Put Option Purchase Price in the form of one or
more Installment Purchase Notes (as hereinafter defined) the principal amount of
which Installment Purchase Note(s), together with any immediately available
funds, if any, paid to the holders of the Series C Preferred Stock, shall equal
the number of shares of Series C Preferred Stock then outstanding multiplied by
the Put Option Purchase Price. An "Installment Purchase Note" shall mean an
unsecured note of the Company, payable in three (3) equal annual installments of
principal and interest, bearing interest at a rate of 6% per annum from the date
of issue and having the terms and conditions substantially the same as those set
forth in EXHIBIT C hereto.
(d) Nothing in this Section 2.25 shall obligate the Company to
purchase the Series C Preferred Stock following receipt of the Put Notice if the
funds legally available at the time of the proposed purchase (including by way
of issuance of Installment Purchase Notes) are insufficient to purchase all such
shares. In the event such purchase shall be deemed by the Company to be
unlawful, then the Company shall promptly so notify the holders of the Series C
Preferred Stock who may elect, by notice to the Company from the holders of not
less than a majority of the Series C Preferred Stock, sent within 15 days of the
receipt of notice of nonpayment from the Company, to (i) withdraw the Put
Notice, in which case the put right described in this Section 2.25 shall remain
in full force and effect, or (ii) keep such Put Notice in effect, in which case
the Company shall be obligated to initially purchase, in accordance with Section
2.25(b), only those number of shares of Series C Preferred Stock for which it
has funds legally available at the time of the proposed purchase (including by
way of issuance of Installment Purchase Notes), and subsequently purchase the
remaining shares of Series C Preferred Stock as soon as such purchase is no
longer unlawful.
(e) The put right provided for in this Section 2.25 shall
terminate upon the earlier to occur of (i) a Qualified Public Offering, (ii) the
closing of any acquisition of the Company by means of merger or other form of
corporate reorganization in which more than 50% of the outstanding shares of the
Company are exchanged for securities or other consideration issued or caused to
be issued by the acquiring corporation or its subsidiary (other than a mere
reincorporation transaction), (iii) the closing of a sale of all or
substantially all of the assets of the Company, (iv) the date specified by vote,
written consent or agreement of holders of at least a majority of the shares of
Series C Preferred Stock then outstanding, and (v) the date on which all of the
Series C Preferred Stock has been converted into shares of Common Stock or
redeemed.
2.26 AMENDMENT OF RESTATED ARTICLES OF INCORPORATION; VOTING AGREEMENT.
In order to increase the size of the Board of Directors of the Company to
provide enough authorized Board seats to permit TIAA to designate a person to
the Board without the need to terminate the service of any current Board member,
the Company hereby agrees, at its next meeting of shareholders, but in any event
not later than July 31, 2000, to (i) amend its Restated Articles of
Incorporation to delete the first sentence of Section 5.2 (A)(3)(b) relating to
the variable size of
30 - Investors' Rights Agreement
its Board of Directors and (ii) adopt an amendment to the Bylaws of the Company
providing that the authorized number of directors of the Company shall be fixed
by the Board of Directors, but in no event shall there be fewer than five (5)
nor more than (9) members. At any such meeting of shareholders of the Company
called for such purpose, whether by ballot, written consent, proxy or otherwise,
each of the Shareholders, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, K. ▇▇▇▇ ▇▇▇▇▇▇▇ and
TIAA, hereby agrees to (i) vote all shares of the Company's capital stock held
by such person to amend the Company's Restated Articles of Incorporation in the
manner described in the foregoing sentence and (ii) to direct their respective
designees to the Board of Directors to vote for an amendment to the Company's
Bylaws in the manner described in the foregoing sentence.
2.27 PROTECTIVE COVENANT. From and after the date of the Agreement, the
Company, without the prior written consent of (i) Agilent Technologies with
respect to Sections 2.4 and 2.5, (ii) the holders of not less than a majority of
the shares of each of the Series A, Series B, and Series C Preferred Stock with
respect to Sections 2.7, 2.18, 2.19 and this Section 2.27, (iii) the holders of
not less than a majority of the shares of Series C Preferred Stock with respect
to Sections 2.25 and 2.26, and (iv) the holders of a majority of the Registrable
Securities as to all other rights and covenants in this Section 2, shall not
enter into any agreement with any holder or prospective holder of any securities
of the Company giving such holder or prospective holder any rights the terms of
which are more favorable than the rights and covenants granted to the Holders
and Significant Holders in this Section 2.
2.28 TERMINATION OF COVENANTS. Unless otherwise provided in the Section
describing a particular covenant, each of the covenants set forth in this
Section 2 shall terminate as follows:
(a) The covenants set forth in Sections 2.1 and 2.2 shall
terminate and be of no further force or effect upon the earlier to occur of an
Initial Public Offering or when the Company first becomes subject to the
periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act.
(b) The covenants set forth in Sections 2.4 and 2.5 shall
terminate and be of no further force or effect immediately prior to an Initial
Public Offering.
(c) The covenants set forth in Section 2.3 and Sections 2.6
through 2.27 shall terminate and be of no further force or effect upon a
Qualified Public Offering.
SECTION 3.
MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Oregon.
31 - Investors' Rights Agreement
3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of and be binding upon,
the successors, assigns, heirs, executors and administrators of the parties
hereto.
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including any
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. Subject to
the limitations of Section 2.27 hereof, neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated, except by a written
instrument signed by the Company and the Holders of at least a majority of the
outstanding Registrable Securities, and any such amendment, waiver, discharge or
termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased, except upon the
written consent of such Holder.
3.4 NOTICES. Unless otherwise provided, any notice or other
communication required or permitted under this Agreement shall be given in
writing and shall be mailed by United States first-class mail, postage prepaid,
sent by facsimile and immediately followed by first-class mail, or delivered
personally by hand or by a nationally recognized overnight courier addressed to
the party to be notified at the address or facsimile number indicated for such
party on the signature page hereof or at such other address as such party may
designate by 10 days' advance written notice to the other parties hereto. All
such notices and other written communications shall be effective (i) if mailed,
three days after mailing, (ii) if delivered personally by hand, immediately,
(iii) if delivered by a nationally recognized overnight courier, one day after
the date deposited with such courier, or (iv) if sent by confirmed facsimile,
immediately if sent during normal business hours of the recipient, if not, then
on the next business day. In the case of any notice to the Company, a copy of
such notice shall be sent to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇., Esq., ▇▇▇▇ ▇▇▇▇▇ LLP,
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, in the case of any notice
to Agilent Technologies, a copy of such notice shall be sent to Mario Oh ▇▇▇▇▇,
Assistant Secretary and Corporate Counsel, Agilent Technologies, Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇: 20BQ, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, in the case of any
notice to Maristeth, a copy of such notice shall be sent to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Esq., ▇▇▇▇▇▇, ▇▇▇▇▇▇, Honeywell, Malanca, ▇▇▇▇▇▇▇▇ & Daheim, P.L.L.C., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, in the case of any
notice to Electroglas, a copy of such notice shall be sent to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq., Enterprise Law Group, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and in the case of any notice to TIAA, a copy of such
notice shall be sent to ▇▇▇▇▇▇ ▇▇▇▇▇, Private Direct Equity Team, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
3.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder upon any breach or default of the Company
under this Agreement shall impair any such right, power or remedy of such Holder
and it shall not be construed to be a waiver of any such breach or default or an
acquiescence therein or in any similar breach or default thereafter occurring;
and no waiver of any single breach or default shall be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Holder of any
32 - Investors' Rights Agreement
breach or default under this Agreement or any waiver on the part of any Holder
of any provisions or conditions of this Agreement must be made in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise afforded to any
Holder, shall be cumulative and not alternative.
3.6 RIGHTS; SEVERABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
3.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
3.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
3.9 TERMINATION OF JULY 1999 INVESTORS' RIGHTS AGREEMENT. This
Agreement supersedes and replaces the July 1999 Investors' Rights Agreement
which, upon execution of this Agreement, is hereby terminated.
[REMAINDER OF PAGE DELIBERATELY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CASCADE MICROTECH, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
Address: ▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
33 - Investors' Rights Agreement
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 16 , 1999
The undersigned Shareholder hereby executes and delivers the Investors'
Rights Agreement to which this Signature Page is attached; which Investors'
Rights Agreement Signature Page, together with the Investors' Rights Agreement
and Signature Pages of other Shareholders, shall constitute counterpart copies
thereof in accordance with the terms of the Investors' Rights Agreement.
Shareholder:
AGILENT TECHNOLOGIES, INC.
(Formerly known as Hewlett-Packard Company)
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
General Manager
Component Test Unit
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
MS 3USP
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
34 - Investors' Rights Agreement
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 16 , 1999
The undersigned Shareholder hereby executes and delivers the Investors'
Rights Agreement to which this Signature Page is attached; which Investors'
Rights Agreement Signature Page, together with the Investors' Rights Agreement
and Signature Pages of other Shareholders, shall constitute counterpart copies
thereof in accordance with the terms of the Investors' Rights Agreement.
Shareholder:
MARISTETH FUND III, LLC
By: /s/ F. ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
F. ▇▇▇▇ ▇▇▇▇▇▇▇, Sole Manager
Maristeth Fund III, LLC
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
35 - Investors' Rights Agreement
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 16 , 1999
The undersigned Shareholder hereby executes and delivers the Investors'
Rights Agreement to which this Signature Page is attached; which Investors'
Rights Agreement Signature Page, together with the Investors' Rights Agreement
and Signature Pages of other Shareholders, shall constitute counterpart copies
thereof in accordance with the terms of the Investors' Rights Agreement.
Shareholder:
ELECTROGLAS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
36 - Investors' Rights Agreement
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 16, 1999
The undersigned Shareholder hereby executes and delivers the Investors'
Rights Agreement to which this Signature Page is attached; which Investors'
Rights Agreement Signature Page, together with the Investors' Rights Agreement
and Signature Pages of other Shareholders, shall constitute counterpart copies
thereof in accordance with the terms of the Investors' Rights Agreement.
Shareholder:
TEACHERS INSURANCE & ANNUITY
ASSOCIATION OF AMERICA
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: Managing Director
------------------------------
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
37 - Investors' Rights Agreement
CASCADE MICROTECH, INC.
SIGNATURE PAGE
TO
INVESTORS' RIGHTS AGREEMENT
Dated as of December 9, 1999
The undersigned Founders hereby execute and deliver the Investors'
Rights Agreement to which this Signature Page is attached; which Investors'
Rights Agreement Signature Page, together with the Investors' Rights Agreement
and Signature Pages of the Shareholders, shall constitute counterpart copies
thereof in accordance with the terms of the Investors' Rights Agreement.
Founders:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ K. ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
K. ▇▇▇▇ ▇▇▇▇▇▇▇
38 - Investors' Rights Agreement
EXHIBIT C
[FORM OF PURCHASE INSTALLMENT NOTE]
CASCADE MICROTECH, INC.
6% INSTALLMENT NOTE
No._________ ________________ , 19___
$________________ PPN______________
FOR VALUE RECEIVED, the undersigned, Cascade Microtech, Inc. (the
"Company"), a corporation organized and existing under the laws of the State of
Oregon hereby promises to pay to Teachers Insurance and Annuity Association of
America, or its registered assigns, the principal sum of
_________________DOLLARS in three equal installments each in the amount of
$____________________DOLLARS, the first payment to occur on _________,_____ with
like payments to be made on the first and second anniversaries of such date.
This Purchase Installment Note ("Note") shall bear interest (computed on the
basis of a 360-day year) on the unpaid balance thereof at the rate of 6% per
annum from the date hereof, and all accrued but unpaid interest shall be paid on
the dates on which Note principal is to be paid as set forth in the preceding
sentence.
Payments of principal and interest on this Note shall be made in lawful
money of the United States of America at ________________ or at such other place
as the holder of this Note shall have designated by written notice to the
Company as provided in the Investors' Rights Agreement referred to below.
This Note is issued pursuant to Section 2.25 of the Investors' Rights
Agreement, dated as of December 16, 1999 (as amended from time to time, the
"Investors' Rights Agreement"), among and between the Company and the respective
Investors and Shareholders named therein. Each holder of this Note will be
deemed, by its acceptance hereof to have agreed to the confidentiality
provisions set forth in the Nondisclosure and Restricted Use Agreement attached
as Exhibit C to the Investors' Rights Agreement.
Any unpaid principal and accrued interest of this Note may be prepaid,
in whole or from time-to-time in part, without penalty, at the sole election of
the Company.
So long as this Note is outstanding, the registered holder shall be
entitled to receive the following financial information of the Company:
(a) As soon as practicable after the end of each fiscal year of
the Company and in any event within 90 days thereafter, a
consolidated balance sheet of the Company and its
subsidiaries, if any, as at the end of such fiscal year and
consolidated statements of income and cash flows of the
Company and its subsidiaries, if any, for such year, prepared
in accordance with generally accepted accounting principles
consistently
1 - Exhibit C
applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail
and certified by independent public accountants of recognized
national standing selected by the Company;
(a) as soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the
Company and in any event within 45 days thereafter, a
consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such quarterly
period and consolidated statements of income and cash flows of
the Company and its subsidiaries for such period and for the
current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied
and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year subject to
changes resulting from normal year-end audit adjustments, all
in reasonable detail and certified by the principal financial
or accounting officer of the Company, except that such
financial statements need not contain the notes required by
generally accepted accounting principles.
This Note is transferrable upon 10 days' prior written notice to the
Company; provided, however, that this Note may not be transferred to any party
that (i) is in the business of manufacturing, distributing or selling any
product or service which competes with any product or service of the Company,
(ii) is in the business of manufacturing, distributing or selling any
semiconductor test or measurement product or service to any party that
manufactures semiconductors or integrated circuits, whether or not such
semiconductor test or measurement product or service competes with any products
or services of the Company, (iii) is in the business of manufacturing,
distributing or selling semiconductors or integrated circuits, or (iv) is an
affiliate of any of the foregoing unless the affiliate is a "qualified
institutional buyer" as that term is defined in Rule 144A(a)(1) of the
Securities Act.
This Note is governed by the laws of the State of Oregon. The parties
acknowledge that the state or federal courts located in Portland, Oregon
constitute the sole and exclusive venue, and the exclusive jurisdiction, for
disputes arising hereunder.
CASCADE MICROTECH, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
2 - Exhibit C