EXHIBIT 4.2
A MENDED AND R ESTATED I NVESTOR R IGHTS A GREEMENT
B Y AND AMONG
C ALL W AVE , I NC .
A ND
T HE I NVESTORS N AMED H EREIN
D ATED A S O F M AY 31, 2001
AMENDED AND RESTATED INVESTOR
RIGHTS AGREEMENT
THIS AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT (the “Agreement”) dated for
reference purposes as of May 31, 2001, by and among C
ALL W AVE , I NC ., a
California corporation (the “Company”) and the holders
of the Company’s Series A Preferred Stock listed on Schedule
A hereto (the “ S ERIES A H OLDERS ”), the holders of the Company’s
Series B Preferred Stock listed on Schedule B hereto (the “
S ERIES
B H OLDERS ”), the holders of the Company’s
Series C Preferred Stock listed on Schedule C hereto (the “
S ERIES
C H OLDERS ”), the holders of the Company’s
Series D Preferred Stock listed on Schedule D hereto (the “
S ERIES
D H OLDERS ”), and the holders of the Company’s
Series E Preferred Stock listed on Schedule E hereto (the “
S ERIES
E H OLDERS ”) (each of the Series A Holders, the
Series B Holders, the Series C Holders, the Series D Holders, and
the Series E Holders individually is referred to as an “
I NVESTOR
” and collectively are
referred to as the “ I NVESTORS ”), with reference to the following
facts:
RECITALS:
A. The Company previously issued to
certain Investors shares of the Company’s Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, and
Series D Preferred Stock, and in connection with such issuance the
Company, the Series A Holders, the Series B Holders, the Series C
Holders, and the Series D Holders executed that certain Prior
Rights Agreement (as defined below), pursuant to which the Company
granted certain registration and other rights to the Series A
Holders, the Series B Holders, the Series C Holders, and the Series
D Holders.
B. Concurrently with the execution
of this Agreement, the Series E Holders are purchasing from the
Company certain shares of the Company’s Series E Preferred
Stock, and the Company has agreed to execute and deliver this
Agreement to the Series E Holders in order to grant to them certain
registration and other rights with respect to their shares of
Series E Preferred Stock.
C. The Parties have agreed to
execute this Agreement in order to amend, restate and supersede the
Investors Rights Agreement and to memorialize the terms and
conditions on which the Company shall grant to all Investors
certain registration and other rights with respect to the
Company’s outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, and Series E Preferred Stock.
AGREEMENTS:
NOW, THEREFORE,
the parties hereto, intending to be
legally bound, do hereby agree as follows:
1. DEFINITIONS . For purposes of this Agreement, the
term:
1.1 “ Act” means the
Securities Act of 1933, as amended.
1.2 “ Common Stock” means
the common capital stock of the Company.
1.3 “ Common Stock
Equivalents” means the Company’s Common Stock
then outstanding plus the shares of Common Stock then issuable upon
conversion of the Company’s then outstanding Preferred
Stock.
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1.4 “ Form S-3” means such
form under the Act as in effect on the date hereof or any
registration form under the Act subsequently adopted by the United
States Securities and Exchange Commission (the “SEC”)
which permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the
SEC.
1.5 “ Holder” means each
Investor and each additional person who purchases any shares of
this Company’s Preferred Stock and executes this
Agreement.
1.6 “ Preferred Stock”
means, collectively, the Company’s (i) Series A Preferred
Stock, (ii) Series B Preferred Stock, (iii) Series C Preferred
Stock, (iv) Series D Preferred Stock, and (v) Series E Preferred
Stock.
1.7 “Prior Rights
Agreement” means that certain “Investor Rights
Agreement” dated effective June 26, 2000, by and among the
Company and the Series A Holders, the Series B Holders, the Series
C Holders, and the Series D Holders.
1.8 “ Register,”
“Registered,” and “Registration”
mean a registration effected by preparing and filing with the SEC a
registration statement or similar document in compliance with the
Act, and the SEC’s declaring or ordering of effectiveness of
such registration statement or document.
1.9 “ Qualified Initial Public
Offering” means an underwritten public offering of
shares of the Company’s capital stock pursuant to an
effective registration statement filed under the Act, pursuant to
which the Company has (i) generated at least Ten Million Dollars
($10,000,000) of gross offering proceeds, (ii) sold its shares in
such offering at a price per share that is (x) at least Five
Dollars ($5.00) per share, and (y) at least equal to the product of
(A) four and seventeen hundredths (4.17), multiplied times
(B) the Series D original purchase price of $2.40 per share (as
adjusted for stock splits with respect to such shares).
1.10 “ Registrable
Securities” means (i) the Common Stock issuable or
issued upon conversion of the Preferred Stock, (ii) any Common
Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such Preferred Stock, and (iii)
shares of Common Stock issuable upon exercise of warrants granted
in connection with promissory notes issued by the Company, to the
extent the Board of Directors elects to grant to the holders of
such warrants the registration rights granted in this
Agreement.
1.11 “ Registrable Securities then
outstanding” means the shares of Common Stock
outstanding which are, and the number of shares of Common Stock
issuable pursuant to exercisable or convertible securities which
are, Registrable Securities.
2. REGISTRATION RIGHTS
The Company covenants and agrees as
follows:
2.1 Requested Registration
. If the Company shall
receive at any time after the earlier of (i) April 30, 2002, or
(ii) nine (9) months after the effective date of the first
registration statement for a public offering of securities of the
Company (other than a registration statement relating either to the
sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or an SEC Rule
145
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transaction), a written request from the Holders
of at least twenty-five percent (25.0%) of the Company’s
Registrable Securities then outstanding (including all shares of
Common Stock into which such shares of Preferred Stock and then may
have been converted) that the Company file a registration statement
under the Act covering the registration of Registrable Securities,
then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and
shall, subject to the limitations of Section 2.1.1, below, use its
diligent best efforts to effect as soon as practicable, the
registration under the Act of all Registrable Securities which the
Holders request to be registered within twenty (20) days of the
mailing of such written notice by the Company.
2.1.1 Exceptions
. However, the Company
shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section
2.1:
A. If the minimum aggregate offering
price of the Registrable Securities requested to be registered
pursuant to such registration by all of the Holders is less than
One Million Dollars ($1,000,000);
B. If the Company has effected two
(2) such registrations pursuant to this Section 2.1, and such
registrations have been declared or ordered effective;
or
C. If the Company shall furnish to
such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors
(or underwriters then engaged by the Company to conduct an offering
within one hundred and eighty (180) days following the date of the
Holders’ request hereunder) such requested registration, if
implemented, would have a material adverse impact upon the Company
or its stockholders, then the Company’s obligation to use its
best efforts to register, qualify or comply under this Section 2.1
shall be deferred for a period not to exceed ninety (90) days from
the date of receipt of written request from the Holders;
provided , however , that the Company may not
utilize this right more than once in any twelve-month
period.
2.1.2 Underwriting
. If the Holders
initiating the registration request hereunder (the
“Initiating Holders”) intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their
request made pursuant to this Section 2.1 and the Company shall
include such information in the written notice referred to in
Section 2.1, above. In such event, the right of any Holder to
include his Registrable Securities in such registration shall be
conditioned upon such Holder’s participation in the
underwriting arrangements required by this Section 2.1, 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) shall be
limited to the extent provided herein.
A. All Holders proposing to
distribute their securities through such underwriting shall
(together with the Company) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating
Holders, provided that such underwriting agreement shall not
provide for indemnification or contribution obligations on the part
of the Holders greater than the obligations set forth in Section
2.8.2. Notwithstanding any other provision of this Section 2.1, if
the managing underwriter advises the Initiating Holders in writing
that marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all holders of
Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and
underwriting shall be allocated among all Holders of Registrable
Securities in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders
at the time of filing the registration statement or in such other
manner as shall be agreed to by the Holders of a majority of the
Registrable Securities
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proposed to be included in such registration,
until all of the Registrable Securities proposed to be included in
such registration are included in such registration. No Registrable
Securities excluded from the underwriting by reason of the
underwriter’s marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may
round the number of shares allocated to any Holder to the nearest
one hundred (100) shares.
B. If any Holder of Registrable
Securities disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the
Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior
to 90 days after the effective date of such registration, or such
other shorter period of time as the underwriters may
require.
2.2 Company
Registration . If the
Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than
the Holders) any of its stock or other securities under the Act in
connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of
securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the
same information as would be required to be included in a
registration statement covering the sale of the Registrable
Securities, or a registration relating solely to a corporate
reorganization or other similar Rule 145 transaction on Form S-4 or
any similar form promulgated in the future), then the Company
shall, at such time, promptly give each Holder written notice of
such registration.
2.2.1 Request by Holder
. Upon the written
request of each Holder given within twenty (20) days after mailing
of the written notice described in Section 2.2, above, by the
Company, the Company shall cause to be registered under the Act all
of the Registrable Securities that each such Holder has requested
to be registered.
2.2.2 Underwriting
. 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 2.2. In
such event the right of any Holder to registration pursuant to this
Section 2.2 shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other Holders
distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company, provided
that such underwriting agreement shall not provide for
indemnification or contribution obligations on the part of the
Holders greater than the obligations set forth in Section 2.8.2.
Notwithstanding any other provision of this Section 2.2, if the
managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities or other
securities to be included in such registration; provided,
however , that no such reduction shall reduce the amount
of securities of the selling Holders included in the registration
below five percent (5.0%) of the total amount of securities
included in such registration, unless such offering is the initial
public offering and the registration does not include shares of any
other selling shareholders, in which event any or all of the
Registrable Securities of the Holders may be excluded;
provided , further, that if the number of shares of
Registrable Securities permitted to be registered is reduced
pursuant to the preceding sentence, then no persons may sell
securities in such offering except for the Company and the Holders
of Registrable Securities.
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A. The Company shall so advise all
Holders and other holders distributing their securities through
such underwriting and the number of shares of Registrable
Securities and other securities that may be included in the
registration, and underwriting shall be allocated among all Holders
in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities held by such Holders at the time of
filing the registration statement. To facilitate the allocation of
shares in accordance with the above provisions, the Company may
round the number of shares allocated to any Holder or holder to the
nearest 100 shares.
B. If any Holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom
by written notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration, and shall not be transferred in a
public distribution prior to 90 days after the effective date of
the registration statement relating thereto, or such other shorter
period of time as the underwriters may require.
2.3 Form S-3
Registration .
2.3.1 Request for
Registration . 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, in addition to the rights contained in the
foregoing portions of this Section 2, if any Holder or Holders
request that the Company effect a registration on Form S-3 and any
related or successor qualification or compliance with respect to
all or a part of the Registrable Securities owned by such Holder or
Holders, the Company shall promptly give written notice of the
proposed registration, and any related qualification or compliance,
to all other Holders. Upon the written request of each Holder given
within twenty (20) days after mailing of written notice by the
Company, the Company shall effect such registration and all such
qualifications and compliance as may be so requested and as would
permit or facilitate the sale and distribution of all or such
portion of such Holder’s or Holders’ Registrable
Securities. Registrations effected pursuant to this Section 2.3
shall not be counted as demands for registration or registrations
effected pursuant to Section 2.1, above.
2.3.2 Exceptions
. Notwithstanding the
foregoing, the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant
to this Section 2.3:
A. If the Holders, together with the
holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price
to the public of less than Five Hundred Thousand Dollars
($500,000);
B. If the Company has already
effected two (2) such registrations pursuant to this Section 2.3
within such twelve-month period, and such registrations have been
declared or ordered effective; or
C. If the Company shall furnish to
such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors
it would be seriously detrimental to the Company or its
shareholders for a registration statement to be filed at such time,
then the Company’s obligation to use its best efforts to
register, qualify or comply under this Section 2.3 shall be
deferred for a period not to exceed ninety (90) days from the date
of receipt of written request from the Holders;
provided , however , that the Company
may not utilize this right more than once in any twelve-month
period.
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2.4 Obligations of the
Company . Whenever
required under this Section 2 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as
reasonably possible:
2.4.1 Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become
effective, and, upon the request of the Holders of a majority of
the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120)
days.
2.4.2 Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to
the disposition of all securities covered by such registration
statement.
2.4.3 Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
2.4.4 Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that the Company
shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
2.4.5 In the event of any underwritten public
offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the
managing underwriter of such offering.
2.4.6 Notify each Holder of Registrable Securities
covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the
Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing.
2.4.7 Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2,
on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to
this Section 2, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with
respect to such securities becomes effective, an opinion, dated
such date, of the counsel representing the Company for the purposes
of such registration, and a letter dated as of such date, from the
independent certified public accountant of the Company, each in
form and substance as is customarily given to underwriters in an
underwritten public offering, addressed to the underwriters, if
any, and to the Holders requesting registration of Registrable
Securities.
2.5 Furnish
Information . It
shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 2 with respect to the
Registrable Securities of any selling Holder that such Holder shall
furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of
disposition of such securities as shall be required to effect the
registration of such Holder’s Registrable
Securities.
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2.6 Expenses of Demand and Company
Registration . The Company shall bear and pay:
2.6.1 Demand
Registration. All
expenses (other than underwriting discounts and commissions, which
shall be paid out of the gross proceeds of such underwritten
offering) including quoting in connection with registrations,
filings, or qualifications pursuant to Section 2.1, above,
including (without limitation) all registration, filing and
qualification fees, printers’ and accounting fees, and fees
and disbursements of accounts for the Company and reasonable fees
of one special counsel selected by the Selling Holders;
provided, however , that the Company shall not be required
to pay for any expenses of any registration proceeding initiated
pursuant to Section 2.1, above, if the registration request is
subsequently withdrawn at the request of the Holders of the
majority of the Registrable Securities to be registered therein (in
which case all participating Holders shall bear such expenses),
unless the Holders of the majority of the Registrable Securities
agree to forfeit their right to a demand registration pursuant to
Section 2.1, above; provided further , however, that if at
the time of such withdrawal, the Holders have learned of a material
adverse change in the condition, business, or prospects of the
Company not known to the Holders at the time of their request, then
such Holders shall not be required to pay any such expenses and
shall retain their rights to initiate registration pursuant to
Section 2.1, above.
2.6.2 Company
Registration. All
expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to
registrations pursuant to Section 2.2, above, for each Holder,
including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or
apportionable thereto, and the fees and disbursements of counsel
for the selling Holders selected by them, including reasonable fees
of one special counsel selected by the selling Holders, but
excluding underwriting discounts and commissions relating to
Registrable Securities.
2.7 Expenses of S-3
Registration . For
the first two (2) registrations pursuant to Section 2.3, above, all
expenses, including (without limitation) underwriting discounts and
commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 2.3, the fees and disbursements
of counsel selected by the selling Holders, all registration,
filing and qualification fees, printers’ and accounting fees,
and fees and disbursements of counsel for the Company shall be
borne by the Company, thereafter such expenses shall be borne pro
rata by the selling Holders (except for the fees of Company counsel
and the Company’s accounting fees which shall be paid by the
Company) in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities being sold by such Holders
pursuant to such registration.
2.8
Indemnification .
In the event any Registrable Securities are included in a
registration statement under this Section 2:
2.8.1 Indemnity by Company
. To the extent permitted
by law, the Company will indemnify and hold harmless each Holder,
the employees, officers, directors, agents and partners of such
Holder, any underwriter (as defined in the Act) for such Holder and
each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as
amended (the “1934 Act”), against any losses, claims,
damages, or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a
“Violation”): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii)
the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation
by the Company of the Act, the 1934 Act, any state securities law
or any rule or regulation promulgated under the Act, the 1934 Act
or any state securities law; and the Company will pay to each such
Holder, the officers, directors and partners of a Holder,
underwriter or controlling person, as incurred, any legal or
other
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expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability, or action; provided , however
, that the indemnity agreement contained in this Section 2.8.1
shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
2.8.2 Indemnity by Holder
. To the extent permitted
by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed
the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against
any losses, claims, damages, or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the
Act, the 1934 Act, or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay, as incurred, any legal
or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 2.8.2, in connection with
investigating or defending any such loss, claim, damage, liability,
or action; provided , however , that the
indemnity agreement contained in this Section 2.8.2 shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably
withheld; provided , that, in no event shall the
total amount of any indemnity under this Section 2.8.2 exceed the
net proceeds from the offering received by such Holder.
2.8.3 Indemnity Procedure
. Promptly after receipt
by an indemnified party under this Section 2.8 of notice of the
commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.8, deliver
to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided , however
, that an indemnified party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying
party of any liability to the indemnified party under this Section
2.8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section
2.8.
2.8.4 Contribution
. In order to provide for
just and equitable contribution to joint liability under the Act in
any case in which either (i) any Holder exercising rights under
this Agreement, or any controlling person of any such Holder, makes
a claim for indemnification pursuant to this Section 2.8 but it is
judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding
the fact that this Section 2.8 provides for indemnification in such
case, or (ii) contribution under
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the Act may be required on the part of any such
selling Holder or any such controlling person in circumstances for
which indemnification is provided under this Section 2.8; then, and
in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion,
so that the Holder is responsible for and shall contribute to the
amount paid or payable by such Indemnified Party as a result of
such loss, liability, claim, damage or expense in such proportion
as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged
untrue 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 party’s relative
intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and other
selling Holders are responsible for the remaining portion,
provided , however , that, in any such case,
(A) no such Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable
Securities offered and sold by such Holder pursuant to such
registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent
misrepresentation.
2.8.5 Survival
. The obligations of the
Company and Holders under this Section 2.8 shall survive the
completion of any offering of Registrable Securities in a
registration statement under this Section 2, and
otherwise.
2.9 Reports Under Securities
Exchange Act of 1934 . With a view to making available to the Holders
the benefits of Rule 144 promulgated under the Act and any other
rule or regulation of the SEC that may at any time permit a Holder
to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company
agrees to:
2.9.1 Make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all
times after one hundred eighty (180) days after the effective date
of the first registration statement filed by the Company for the
offering of its securities to the general public;
2.9.2 Take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act,
as is necessary to enable the Holders to utilize Form S-3 for the
sale of their Registrable Securities, such action to be taken as
soon as practicable after the end of the fiscal year in which the
first registration statement filed by the Company for the offering
of its securities to the general public is declared
effective;
2.9.3 File with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the
1934 Act; and
2.9.4 Furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144 (at any time after one
hundred eighty (180) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934
Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it
so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and
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such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without
registration or pursuant to such form.
2.10 “Market
Stand-Off” Agreement . Each Holder of Registrable Securities hereby
agrees that, during such period as is determined by the
Company’s underwriters (not to exceed 180 days following the
effective date of the first registration statement filed by the
Company under the Act covering Common Stock (or other securities)
to be sold on the Company’s behalf to the public in an
underwritten initial public offering), it shall not, to the extent
requested by the Company, sell or otherwise transfer or dispose of
(other than to a donee who agrees to be similarly bound) any Common
Stock of the Company held by it at any time during such period
except Common Stock included in such registration;
provided , however , that each officer and
director of the Company and each holder of one percent (1.0%) or
more of the Company’s outstanding equity securities enters
into a similar agreement. In order to enforce the foregoing
covenants, the Company may impose stop-transfer instructions with
respect to the Registrable Securities of each Holder (and the
shares or securities of every other person subject to the foregoing
restriction) until the end of any such period.
2.11 Waivers and Amendments of
Registration Rights .
Any term of this Section 2 may be amended and the observance of any
term of this Section 2 may be waived (either generally or in a
particular instance and either retroactively or prospectively),
only with the written consent of the Company and the Holders of at
least a majority of the shares of Registrable Securities then
outstanding. Any amendment or waiver effected in accordance with
this Section 2.11 shall be binding upon the Company and each Holder
of rights under this Section 2.
2.12 Termination of
Registration Rights . No Holder shall be entitled to exercise any
right provided for in this Section 2 after (i) five (5) years
following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering
of its securities to the general public, or (ii) the first date as
of which Holder may sell all of Holders of Registrable Securities
within any period of ninety (90) consecutive days pursuant to Rule
144.
3. CERTAIN COVENANTS OF THE
COMPANY
3.1 Information and Inspection
Rights . Subject to
Section 3.2, below:
3.1.1 The Company shall provide to each Holder the
following information:
A. As soon as practicable after the
end of each fiscal year, and in any event within ninety (90) days
thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income, stockholders’ equity 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 audited by independent public accountants
selected by the Company;
B. As soon as practicable after the
end of each quarter, and in any event within forty-five (45) days
thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such quarter,
consolidated statements of income and cash flows of the Company and
its subsidiaries, if any, for such quarter, and setting forth in
each case in comparative form the figures for corresponding periods
in the previous fiscal year, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes),
subject to changes resulting from year-end audit adjustments, all
in reasonable detail and signed by the principal financial or
accounting officer of the Company; and
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C. As soon as it is available, but
in any event within thirty (30) days prior to the end of the
current fiscal year, an annual financial and business plan for the
next fiscal year of the Company containing profit and loss
projections, cash flow projections, and capital expenditures, all
on a monthly basis.
3.1.2 The rights granted pursuant to Section 3.1.1,
above, may be assigned or otherwise transferred by the Holder or by
any subsequent transferee only to an assignee who acquires
sufficient shares of Preferred Stock so as to hold, in the
aggregate, at least fifteen percent (15.0%) of the number of shares
of Preferred Stock then outstanding.
3.1.3 The foregoing covenants set forth in this
Section 3.1 shall terminate and be of no further force or effect
upon the closing of a Qualified Initial Public Offering.
3.2 Confidentiality
. Except with the prior
written consent of the Company, each Holder receiving information
from the Company pursuant to Section 3.1, above, shall not (i)
disclose such information to any person without the prior written
consent of the Company (which consent may be withheld in the
absolute discretion of the Company), and (ii) shall not use such
information for any purpose other than in evaluating such
person’s investment in the Company. The foregoing covenant
shall not apply to any information which becomes generally
available to the public other than by reason of Holder’s
breach of its obligations under this Section 3.2.
3.3 Reservation of Common
Stock . The Company
shall at all times reserve and keep available, solely for issuance
and delivery upon the conversion of the Shares, all Common Stock
issuable from time to time upon such conversion.
4. MISCELLANEOUS
PROVISIONS
4.1 Notices .
All notices, requests, demands or
other communications permitted or required under this Agreement
shall be effective only if in writing, and shall be deemed to have
been given, received and delivered (a) when personally delivered;
(b) on the third (3 rd ) business day after the date on
which it was deposited by certified or registered United States
mail, return receipt requested, postage prepaid; (c) on the date on
which transmitted by facsimile or other electronic means generating
a receipt evidencing a successful transmission (provided that, on
that same date, a copy of such notice is sent by registered or
certified mail, postage prepaid, return receipt requested), or (d)
on the next business day after the day on which deposited with a
public carrier regulated under United States laws ( e.g .,
Federal Express) for overnight delivery, with a return receipt (or
equivalent thereof administered by such regulated public carrier)
requested, in a sealed envelope addressed to the party for whom
intended at the address or facsimile number set forth on the
signature page of this Agreement or such other address or facsimile
number, notice of which is given in a manner permitted by this
Section 4.1.
4.2 Descriptive Headings
. The descriptive
headings herein have been inserted for convenience only and shall
not be deemed to limit or otherwise affect the construction of any
provisions hereof.
4.3 Arbitration
. All disputes arising under or in
connection with this Agreement and transactions contemplated herein
shall be resolved through binding arbitration, before a single
arbitrator, in the City of Santa
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Barbara, California, under the rules then
obtaining of the American Arbitration Association. the decision of
the arbitrator shall be final and binding on the parties hereto,
and judgment thereon may be entered in a court of competent
jurisdiction.
4.4 Governing Law;
Jurisdiction; Venue . This Agreement shall be governed by and
interpreted under the laws of the State of California as applied to
agreements among California residents, made and to be performed
entirely within the State of California. Subject to Section 4.3,
above, the exclusive venue for all disputes hereunder shall be the
Superior Court in and for Santa Barbara County. Each party hereto
consents to the jurisdiction of the courts of the State of
California, and waives any objection that such venue shall be in
any way inconvenient or otherwise objectionable.
4.5 Counterparts
. This Agreement may be
executed in two or more counterparts, each of which shall for all
purposes be deemed to be an original and all of which shall
constitute the same instrument, binding on each signatory thereto.
The parties acknowledge and agree that after the execution hereof
by the Series A Holders, the Series B Holders, the Series C
Holders, the Series D Holders and the Series E Holders initially
executing this Agreement:
4.5.1 Additional Closings for
Series E Offering .
The Company intends to conduct one or more closings of the sale of
shares of Series E Preferred Stock, pursuant to the Series E
Preferred Stock Purchase Agreement of even date herewith, and each
person purchasing shares of such stock pursuant to such Series E
Preferred Stock Purchase Agreement shall be entitled to execute
counterparts of this Agreement and hold the rights conferred upon
the Series E Holders herein, and such persons shall be treated as
parties to this Agreement without any action or consent by any
other party hereto; and
4.5.2
Continuation .
This Agreement shall continue in full force and effect with respect
to the parties who have executed this Agreement, regardless of
whether or not any of the persons identified in Section 4.5.1,
above, hereafter executes a counterpart or this Agreement or
otherwise are treated as parties to this Agreement.
4.6 Successors and Assigns
. This Agreement shall be
binding upon, and inure to the benefit of, the parties to this
Agreement and their respective successors and assigns; provided
that the registration rights conferred upon Investor in Section
2 of this Agreement are personal to Investor and may not be
assigned to any purchaser of all or any portion of the
Shares.
4.7 Entire Agreement
. This Agreement (i)
represents the entire agreement of the parties regarding the
subject matter hereof, and supersedes all prior or contemporaneous
understandings, whether oral or written, regarding such subject
matter, and (ii) may not be modified or amended, except by a
written instrument executed by the party against whom enforcement
of any such amendment may be sought.
4.8 Separability;
Severability . Unless
expressly provided in this Agreement, the rights of each Holder
under this Agreement are several rights, not rights jointly held
with any other Holders. Any invalidity, illegality or limitation on
the enforceability of this Agreement with respect to any Holder
shall not affect the validity, legality or enforceability of this
Agreement with respect to the other Holders. If any provision of
this Agreement is judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired.
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4.9 Stock Splits
. All references to
numbers of shares in this Agreement shall be appropriately adjusted
to reflect any stock dividend, split, combination or other
recapitalization of shares by the Company occurring after the date
of this Agreement.
4.10 Effect
