Exhibit 4.2
FIFTH AMENDED AND RESTATED INVESTOR RIGHTS
AGREEMENT
PORTALPLAYER, INC.
FIFTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS FIFTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT (the “Agreement”) is entered
into as of March ,
2003, by and among PortalPlayer, Inc., a California corporation
(the “Company”), the undersigned holders of the
Company’s Series A Preferred Stock, Series B Preferred Stock,
Series B-1 Preferred Stock, Series C Preferred Stock, Series C-1
Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock together with their qualifying transferees (collectively, the
“Preferred Holders”), and each of John Mallard, Sanjeev
Kumar, Suresh Bhaskaran, Michael Maia, Jeffrey Grammer and Techfarm
II, L.P. (collectively, the “Common Holders”). This
Agreement supersedes in all respects the Series D Rights Agreement
(as defined below).
RECITALS :
A. Certain investors purchased from
the Company certain shares of the Company’s Series D
Preferred Stock.
B. In connection with the purchase
of shares of Series D Preferred Stock by certain investors, the
purchasers of Series A Preferred Stock, the purchasers of Series B
Preferred Stock, the purchasers of Series C Preferred Stock and the
purchasers of Series D Preferred Stock were granted certain rights
and privileges set forth in a Fourth Amended and Restated Investor
Rights Agreement, dated May 28, 2002 (“Series D Rights
Agreement”).
C. On August 2, 2002 a one hundred
fifty to one (150:1) reverse stock split was effected by the
Company (the “Reverse Split”).
D. Pursuant to that certain Exchange
Agreement of even date herewith (the “Exchange
Agreement”), certain holders of Series D Preferred Stock
exchanged all or a portion of their shares of Series D Preferred
Stock for shares of Series E Preferred Stock (the
“Exchange”).
E. The Company, the Preferred
Holders, and the Common Holders desire to enter into this
Agreement, and to amend, restate and replace their rights under the
Prior Series D Rights Agreement, with the rights set forth in this
Agreement, in order to reflect the effect of the Reverse Split and
the Exchange.
F. By this Agreement, the Company,
the Holders and the Common Holders desire to set forth certain
registration and other rights of the parties as set forth
below.
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AGREEMENT :
NOW, THEREFORE, in consideration of
the foregoing and of the mutual promises and covenants contained
herein, the parties, severally and not jointly, hereby agree as
follows:
1. Registration Rights
.
1.1 Definitions . As used in
this Agreement, the following terms shall have the following
respective meanings:
(a) The term “Common
Shares” shall mean all shares of Common Stock of the Company
owned or subsequently acquired by any Common Holder and all shares
of Common Stock issuable upon exercise or conversion of any
derivative securities held or subsequently acquired by any Common
Holder other than shares of Common Stock issued upon conversion of
Preferred Stock and shares held by such persons which are eligible
for sale on a registration statement on Form S-8.
(b) The terms “Holder”
or “Holders” means any person or persons to whom
Registrable Securities were originally issued or qualifying
transferees under subsection 1.10 hereof who hold Registrable
Securities.
(c) The term “Initiating
Holders” means any Holder or Holders of 10% or greater of the
Registrable Securities then outstanding.
(d) The term “Preferred
Shares” means (i) the Series A Preferred Stock of the Company
(the “Series A Shares”) issued pursuant to the Series A
Stock Purchase Agreement dated October 15, 1999 (the “Series
A Agreement”), (ii) the Series B Preferred Stock of the
Company (the “Series B Shares”) issued pursuant to the
Series B Stock Purchase Agreement dated February 8, 2000 (the
“Series B Agreement”) and the Series B-1 Preferred
Stock issued upon exchange thereof (the “Series B-1
Shares”), (iii) the Series C Preferred Stock of the Company
(the “Series C Shares”) issued pursuant to the Series C
Preferred Stock Purchase Agreement dated December 7, 2000 (the
“Series C Agreement”) and the Series C-1 Preferred
Stock issued upon exchange thereof (the “Series C-1
Shares”), (iv) the Series D Preferred Stock of the Company
(the “Series D Shares”) issued pursuant to the Series D
Preferred Stock Purchase Agreement dated December 12, 2001 and (v)
the Series E Preferred Stock of the Company (the “Series E
Shares”) issued pursuant to the Exchange
Agreement.
(e) The term “Recapitalization
Event” shall mean any consolidation, combination, stock
distribution, stock dividend, stock split or similar
events.
(f) The terms
“register,” “registered” and
“registration” refer to a registration effected by
preparing and filing a registration statement in compliance with
the Securities Act of 1933, as amended (the “Securities
Act”), and the declaration or ordering of the effectiveness
of such registration statement.
(g) The term “Registrable
Securities” means (i) any and all shares of Common Stock of
the Company issued or issuable upon conversion of (1) the Preferred
Shares, (2) the shares of Series A Preferred Stock issuable upon
exercise of the Warrant to Purchase
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Stock, dated as of August 24, 1999,
issued by the Company to Silicon Valley Bank, (3) 66,006 shares of
Series D Preferred Stock issuable upon exercise of the Warrant to
Purchase Stock dated as of September 26, 2002 issued by the Company
to Silicon Valley Bank (as adjusted for any Recapitalization
Event), and (4) for purposes of Section 1.3 only, any and all
shares of Common Stock of the Company held by Common Holders; (ii)
stock issued with respect to or in any exchange for or in
replacement of stock referred to in subsection (i) above which has
not been sold to the public; or (iii) stock issued in respect of
the stock referred to in subsections (i) and (ii) above as a result
of a stock split, stock dividend, recapitalization or the like,
which has not been sold to the public.
(h) The term “Registration
Expenses” shall mean all expenses incurred in complying with
subsections 1.2, 1.3 and 1.4 hereof, including, without limitation,
all registration, qualification and filing fees, accounting fees,
printing expenses, escrow fees, fees and disbursements of counsel
for the Company and counsel for the Holders, blue sky fees and
expenses, exchange or NASDAQ listing fees and the expense of any
special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company.)
(i) The term “SEC” means
the Securities and Exchange Commission.
(j) The term “Series D
Agreement” shall mean the Series D Preferred Stock Agreement
dated May 28, 2002 by and between the Company and certain Preferred
Holders.
1.2 Demand Registration
.
(a) Request for Registration
. If the Company shall receive from the Initiating Holders a
written request that the Company effect any registration,
qualification or compliance with respect to Registrable Securities
with an anticipated aggregate offering price, before deduction of
underwriting discounts and commissions, of at least $5,000,000, the
Company will:
(i) promptly give written notice of
the proposed registration, qualification or compliance to all other
Holders; and
(ii) as soon as practicable, use its
best efforts to effect all such registrations, qualifications and
compliances (including, without limitation, the preparation of a
registration statement and prospectus complying as to form with the
requirements of the Securities Act, the execution of an undertaking
to file post-effective amendments, appropriate qualifications under
the applicable blue sky or other state securities laws and
appropriate compliance with exemptive regulations issued under the
Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such
Initiating Holder’s or Initiating Holders’ Registrable
Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request given
within thirty (30) days after receipt of such written notice from
the
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Company; provided that the Company
shall not be obligated to take any action to effect such
registration, qualification or compliance pursuant to this
subsection 1.2:
A) at any time prior to the earlier
of two (2) years from the date of the Series D Agreement or six (6)
months following the effective date of the registration statement
under the Securities Act for the Company’s initial registered
public offering (the “IPO”) of its securities to the
general public (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
transaction);
B) in any particular jurisdiction in
which the Company would be required to execute a general consent to
service of process unless the Company is already subject to service
in such jurisdiction and except as required by the Securities Act;
or
C) after the Company has effected
three (3) such registrations pursuant to this subsection 1.2(a) and
such registrations have been declared or ordered effective for the
period set forth in Section 1.6(a).
Subject to the foregoing clauses (A)
through (C), the Company shall file a registration statement
covering the Registrable Securities so requested to be registered
as soon as practical, but in any event within sixty (60) days,
after receipt of the request or requests of the Initiating Holders;
provided , however , that if the Company shall
furnish to such holders a certificate signed, by the
Company’s investment bankers and supported by a determination
of the Company’s Board of Directors (the
“Board”), that in its good faith judgment, it would be
seriously detrimental to the Company and its shareholders for such
registration statement to be filed at the date filing would be
required and it is therefore essential to defer the filing of such
registration statement, the Company shall have an additional period
of not more than ninety (90) days after the expiration of the
initial ninety (90) day period within which to file such
registration statement; provided, further that the Company may not
use such additional deferral right more than once in any twelve
(12) month period.
(b) Underwriting . If 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 part of their request made pursuant to
subsection 1.2 and the Company shall include such information in
the written notice referred to in subsection 1.2(a)(i). In such
event, the underwriter shall be selected by a majority in interest
of the Initiating Holders and shall be reasonably acceptable to the
Company. The right of any Holder to registration pursuant to
subsection 1.2 shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such
Holder’s Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or
underwriters. Notwithstanding any other provision of this
subsection 1.2, if the underwriter advises the Initiating Holders
in writing that marketing factors require a limitation of the
number of shares to be underwritten, the Initiating Holders shall
so advise all Holders, and the number of shares of Registrable
Securities that may be included in the registration and
underwriting shall be allocated as follows: (i) first, among the
Holders of all
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Registrable Securities consisting
of, or issued with respect to or in any exchange for or in
replacement of, Series D Preferred Stock and/or Series E Preferred
Stock, which are requested to be registered under this Section 1,
reduced, if necessary, in proportion to the respective amount of
such Registrable Securities held by such Holders and (ii) second,
among the Holders of all other Registrable Securities in
proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders; provided ,
however , that the number of shares of Registrable
Securities, other than the Common Shares, to be included in such
underwriting shall not be reduced unless all other securities,
including the Common Shares, are first entirely excluded from the
underwriting. If any Holder of Registrable Securities held by
Common Holders disapproves of the terms of the underwriting, such
Holder may elect to withdraw therefrom by written notice to the
Company, the underwriter and the Initiating Holders. Any
Registrable Securities which are excluded from the underwriting by
reason of the underwriter’s marketing limitation or withdrawn
from such underwriting shall be withdrawn from such registration.
If the underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include securities
for its own account (or for the account of employees and other
holders, at the Company’s sole discretion) in such
registration if the underwriter so agrees and if the number of
Registrable Securities which would otherwise have been included in
such registration and underwriting will not thereby be limited by
the underwriter.
1.3 Company Registration
.
(a) Registration . If at any
time or from time to time, the Company shall determine to register
any of its securities, for its own account or the account of any of
its shareholders, other than a registration relating solely to
employee stock option or purchase plans, or a registration on Form
S-4 relating solely to an SEC Rule 145 transaction or a
registration on any other form (other than Form S-1, S-2, S-3 or
S-18, or their successor forms) or any successor to such forms,
which does not include substantially the same information as would
be required to be included in a registration statement covering the
sale of Registrable Securities, the Company will:
(i) promptly give to each Holder
written notice thereof and
(ii) include in such registration
(and any related qualification under blue sky laws or other
compliance with applicable laws), and in any underwriting involved
therein, all the Registrable Securities specified in a written
request or requests, made within twenty (20) days after receipt of
such written notice from the Company, by any Holder or Holders,
except as set forth in subsection 1.3(b) below.
(b) 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 subsection 1.3(a)(i). In such event the right of any Holder to
registration pursuant to subsection 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 shall
(together with the Company and the other shareholders distributing
their securities through such underwriting) enter into an
underwriting
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agreement in customary form with the
underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this subsection
1.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, and (i) if
such registration is the IPO, the underwriter may limit the number
of Registrable Securities to be included in the registration and
underwriting, or may exclude Registrable Securities entirely from
such registration and underwriting; provided that no other
securities are registered and sold in the IPO other than those
securities registered and sold by the Company, or (ii) if such
registration is other than the IPO, the underwriter may limit the
amount of securities to be included in the registration and
underwriting by the Company’s shareholders; provided
however , the number of Registrable Securities to be
included in such registration and underwriting under this
subsection 1.3(b)(ii) shall not be reduced to less than twenty five
percent (25%) of the aggregate securities included in such
registration, allocated as follows: (i) first, among the Holders of
all Registrable Securities consisting of, or issued with respect to
or in any exchange for or in replacement of, Series D Preferred
Stock and/or Series E Preferred Stock, which are requested to be
registered under this Section 1, reduced, if necessary, in
proportion to the respective amount of such Registrable Securities
held by such Holders and (ii) second, among the Holders of all
other Registrable Securities in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities
held by such Holders; and provided, further, that the number of
shares of Registrable Securities, other than Common Shares, to be
included in such underwriting shall not be reduced until all other
securities, including the Common Shares, are first entirely
excluded from the underwriting. The Company shall so advise all
Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto, and the number of
shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated first, to the
Company; second, among the Holders requesting registration in
proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by each of such Holders as of the date
of the notice pursuant to subsection 1.3(a)(i) above; and third,
among the other Holders on a pro rata basis. If any Holder
disapproves of the terms of such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities excluded or withdrawn from
such underwriting shall be withdrawn from such
registration.
(c) Registration Rights of
Officers and Directors . Upon any sale by the Company of its
securities to the public in a firmly underwritten public offering,
other than the Company’s initial public offering, the then
existing officers and directors of the Company shall be entitled to
include any of their securities of the Company in any registration
by the Company under this subsection 1.3 provided that such
inclusion shall not diminish the number of securities included by
the Company or the number of Registrable Securities which may be
included by the Holders as set forth in subsection 1.3(b) above in
the event that the underwriters determine that marketing factors
require a limitation on the number of shares included in the
registration and underwriting and provided, further, that such
inclusion shall be subject to all of the restrictions and
limitations set forth herein, including without limitation the
indemnity and market stand-off provisions hereof.
1.4 Form S-3 . In addition to
the rights and obligations set forth in subsection 1.2 above, if
any Holder requests that the Company file a registration statement
on Form S-3 (or any successor to Form S-3) for a public offering of
shares of Registrable Securities, the reasonably anticipated
aggregate price to the public of which (before deduction
of
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underwriting discounts and
commissions) would equal or exceed $2,500,000 and the Company is
then a registrant entitled to use Form S-3 to register the shares
for such an offering, the Company shall use its best efforts to
cause such shares to be registered for the offering as soon as
practicable (but in no event more than 60 days after receipt of the
request) on Form S-3 (or any successor form to Form S-3);
provided , however , that the Company shall not be
required to effect more than two (2) registrations pursuant to this
subsection 1.4 in any 365 day period; and; provided, further, that
the Company shall not be required to effect a registration pursuant
to this subsection 1.4:
(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) if the Company, within ten (10)
days of the receipt of the request of such Holder(s), gives notice
of its bona fide intention to effect the filing of a registration
statement with the SEC within forty-five (45) days of receipt of
such request (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees
or any other registration which is not appropriate for the
registration of Registrable Securities);
(c) during a period of one hundred
eighty (180) days following the effective date of a registration
statement pursuant to which Holders had the opportunity to
participate pursuant to Section 1.3 hereof; or
(d) if the Company shall furnish to
such Holders a certificate signed by the Company’s investment
bankers and supported by a determination of the Company’s
Board that, in its good faith judgment, it would be seriously
detrimental to the Company and its shareholders for such
registration statement to be filed on or before the date filing
would be required and it is therefore essential to defer the filing
of such registration statement, in which case the Company shall
have the right to defer such filing for a period of not more than
ninety (90) days after the furnishing of such a certificate of
deferral, provided that the Company may not defer such filing
pursuant to this subsection 1.4(d) more than once in any twelve
(12) month period.
In the event such Holders propose to
offer the shares of Registrable Securities pursuant to this
subsection 1.4 by means of an underwriting, the proposed
underwriter(s) shall be selected by a majority in interest of the
such Holders and shall be reasonably acceptable to the Company,
provided , however , that in the event such
underwriter(s) is (are) not reasonably acceptable to the Company,
the Company shall be required to furnish to the Holders, within
twenty (20) days of the receipt of the request for registration
from Holders pursuant to this subsection 1.4, the names of at least
2 underwriters acceptable to the Company, who agree to act as
underwriter for the proposed offering on terms no less favorable to
the Holders than those terms proposed in writing by the
underwriter(s) selected by the Holders. The Company shall give
written notice to all Holders of the receipt of a request for
registration pursuant to this subsection 1.4 and shall provide a
reasonable opportunity for other Holders to participate in the
registration, provided that if the registration is for an
underwritten offering, the terms of subsection 1.2(b),
including
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without limitation the provisions relating to
the allocation of Registrable Securities in a registration and
underwriting and the exclusion of other securities (including the
Common Shares held by Common Holders) prior to any reduction of
Registrable Securities in any Underwriting, shall apply to all
participants in such offering. Any registration pursuant to this
Section 1.4 shall not be counted as a registration pursuant to
Section 1.2.
1.5 Expenses of Registration
. All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to this Section
1 shall be borne by the Company except as follows:
(a) The Company shall not be
required to pay for expenses of any registration proceeding begun
pursuant to subsection 1.2 the request for which has been
subsequently withdrawn by the Initiating Holders (in which such
case, such expenses shall be borne pro rata by the Holders
requesting such withdrawal); provided that if such withdrawal is
(i) the result of an adverse change in the condition or the
business of the Company or (ii) the consequence of a decline of 10%
or more in the Nasdaq composite index or the Russell 2000 small-cap
index, measured from the date of any request for registration given
pursuant to Section 1.2, then the Holders shall not be required to
pay any such expenses and the Company shall pay such
expenses.
(b) The Company shall not be
required to pay fees and/or disbursements of counsel(s) for the
Holders except for the reasonable fees and expenses for a single
counsel acting on behalf of all selling Holders (which counsel may
also be counsel to the Company unless counsel to the Company has a
conflict of interest with respect to the representation of any
selling Holder or the underwriters or a majority in interest of the
participating Holders object to the selling Holders’
representation by Company counsel).
(c) The Company shall not be
required to pay underwriters’ fees, discounts or commissions
relating to Registrable Securities.
1.6 Registration Procedures .
In the case of each registration, qualification or compliance
effected by the Company pursuant to this Rights Agreement, the
Company will keep each Holder participating therein advised in
writing as to the initiation of each registration, qualification
and compliance and as to the completion thereof. Except as
otherwise provided in subsection 1.5, at its expense the Company
will:
(a) 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 as soon as practicable, and keep such registration
statement effective for a period of 180 days or until the Holder or
Holders have completed the distribution described in the
registration statement relating thereto, whichever first
occurs;
(b) Prepare and file with the SEC
such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by
such registration statement.
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(c) Use its best efforts to register
and qualify the securities covered by such registration statement
under such other securities or Blue Sky laws of such jurisdictions
as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions
unless the Company is already subject to service in such
jurisdiction and expect as may be required by the Securities
Act.
(d) In the event of any underwritten
public offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the
managing underwriter of such offering. Each Holder participating in
such underwriting shall also enter into and perform its obligations
under such an agreement.
(e) Furnish to the Holders such
numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by them.
(f) Notify each Holder of
Registrable Securities covered by such registration statement at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as
a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then
existing.
(g) Cause all Registrable Statements
registered under this Section 1 to be listed on each securities
exchange or reporting system on which similar securities issued by
the Company are then listed.
(h) Provide a transfer agent,
registrar, and a CUISP number for such Registrable Securities not
later than the effective date of such registration.
(i) Use its best efforts to have its
counsel and its accountants to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant
to this Section 1, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with such
registration, if such securities are being sold through
underwriters or, if such securities are not being sold through
underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated
such date, of the counsel representing the Company for the purposes
of such registration, in form and substance as is customarily given
to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such
date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if
any, and to the Holders requesting registration of Registrable
Securities.
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1.7 Indemnification
.
(a) The Company will indemnify and
hold harmless each Holder of Registrable Securities and each of its
officers, directors and partners, and each person controlling such
Holder, with respect to which such registration, qualification or
compliance has been effected pursuant to this Rights Agreement, and
each underwriter, if any, and each person who controls any
underwriter of the Registrable Securities held by or issuable to
such Holder, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereto) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained in or incorporated by reference into any
registration statement, prospectus, offering circular, prospectus
supplement, abbreviated term sheet 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 statement
therein not misleading, or any violation or alleged violation by
the Company of the Securities Act, the Securities Exchange Act of
1934, as amended, (“Exchange Act”), the Trust Indenture
Act of 1939, as amended, or any state securities law applicable to
the Company or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any such state law and relating
to action or inaction required of the Company in connection with
any such registration, qualification of compliance, and will
reimburse each such Holder, each of its officers, directors and
partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, on
an as incurred basis for any reasonable legal and any other
expenses incurred in connection with investigating, defending, or
settling any such claim, loss, damage, liability or action;
provided, however, that the indemnity agreement contained in this
subsection 1.7(a) shall not apply to amounts paid in settlement of
any such claim, loss, damage, liability, or action if such
settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld); and provided further,
that the Company will not be liable in any such case to the extent
that and only to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by
an instrument duly executed by such Holder specifically for use
therein. This obligation shall be in addition to all other rights
and remedies available to a Holder.
(b) Each Holder, severally and not
jointly, will, if Registrable Securities held by or issuable to
such Holder are included in the securities as to which such
registration, qualification or compliance is being effected,
indemnify the Company and each of its directors and officers,
against all claims, losses, expenses, damages and liabilities (or
actions in respect thereof) (collectively “Damages”)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in or incorporated by
reference into any such registration statement, prospectus,
offering circular, prospectus supplement or other document incident
to 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, and will reimburse the Company, such
directors and officers, for any reasonable legal or any other
expenses incurred in connection with investigating, defending or
settling 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 or prospectus in
reliance upon and in conformity with written information furnished
to the Company by the Holder in an
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instrument duly executed by such
Holder specifically for use therein; provided ,
however , that the indemnity agreement contained in this
subsection 1.7(b) shall not apply to amounts paid in settlement of
any such claim, loss, damage, liability or action if such
settlement is effected without the consent of the Holder (which
consent shall not be unreasonably withheld); and provided
further , that the total amount for which any Holder shall
be liable under this subsection 1.7(b) shall not in any event
exceed the lesser of the net proceeds received by such Holder from
the sale of Registrable Securities held by such Holder in such
registration or its pro rata amount of the Damages based on the
number of securities sold by each such Holder. No holder of
Registrable Securities will be required to indemnify any person
against any liability arising from any untrue or misleading
statement or omission contained in any preliminary prospectus if
such deficiency was corrected in the final prospectus or for any
liability which arises out of the failure of any person to deliver
a prospectus as required by the Securities Act.
(c) Each party entitled to
indemnification under this subsection 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 that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may
participate in such defense and hire counsel at such party’s
own 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 hereunder, unless
and only to the extent that such failure resulted in material
prejudice to the Indemnifying Party; and provided further, that an
Indemnified Party (together with all other Indemnified Parties
which may be represented without conflict by one counsel) shall
have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of
such Indemnified Party by the counsel retained by the Indemnifying
Party would be inappropriate due to actual or potential differing
interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying
Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry
of any judgment or enter into any settlement which does not include
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. Any Indemnified Party shall
reasonably cooperate with the Indemnifying Party in the defense of
any claim or litigation brought against such Indemnified
Party.
(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 losses, claims, damages or liabilities referred to herein,
the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, claim, damage or liability 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 violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying
Party and of the Indemnified Party shall be determined by a court
of law by reference to, among other things, whether the
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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; provided, that in no event
shall any contribution by a Holder hereunder exceed the net
proceeds from the offering received by such Holder.
(e) The obligations of the Company
and Holders under this Section 1.7 shall survive completion of any
offering of Registrable Securities and the termination of this
Agreement. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any
settlement which does not include 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.
(f) No Holder shall be obligated to
enter into an underwriting agreement that contains any provisions
more onerous to such Holder than the provisions in this Section 1.7
and such failure to enter into such agreement shall not adversely
affect such Holder’s rights set forth herein.
1.8 Information by Holder .
Any Holder or Holders of Registrable Securities included in any
registration shall promptly furnish to the Company such information
regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as
shall be required in connection with any registration,
qualification or compliance referred to herein.
1.9 Rule 144 Reporting . With
a view to making available to Holders the benefits of certain rules
and regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the
Company agrees at all times to:
(a) make and keep public information
available, as those terms are understood and defined in SEC Rule
144 promulgated under the Securities Act, after ninety (90) days
after the effective date of the first registration statement filed
by the Company whether under the Securities Act or the Exchange
Act;
(b) file with the SEC in a timely
manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements); and
(c) so long as a Holder owns any
Registrable Securities, to furnish to s
