FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENTInvestors Rights Agreement |
|
|
|
You are currently viewing: This Investors Rights Agreement involves
SOURCEFIRE INC. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
|
|
|
Search Investors Rights Agreement by:
Exhibit 10.1
SOURCEFIRE, INC.
FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
This
Fourth Amended and Restated Investor Rights Agreement (this “Agreement”),
dated as of May 24, 2006, is entered into by and among Sourcefire, Inc., a
Delaware corporation (the “Company”), the individuals
and entities listed on Exhibit A attached hereto (the
“Series A Purchasers”, the “Series B
Purchasers” and the “Series C Purchasers”),
and the individuals and entities listed on Exhibit B
attached hereto (the “Series D Purchasers” and
together with the Series A Purchasers, the Series B Purchasers and
the Series C Purchasers, the “Purchasers”).
Recitals
WHEREAS,
the Series D Purchasers are purchasing shares of the Company’s
Series D Convertible Preferred Stock, par value $0.001 per share (the
“Series D Preferred Stock”), pursuant to that
certain Series D Convertible Preferred Stock Purchase Agreement, dated as
of the date hereof, by and among the Company and the parties identified therein
(the “Purchase Agreement”);
WHEREAS,
the obligations in the Purchase Agreement are conditioned upon the execution
and delivery of this Agreement;
WHEREAS,
the Series A Purchasers are holders of the Company’s Series A
Convertible Preferred Stock, par value $0.001 per share (the “Series A
Preferred Stock”), the Series B Purchasers are holders of
the Company’s Series B Convertible Preferred Stock, par value $0.001
per share (the “Series B Preferred Stock”), the
Series C Purchasers are holders of the Company’s Series C
Convertible Preferred Stock, par value $0.001 per share (the “Series C
Preferred Stock” and together with the Series A Preferred
Stock, the Series B Preferred Stock and the Series D Preferred Stock,
the “Preferred Stock”);
WHEREAS, the Company and the Series A Purchasers,
Series B Purchasers and Series C Purchasers are parties to the Third
Amended and Restated Investor Rights Agreement dated as of January 15,
2004 (the “Prior Agreement”);
WHEREAS,
the Prior Agreement can be amended with the written consent of (i) the
Company, (ii) those Series A Purchasers holding Series A Preferred
Stock representing at least two-thirds (2/3) of the outstanding shares of
Series A Preferred Stock then held by the Series A Purchasers, (iii)
those Series B Purchasers holding Series B Preferred Stock
representing at least sixty percent (60%) of the outstanding shares of
Series B Preferred Stock then held by the Series B Purchasers, and
(iv) those Series C Purchasers holding Series C Preferred Stock
representing at least a majority of the outstanding shares of Series C
Preferred Stock then held by the Series C Purchasers; and
WHEREAS, the parties to the Prior
Agreement desire to amend and restate the Prior Agreement in its entirety and,
together with the other parties hereto, desire to enter into this
Agreement in order to effect
such amendment and restatement of the Prior Agreement and to grant certain
registration and information rights to the Purchasers.
NOW,
THEREFORE, in consideration of the mutual promises and covenants contained in
this Agreement, the parties hereto agree as follows:
1. Certain
Definitions.
As
used in this Agreement, the following terms shall have the following respective
meanings:
“Available
Undersubscription Amount” means the difference between the total
of all of the Basic Amounts available for purchase by Purchasers pursuant to
Section 3.1 and the Basic Amounts subscribed for pursuant to
Section 3.1.
“Basic
Amount” means, with respect to a Purchaser, its pro rata portion
of the Offered Securities determined by dividing the aggregate number of shares
of Common Stock issued or issuable upon conversion of the Preferred Stock then
held by such Purchaser by the total number of shares of Common Stock
then-outstanding and issuable upon conversion of the Preferred Stock then held
by all of the Purchasers; provided, however, that DBED’s Basic
Amount shall include that additional portion of Offered Securities as if DBED
purchased its pro rata share of (i) the Series B Preferred Stock
purchased by all of the Series A Purchasers pursuant to the Series B
Convertible Preferred Stock Purchase Agreement dated February 10, 2003
(i.e., 244,643 shares of Series B Preferred Stock), (ii) the
Series C Preferred Stock purchased by all of the Series A Purchasers
and Series B Purchasers pursuant to the Series C Convertible
Preferred Stock Purchase Agreement dated January 15, 2004 (i.e. 184,694 shares
of Series C Preferred Stock), and (iii) the Series D Preferred
Stock purchased by all of the Series A Purchasers, Series B
Purchasers and Series C Purchasers pursuant to the Purchase Agreement and
the Basic Amount of the other Purchasers shall be reduced on a pro rata basis; provided,
further, however, that for purposes of determining the pro rata portion of
Core Capital Partners, L.P. and Minotaur Funds, LLC, the shares of Common Stock
issued or issuable upon conversion of the Preferred Stock then held by Core
Capital Partners, L.P. and Minotaur Funds, LLC shall be aggregated and Core
Capital Partners, L.P. and the Minotaur Funds, LLC (either individually or
together) shall have the right to repurchase all or part of such aggregate pro
rata portion.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Commission”
means the Securities and Exchange Commission, or any other federal agency at
the time administering the Securities Act.
“Common
Stock” means the common stock, $0.001 par value per share, of the
Company.
“Company”
has the meaning ascribed to it in the introductory paragraph hereto.
2
“Company
Sale” means an Acquisition (as defined in the Certificate of
Incorporation of the Company in effect on the date hereof (the “Charter”))
or an Asset Transfer (as defined in the Charter).
“Company
Subsidiary” means any corporation, partnership, trust, limited
liability company or other non-corporate business enterprise in which the
Company (or another Company Subsidiary) holds stock or other ownership interests
representing (a) more that fifty percent (50%) of the voting power of all
outstanding stock or ownership interests of such entity or (b) the right
to receive more than fifty percent (50%) of the net assets of such entity
available for distribution to the holders of outstanding stock or ownership
interests upon a liquidation or dissolution of such entity.
“Confidential
Information” means any information that is labeled as
confidential, proprietary or secret, or which otherwise should be reasonably
understood by the recipient because of the circumstances of disclosure or the
nature of the information itself, which a Purchaser obtains from the Company
pursuant to financial statements, reports and other materials provided by the
Company to such Purchaser pursuant to this Agreement or pursuant to visitation
or inspection rights granted hereunder.
“DBED”
means the Maryland Department of Business and Economic Development.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
issued under such act, as they each may, from time to time, be in effect.
“Indemnified
Party” means a party entitled to indemnification pursuant to
Section 2.5.
“Indemnifying
Party” means a party obligated to provide indemnification
pursuant to Section 2.5.
“Initiating
Holders” means the Purchasers initiating a request for
registration pursuant to Section 2.1(a) or 2.1(b), as the case may be.
“Major
Purchaser” means DBED, Meritech and any Purchaser that holds at
least five percent (5%) of the Common Stock issued or issuable upon the
conversion of all the Preferred Stock.
“Meritech”
means Meritech Capital Partners III L.P., Meritech Capital Affiliates III L.P.
and their respective affiliates.
“Notice
of Acceptance” means a written notice from a Purchaser to the
Company containing the information specified in Section 3.1(b).
3
“Offer”
means a written notice of any proposed or intended issuance, sale or exchange
of Offered Securities containing the information specified in
Section 3.1(a).
“Offered
Securities” means (i) any shares of Common Stock,
(ii) any other equity securities of the Company, including, without
limitation, shares of preferred stock, (iii) any option, warrant or other
right to subscribe for, purchase or otherwise acquire any equity securities of
the Company, or (iv) any debt securities convertible into capital stock of
the Company.
“Other
Holders” means holders of securities of the Company (other than
Purchasers) who are entitled, by contract with the Company, to have securities
included in a Registration Statement.
“Preferred
Stock” has the meaning ascribed to it in the recitals hereto.
“Prospectus”
means the prospectus included in any Registration Statement, as amended or
supplemented by an amendment or prospectus supplement, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Purchase
Agreement” has the meaning ascribed to it in the recitals hereto.
“Purchaser”
has the meaning ascribed to it in the introductory paragraph hereto.
“Qualifying
Public Offering” has the meaning ascribed to it in the Charter.
“Refused
Securities” means those Offered Securities as to which a Notice
of Acceptance has not been given to the Company by the Purchasers pursuant to
Section 3.1.
“Registration
Statement” means a registration statement filed by the Company
with the Commission for a public offering and sale of securities of the Company
under the Securities Act (other than a registration statement relating to an
employee benefit plan or any corporate reorganization or other transaction
under Rule 145, such as a registration statement on Form S-8 or Form S-4,
or their successors forms, or any other form for a similar limited purpose).
“Registration
Expenses” means all expenses (other than underwriting discounts
and commissions and transfer taxes) incurred by the Company in complying with
the provisions of Section 2, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, fees
and expenses of counsel for the Company and the fees and expenses of one
counsel selected by the holders of a majority of the Registrable Shares held by
the Selling Stockholders to represent the Selling Stockholders in connection
with such registration, state Blue Sky fees and expenses, and the expense of
any special audits incident to or required by any such registration, but
excluding underwriting discounts, selling commissions and the fees and expenses
of Selling Stockholders’ own counsel (other than the counsel selected to
represent all Selling Stockholders).
4
“Registrable
Shares” means (a) the shares of Common Stock issued or
issuable upon conversion of the Preferred Stock, (b) the shares of Common
Stock issued or issuable upon the conversion or exercise of any other
convertible securities or warrants acquired by the holders of the Preferred
Stock, (c) any other shares of Common Stock issued as a dividend or other
distribution with respect to, or in exchange for, or in replacement of, such
shares, and (d) any shares of Common Stock or Preferred Stock acquired
pursuant to that certain Fourth Amended and Restated Right of First Refusal and
Co-Sale Agreement, dated as of the date of this Agreement, by and among the
Company, the Purchasers, and the Key Holders (all as defined therein) (the
“Co-Sale Agreement”); provided, however,
that shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares upon five (5) years after the closing of the Qualifying
Public Offering or, with respect to any holder, at such time that such holder
is able to sell all its shares of Common Stock pursuant to Rule 144(k).
Wherever reference is made in this Agreement to a request or consent of holders
of a certain percentage of Registrable Shares, the determination of such
percentage shall include shares of Common Stock issuable upon conversion of the
Preferred Stock even if such conversion has not been effected.
“Securities
Act” means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
issued under such act, as they each may, from time to time, be in effect.
“Selling
Stockholder” means any person owning of record Registrable Shares
to be included in a Registration Statement.
“Undersubscription
Amount” means, with respect to a Purchaser, any additional
portion of the Offered Securities attributable to the Basic Amounts of other
Purchasers as such Purchaser indicates it will purchase or acquire should the
other Purchasers subscribe for less than their Basic Amounts.
2. Registration
Rights.
2.1
Required Registrations.
(a) At
any time after the earlier of (i) the fourth (4th)
anniversary of the date of this Agreement or (ii) six (6) months
after the closing of the Qualifying Public Offering, a Purchaser or Purchasers
holding in the aggregate at least twenty percent (20%) of the Registrable
Shares may together request, in writing, that the Company effect the
registration on Form S-1 (or any successor form) of Registrable Shares having
an aggregate anticipated offering price, net of underwriting discounts and
commissions, of at least $5,000,000 (based on the market price or fair value on
the date of such request). The Company shall not be required to effect more
than two (2) registrations (that have been declared and ordered effective by
the Commission) pursuant to this Section 2.1(a).
(b) At
any time after the Company becomes eligible to file a Registration Statement on
Form S-3 (or any successor form relating to secondary offerings), a Purchaser
or Purchasers holding at least ten percent (10%) of the Registrable Shares may
request, in writing, that the Company effect the registration on Form S-3 (or
such successor
5
form) of Registrable Shares
having an aggregate anticipated offering price of at least $2,000,000. The
Company shall not be required to effect more than two (2) registrations in
any twelve (12) month period pursuant to this Section 2.1(b).
(c) Upon
receipt of any request for registration pursuant to this Section 2.1, the
Company shall promptly give written notice of such proposed registration to all
Purchasers other than the Initiating Holders. Such Purchasers shall have the
right, by giving written notice to the Company within thirty (30) days
after the Company provides its notice, to elect to have included in such
registration such of their Registrable Shares as such Purchasers may request in
such notice of election, subject in the case of an underwritten offering to the
terms of Section 2.1(d). Thereupon, the Company shall, as expeditiously as
possible, use its best efforts to effect the registration on an appropriate
registration form of all Registrable Shares which the Company has been
requested to so register; provided, however, that in the case of
a registration requested under Section 2.1(b), the Company will only be
obligated to effect such registration on Form S-3 (or any successor form).
(d) If
the Initiating Holders intend to distribute the Registrable Shares covered by
their request by means of an underwriting, they shall so advise the Company as
a part of their request made pursuant to Section 2.1(a) or (b), as the case
may be, and the Company shall include such information in its written notice
referred to in Section 2.1(c). In such event, the right of any other
Purchaser to include its Registrable Shares in such registration pursuant to
Section 2.1(a) or (b), as the case may be, shall be conditioned upon such
other Purchaser’s participation in such underwriting on the terms set
forth herein. All Purchasers including Registrable Shares in such registration
shall enter into an underwriting agreement upon customary terms with the
underwriter or underwriters selected for such underwriting by the Company and
approved by a majority of the Initiating Holders, which such approval will not
be unreasonably withheld, conditioned, or delayed; provided that such
underwriting agreement shall not provide for indemnification or contribution
obligations on the part of the Purchasers materially greater than the
obligations of the Purchasers pursuant to Section 2.5. If any Purchaser
who has requested inclusion of its Registrable Shares in such registration as
provided above disapproves of the terms of the underwriting, such Purchaser may
elect, by written notice to the Company, to withdraw its Registrable Shares
from such Registration Statement and underwriting. If the managing underwriter
advises the Company in writing that marketing factors require a limitation on
the number of shares to be underwritten, the number of Registrable Shares to be
included in the Registration Statement and underwriting shall be allocated
among all Purchasers requesting registration in proportion, as nearly as
practicable, to the respective number of Registrable Shares held by them on the
date of the request for registration made by the Initiating Holders pursuant to
Section 2.1(a) or (b), as the case may be; provided, however, that
the number of shares of Registrable Securities to be included in such
underwriting and registration shall not be reduced unless all other securities
of the Company are first entirely excluded from the underwriting and
registration. If any Purchaser would thus be entitled to include more
Registrable Shares than such Purchaser requested to be registered, the excess
shall be allocated among other requesting Purchasers pro rata in the manner
described in the preceding sentence.
6
(e) The
Company shall not be required to effect any registration within six
(6) months after the effective date of the Registration Statement relating
to the Qualifying Public Offering. For purposes of this Section 2.1(e), a
Registration Statement shall not be counted if, as a result of an exercise of
the underwriter’s cut-back provisions, less than thirty-five percent
(35%) of the total number of Registrable Shares that Purchasers have requested
to be included in such Registration Statement are so included.
(f) If
at the time of any request to register Registrable Shares by Initiating Holders
pursuant to this Section 2.1, the Company is engaged or has plans to
engage in a registered public offering or is engaged in any other activity
which, in the good faith determination of the Company’s Board of
Directors, would be adversely affected by the requested registration, then the
Company may at its option direct that such request be delayed for a period not
in excess of ninety (90) days from the date of such request, such right to
delay a request to be exercised by the Company not more than twice in any
twelve (12) month period.
2.2
Incidental Registration.
(a) Whenever
the Company proposes to file a Registration Statement (other than a
Registration Statement filed pursuant to Section 2.1 or filed as part of
the Company’s initial public offering) at any time and from time to time,
it will, prior to such filing, give written notice to all Purchasers of its
intention to do so. Upon the written request of a Purchaser or Purchasers given
within fifteen (15) days after the Company provides such notice (which
request shall state the intended method of disposition of such Registrable
Shares), the Company shall use its best efforts to cause all Registrable Shares
which the Company has been requested by such Purchaser or Purchasers to
register to be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of such Purchaser or Purchasers; provided
that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Section 2.2 without obligation to
any Purchaser.
(b) If
the registration for which the Company gives notice pursuant to
Section 2.2(a) is a registered public offering involving an underwriting,
the Company shall so advise the Purchasers as a part of the written notice
given pursuant to Section 2.2(a). In such event, the right of any
Purchaser to include its Registrable Shares in such registration pursuant to
this Section 2.2 shall be conditioned upon such Purchaser’s
participation in such underwriting on the terms set forth herein. All Purchasers
including Registrable Shares in such registration shall enter into an
underwriting agreement upon customary terms with the underwriter or
underwriters selected for the underwriting by the Company; provided that
such underwriting agreement shall not provide for indemnification or
contribution obligations on the part of Purchasers materially greater than the
obligations of the Purchasers pursuant to Section 2.5. If any Purchaser
who has requested inclusion of its Registrable Shares in such registration as
provided above disapproves of the terms of the underwriting, such Purchaser may
elect, by written notice to the Company delivered at least ten
(10) business days prior to the effective date of the registration
statement, to withdraw its shares from such Registration Statement and
underwriting without loss of any future registration rights. If the managing
underwriter advises the Company in writing that
7
marketing factors require a
limitation on the number of shares to be underwritten, the number of shares
that may be included in the underwriting shall be allocated, first, to the
Company, and second, to the Selling Stockholders in proportion, as nearly as
practicable, to the respective number of Registrable Shares held by them on the
date the Company gives the notice specified in Section 2.2(a); provided,
however, that the number of Registrable Shares permitted to be included
in such registration shall in any event be at least twenty-five percent (25%)
of the aggregate number of shares included in such registration, unless such
registration is the initial public offering. No Registrable Shares shall be
excluded from such offering unless all other shares (other than those to be
sold for the account of the Company) are first excluded.
2.3
Registration Procedures.
(a) If
and whenever the Company is required by the provisions of this Agreement to use
its best efforts to effect the registration of any Registrable Shares under the
Securities Act, the Company shall promptly:
(i) file
with the Commission a Registration Statement with respect to such Registrable
Shares and use its best efforts to cause that Registration Statement to become
effective;
(ii) prepare
and file with the Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration Statement as may be
necessary to comply with the provisions of the Securities Act (including the
anti-fraud provisions thereof) and to keep the Registration Statement effective
for thirty (30) days from the effective date or such lesser period until
all such Registrable Shares are sold, provided that a Registration Statement on
a Form S-3 which will remain effective for twelve (12) months from the effective
date or such lesser period until all such Registrable Shares are sold;
(iii) furnish
to each Selling Stockholder such reasonable numbers of copies of the
Prospectus, including any preliminary Prospectus, in conformity with the requirements
of the Securities Act, and such other documents as such Selling Stockholders
may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Shares owned by such Selling Stockholder;
(iv) register
or qualify the Registrable Shares covered by the Registration Statement under
the securities or Blue Sky laws of such states as the Selling Stockholders
shall reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the Selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the Selling Stockholders; provided, however, that the Company
shall not be required in connection with this paragraph (iv) to qualify as
a foreign corporation or execute a general consent to service of process in any
jurisdiction;
(v) cause
all such Registrable Shares to be listed on each securities exchange or
automated quotation system on which similar securities issued by the Company
are then listed;
8
(vi) provide
a transfer agent and registrar for all such Registrable Shares not later than
the effective date of such registration statement;
(vii) make
available for inspection by the Selling Stockholders, any managing underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney or accountant or other agent retained by any such underwriter or
selected by the Selling Stockholders, all financial and other records,
pertinent corporate documents and properties of the Company and cause the
Company’s officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such Registration Statement;
(viii) notify
each Selling Stockholder, promptly after it shall receive notice thereof, of
the time when such Registration Statement has become effective or a supplement
to any Prospectus forming a part of such Registration Statement has been filed;
and
(ix) following
the effectiveness of such Registration Statement, notify each seller of such
Registrable Shares of any request by the Commission for the amending or
supplementing of such Registration Statement or Prospectus.
(b) If
the Company has delivered a Prospectus to the Selling Stockholders and after
having done so the Prospectus is amended to comply with the requirements of the
Securities Act, the Company shall promptly notify the Selling Stockholders and,
if requested, the Selling Stockholders shall immediately cease making offers of
Registrable Shares and return all Prospectuses to the Company. The Company
shall promptly provide the Selling Stockholders with revised Prospectuses and,
following receipt of the revised Prospectuses, the Selling Stockholders shall
be free to resume making offers of the Registrable Shares.
(c) In
the event that, in the judgment of the Company, it is advisable to suspend use
of a Prospectus included in a Registration Statement due to pending material
developments or other events that have not yet been publicly disclosed and as
to which the Company believes public disclosure would be detrimental to the
Company, the Company shall notify all Selling Stockholders to such effect, and,
upon receipt of such notice, each such Selling Stockholder shall immediately
discontinue any sales of Registrable Shares pursuant to such Registration
Statement until such Selling Stockholder has received copies of a supplemented
or amended Prospectus or until such Selling Stockholder is advised in writing
by the Company that the then current Prospectus may be used and has received
copies of any additional or supplemental filings that are incorporated or
deemed incorporated by reference in such Prospectus. Notwithstanding anything
to the contrary herein, the Company shall not exercise its rights under this
Section 2.3(c) to suspend sales of Registrable Shares for a period in
excess of thirty (30) days consecutively or sixty (60) days in any
three hundred sixty-five (365) day period as long as such suspension would
not be in violation of the Securities Act.
2.4
Allocation of Expenses. The Company will pay all Registration Expenses
for all registrations under this Agreement; provided, however,
that if a registration under
9
Section 2.1(a) or
Section 2.1(b) is withdrawn at the request of the Initiating Holders
(other than as a result of material adverse information concerning the business
or financial condition of the Company which is made known to the Selling
Stockholders after the date on which such registration was requested) and if
the Initiating Holders elect not to have such registration counted as a
registration requested under Section 2.1(a) or Section 2.1(b), as
applicable, the Selling Stockholders shall pay the Registration Expenses of
such registration pro rata in accordance with the number of their Registrable
Shares included in such registration.
2.5
Indemnification and Contribution.
(a) In
the event of any registration of any of the Registrable Shares under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless each Selling Stockholder, each underwriter of such Registrable Shares,
and each other person, if any, who controls such Selling Stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such Selling Stockholder, underwriter or controlling person may become subject
under the Securities Act, the Exchange Act, state securities or Blue Sky laws,
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were registered
under the Securities Act, any Prospectus or any amendment or supplement to such
Registration Statement, (ii) the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law in connection with the Registration Statement or
the offering contemplated thereby; and the Company will reimburse such Selling
Stockholder, underwriter and each such controlling person for any legal or any
other expenses reasonably incurred by such Selling Stockholder, underwriter or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or omission made in such Registration Statement, Prospectus or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such Selling
Stockholder, underwriter or controlling person specifically for use in the
preparation thereof.
(b) In
the event of any registration of any of the Registrable Shares under the
Securities Act pursuant to this Agreement, each Selling Stockholder, severally
and not jointly, will indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any) and each person, if any,
who controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company, such directors and
officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue
10
statement or alleged untrue
statement of a material fact contained in any Registration Statement under
which such Registrable Shares were registered under the Securities Act, any
Prospectus, or any amendment or supplement to the Registration Statement or
(ii) any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
if and to the extent (and only to the extent) that the statement or omission
was made in reliance upon and in conformity with information relating to such
Selling Stockholder furnished in writing to the Company by such Selling
Stockholder specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided, however,
that the obligations of a Selling Stockholder hereunder shall be limited to an
amount equal to the net proceeds to such Selling Stockholder of Registrable
Shares sold in connection with such registration.
(c) Each
Indemnified Party shall give notice to 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, conditioned or delayed); 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 2.5 except to the extent that the Indemnifying Party is adversely
affected by such failure. The Indemnified Party may participate in such defense
at such party’s expense; provided, however, that the
Indemnifying Party shall pay the reasonable expenses of the Indemnified Party
if the Indemnified Party reasonably concludes that representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding; and provided, further, that in no event shall the
Indemnifying Party be required to pay the expenses of more than one counsel for
the Indemnified Party. The Indemnifying Party also shall be responsible for the
expenses of such defense if the Indemnifying Party does not elect to assume
such defense. 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 of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld, conditioned or
delayed.
(d) In
order to provide for just and equitable contribution in circumstances in which
the indemnification provided for in this Section 2.5 is due in accordance
with its terms but for any reason is held to be unavailable to an Indemnified
Party in respect to any losses, claims, damages and liabilities referred to
herein, then the Indemnifying Party shall, in lieu of indemnifying such
Indemnified Party, contribute to the amount paid or payable by such Indemnified
Party as a result of such losses, claims, damages or liabilities to which such
party may be subject in such proportion as is appropriate to reflect the
relative fault of the Indemnified Party on the one hand and the Indemnifying
Party on the other in connection with the statements
11
or omissions which resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the Indemnified Party and the
Indemnifying Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material fact related to
information supplied by the Indemnified Party or the Indemnifying Party and the
parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Selling Stockholders agree that it would not be just and equitable if
contribution pursuant to this Section 2.5(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 2.5(d), (i) in no case shall any one Selling
Stockholder be liable or responsible for any amount in excess of the net
proceeds received by such Selling Stockholder from the offering of Registrable
Shares and (ii) the Company shall be liable and responsible for any amount
in excess of such proceeds; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 2.5(d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties from whom contribution may be sought shall not
relieve such party from any other obligation it or they may have thereunder or
otherwise under this Section 2.5(d). No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed.
(e) The
rights and obligations of the Company and the Selling Stockholders under this
Section 2.5 shall survive the termination of this Agreement.
(f) It
is expressly acknowledged and agreed that in accordance with the terms of the
Opinion of the Maryland Attorney General No. 86-064 dated December 1,
1986, absent already available appropriations to fund indemnification or
contribution obligations that may arise under Section 2.5, any and all such
obligations of DBED are conditioned upon the availability of appropriations for
use by DBED at the time such indemnification or contribution obligations arise;
any and all such obligations are further limited to the extent of the State of
Maryland’s statutory waiver of its sovereign immunity.
2.6
Other Matters with Respect to Underwritten Offerings. In the event that
Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2.1, the Company agrees to
(a) enter into an underwriting agreement containing customary
representations and warranties with respect to the business and operations of
the Company and customary covenants and agreements to be performed by the
Company, including without limitation customary provisions with respect to
indemnification by the Company of the underwriters of such offering;
(b) use its best efforts to cause its legal counsel to render customary
opinions to the underwriters and the Selling Stockholders with respect to the
Registration Statement; and (c) use its best efforts to cause its
independent public accounting
12
firm to issue customary
“cold comfort letters” to the underwriters and the Selling
Stockholders with respect to the Registration Statement.
2.7
Information by Holder. Each holder of Registrable Shares included in any
registration 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 required in connection with any
registration, qualification or compliance referred to in this Agreement.
2.8
“Standoff” Agreement; Confidentiality of Notices. Each
Purchaser, if requested by the Company and the managing underwriter of an
underwritten public offering by the Company of Common Stock, shall not sell or
otherwise transfer or dispose of any Registrable Shares or other securities of
the Company (excluding securities included in the registration or acquired in
the initial public offering or in the public market after such offering) held by
such Purchaser for a period of one hundred eighty (180) days following the
effective date of a Registration Statement; provided, that:
(a) such
agreement shall only apply to the first public offering of the Company’s
Common Stock;
(b) all
current stockholders of the Company, all officers and directors of the Company,
and any stockholders who acquire stock of the Company before or during the one
hundred eighty (180) day period following the effective date of a
Registration Statement enter into similar agreements; and
(c) such
agreement shall provide that all Purchasers will participate on a pro-rata
basis in any early release from the “standoff” obligations of any
stockholder, warrantholder or optionholder.
The
Company may impose stop-transfer instructions with respect to the Registrable
Shares or other securities subject to the foregoing restriction until the end
of such one hundred eighty (180) day period.
Any
Purchaser receiving any written notice from the Company regarding the
Company’s plans to file a Registration Statement shall treat such notice
confidentially and shall not disclose such information to any person other than
as necessary to exercise its rights under this Agreement.
2.9
Limitations on Subsequent Registration Rights. The Company shall not,
without the prior written consent of the holders of at least seventy percent
(70%) of the Registrable Shares then outstanding held by the Purchasers, enter
into any agreement (other than this Agreement) with any holder or prospective
holder of any securities of the Company which grant such holder or prospective
holder registration rights that are pari passu with, or senior
to, those granted to the Purchasers hereunder.
13
2.10
Rule 144 Requirements. After the earliest of (i) the closing
of the sale of securities of the Company pursuant to a Registration Statement,
(ii) the registration by the Company of a class of securities under
Section 12 of the Exchange Act, or (iii) the issuance by the Company
of an offering circular pursuant to Regulation A under the Securities Act,
the Company agrees to:
(a) make
and keep current public information about the Company available, as those terms
are understood and defined in Rule 144;
(b) use
its best efforts to 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); and
(c) furnish
to any holder of Registrable Shares upon request (i) a written statement
by the Company as to its compliance with the reporting requirements of
Rule 144 and of the Securities Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Company, and (iii) such other
reports and documents of the Company as such holder may reasonably request to
avail itself of any similar rule or regulation of the Commission allowing it to
sell any such securities without registration.
2.11
Termination. All of the Company’s obligations to register
Registrable Shares under this Agreement shall terminate five (5) years
after the closing of the Qualifying Public Offering. In addition, the
Company’s obligations to register Registrable Shares under this Agreement
with respect to any holder of Registrable Shares shall terminate at such time
that such holder is able to sell Registrable Shares pursuant to
Rule 144(k).
3. Right
of First Refusal.
3.1
Rights of Purchasers to Acquire Offered Securities.
(a) The
Company shall not issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, any Offered Securities,
unless in each such case the Company shall have first complied with this
Section 3.1. The Company shall deliver to each Purchaser an Offer, which
shall (i) identify and describe the Offered Securities, (ii) describe the
price and other terms upon which they are to be issued, sold or exchanged, and
the number or amount of the Offered Securities to be issued, sold or exchanged,
(iii) identify the persons or entities (if known) to which or with which
the Offered Securities are to be offered, issued, sold or exchanged, and
(iv) offer to issue and sell to or exchange with such Purchaser (A) such
Purchaser’s Basic Amount and (B) such Purchaser’s
Undersubscription Amount.
(b) To
accept an Offer, in whole or in part, a Purchaser must deliver to the Company,
on or prior to the date twenty (20) days after the date of delivery of the
Offer, a Notice of Acceptance indicating the portion of the Purchaser’s
Basic Amount that such Purchaser elects to purchase and, if such Purchaser
shall elect to purchase all of its Basic
14
Amount, the Undersubscription
Amount (if any) that such Purchaser elects to purchase. If the Basic Amounts
subscribed for by all Purchasers are less than the total of all of the Basic
Amounts available for purchase, then each Purchaser who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however,
that if the Undersubscription Amounts subscribed for exceed the Available
Undersubscription Amount, each Purchaser who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Undersubscription Amount subscribed
for by such Purchaser bears to the total Undersubscription Amounts subscribed
for by all Purchasers, subject to rounding by the Board of Directors to the
extent it deems reasonably necessary.
(c) The
Company shall have ninety (90) days from the expiration of the period set
forth in Section 3.1(b) to issue, sell or exchange all or any part of the
Refused Securities, but only to the offerees or purchasers described in the
Offer (if so described therein) and only upon terms and conditions (including,
without limitation, unit prices and interest rates) which are not more
favorable, in the aggregate, to the acquiring person or persons or less
favorable to the Company than those set forth in the Offer. If the Company has
not sold such Refused Securities within such ninety (90) day period, the
Company shall not thereafter issue or sell any Offered Securities without first
offering such securities to the Purchasers in the manner provided above.
(d) Upon
the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, the Purchasers shall, within fifteen (15) days of
notice given by the Company of such closing, acquire from the Company and the
Company shall issue to the Purchasers, the number or amount of Offered
Securities specified in the Notices of Acceptance against payment of the
purchase price therefor and upon such other terms and conditions specified in
the Offer.
(e) The
purchase by the Purchasers of any Offered Securities is subject in all cases to
the preparation, execution and delivery by the Company and the Purchasers of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Company, the Purchasers and their respective
counsel.
(f) The
rights of the Purchasers under this Section 3.1 shall not apply to:
(i) the
issuance of any shares of Common Stock in connection with any stock split,
stock dividend, or recapitalization of the Company;
(ii) the
issuance of any shares of Common Stock upon conversion of shares of convertible
preferred stock;
(iii) shares
of Common Stock, and options or warrants therefor, issued or to be issued after
the date of this Agreement to employees, officers or directors of, or
consultants or advisors to, the Company or any subsidiary pursuant to the
Sourcefire, Inc. 2002
15
Stock Incentive Plan or any
other stock purchase or stock option plans that are approved by (A) the
Board of Directors including the affirmative vote of the director (the “Series A
Designee”) elected solely by holders of the Series A
Preferred Stock, voting as a separate class, and the director (the “Series B
Designee”) elected solely by holders of the Series B
Preferred Stock, voting as a separate class, and the director (the “Series D
Designee” and collectively with the Series A Designee and
the Series B Designee, the “Preferred Designees”)
elected pursuant to Section 1(e) of that certain Stockholders’ Voting
Agreement, dated as of the date hereof, by and between the Company and the
other parties identified therein, and (B) the stockholders of the Company
if such approval is required pursuant to the terms of the Charter;
(iv) stock
issued or issuable pursuant to any rights or agreements, options, warrants or
convertible securities outstanding as of the date of this Agreement; and stock
issued pursuant to any such rights or agreements granted after the date of this
Agreement, so long as the rights of first refusal established by this
Section 3 were complied with or were inapplicable pursuant to any
provision of this Section 3 with respect to the initial sale or grant by
the Company of such rights or agreements;
(v) shares
of Common Stock issued or issuable as a dividend or distribution on the
Preferred Stock;
(vi) shares
of Common Stock or Preferred Stock, or options or warrants therefor, issued or
issuable to any bank, or other financial or lending institution, equipment
lessor or service provider, pursuant to any equipment leasing, loan
arrangement, debt financing, or similar arrangement, provided that the issuance
of such shares, options or warrants is approved by (a) the Board of
Directors, including all of the Preferred Designees, and (b) at least a
majority of the then outstanding shares of Series C Preferred Stock and at
least a majority of the then outstanding shares of Series D Preferred
Stock, each voting or consenting as separate classes; and provided, further,
that the primary purpose of the transaction is not an equity financing;
(vii) shares
of Common Stock, or options, warrants or other convertible securities therefor,
issued or issuable in connection with a strategic transaction, such as a joint
venture, or a manufacturing, marketing or distribution arrangement (including
the acquisition or licensing of technology (including, without limitation,
sponsored research) by the Company or to a collaborative partner of the Company
in connection with a corporate partnering transaction) that is not
substantially for equity financing purposes and is approved by (a) the
Board of Directors, including all of the Preferred Designees, and (b) at
least a majority of the then outstanding shares of Series C Preferred
Stock and at least a majority of the then outstanding shares of Series D
Preferred Stock, each voting or consenting as separate classes;
(viii) shares
of Common Stock that are issued in connection with a Qualifying Public
Offering;
(ix) shares
of Common Stock, or options, warrants or other convertible securities therefor,
issued or issuable in connection with the acquisition of another entity by the
Company by merger, purchase of all or substantially all of the assets of
another
16
entity or other
reorganization resulting in ownership by the Corporation of not less than
fifty-one percent (51%) of the voting power of such entity; or
(x) shares
of Common Stock or Preferred Stock, or options, warrants or other convertible
securities therefor, issued with the consent of the holders of (a) at
least two-thirds of the then outstanding Series A Preferred Stock,
(b) at least sixty percent (60%) of the then outstanding Series B
Preferred Stock, (c) at least a majority of the then outstanding
Series C Preferred Stock, and (d) at least a majority of the then
outstanding Series D Preferred Stock, each voting or consenting as
separate classes.
3.2
Termination. This Section 3 shall terminate upon the earlier of the
closing of a Company Sale or the closing of a Qualifying Public Offering.
4. Covenants.
4.1
Negative Covenants, Director Majority Vote. So long as any Preferred
Stock is outstanding, the Company shall not, without prior written consent of a
majority of the Board of Directors (including at least one of the Preferred
Designees):
(a) apply
any of its assets to the redemption, retirement, purchase or acquisition,
directly or indirectly (including through a Company Subsidiary), or otherwise,
of any shares of its capital stock (other than (i) redemptions of
Preferred Stock in accordance with the terms of the Charter,
(ii) repurchases of Common Stock at cost upon termination of employment or
service, or (iii) stock purchases made pursuant to the Stock Repurchase
Agreement entered into between the Company and DBED dated February 5,
2002);
(b) enter
into, or permit any Company Subsidiary to enter into, any lines of business
that is not primarily related to the business of the Company as conducted or proposed
to be conducted as of the date of this Agreement or relocate the Company’s
principal office to a different region of the country;
(c) acquire,
directly or indirectly (including through a Company Subsidiary), all or
substantially all of the properties, assets or stock of any other company or
entity;
(d) incur
any indebtedness, or permit any Company Subsidiary to incur any indebtedness
(other than indebtedness of Company Subsidiaries owed to the Company), in
excess of $500,000 in the aggregate; provided, however, that the
approval of the Board of Directors pursuant to this Section 4 shall not be
required for the Company to draw down or otherwise access any amounts under
(i) the $5,000,000 revolving credit facility with Silicon Valley Bank (the
“SVB Credit Facility”) and (ii) the $1,000,000
equipment line facility with Silicon Valley Bank (the “SVB
Equipment Line Facility”);
(e) materially
amend any provision of the SVB Credit Facility or the SVB Equipment Line
Facility, including, without limitation, any increase in the maximum loan
amount or the extension of the maturity date of either such facilities;
17
(f) make
any capital expenditures in any fiscal year (including expenditures for
capitalized leases and capital expenditures by Company Subsidiaries) in excess
of $400,000, other than as set forth in the budget duly adopted by the Board of
Directors, including all of the Preferred Designees;
(g) make,
or permit any Company Subsidiary to make, any loan or advance to any entity or
person, including, without limitation, any employee or director of the Company
or any Company Subsidiary, except advances and similar expenditures in the
ordinary course of business or under the terms of an employee stock or option
plan approved by the Board of Directors of the Company, including all of the
Preferred Designees;
(h) pledge
assets, guarantee, or permit any Company Subsidiary to guarantee, directly or
indirectly, any indebtedness or obligations except for guarantees of trade
accounts of the Company or any Company Subsidiary arising in the ordinary
course of business;
(i) enter
into any agreement or contract with any affiliate of the Company or its
officers or directors other than agreements required by the Purchase Agreement
or arising in the ordinary course of business; or
(j) increase
or decrease the number of seats on the Company’s Board of Directors from
its current number of seven (7).
Any such action taken without
the required consent or affirmative vote of a majority of the Board of
Directors (including all of the Preferred Designees) shall be void ab initio.
4.2
Inspection and Observation. The Company shall permit each Major
Purchaser, or any authorized representative thereof, to visit and inspect the
properties of the Company, including its corporate and financial records, and
to discuss its business and finances with officers of the Company, during
normal business hours following reasonable notice and as often as may be
reasonably requested.
4.3
Financial Statements and Other Information.
(a) Until
the earlier of the Company’s Qualifying Public Offering or the Company
otherwise becomes subject to the reporting provisions of the Exchange Act, the
Company shall deliver to each Major Purchaser:
(i) within
ninety (90) days after the end of each fiscal year of the Company, an
audited balance sheet of the Company as of the end of such year and audited
statements of income and of cash flows of the Company for such year, certified
by certified public accountants of established national reputation selected by
the Company, and prepared in accordance with generally accepted accounting
principles consistently applied;
(ii) within
thirty (30) days after the end of each fiscal quarter of the Company
(other than the fourth quarter), an unaudited balance sheet of the Company as
of the end of such quarter, a statement of stockholders’ equity, and
unaudited statements of income
18
and of cash flows of the
Company for such fiscal quarter and for the current fiscal year to the end of
such fiscal quarter;
(iii) within
twenty (20) days after the end of each month, an unaudited balance sheet
of the Company as of the end of such month and unaudited statements of income
and of cash flows of the Company for such month and for the current fiscal year
to the end of such month, setting forth in comparative form the Company’s
projected financial statements for the corresponding periods for the current
fiscal year;
(iv) at
least thirty (30) days prior to the commencement of each new fiscal year,
an operating plan and budget, including monthly projections, for such fiscal
year in the same format as the financial statements (Board of Directors
approval of the budget (which shall not be unreasonably withheld) must be
received no later than 10 days prior to the commencement of such fiscal
year);
(v) within
thirty (30) days after filing, copies of all material documents filed with
government agencies, other than documents filed primarily in connection with
selling products or services of the Company to such government agency;
(vi) within
thirty (30) days after filing or service, pleadings of any material
lawsuits filed by or against the Company;
(vii) within
ten (10) days after receipt, copies of any notices regarding any defaults
on any loans or material leases to which the Company is a party;
(viii) such
other notices, information and data with respect to the Company as the Company
delivers to all of the holders of its capital stock at the same time it
delivers such items to such holders; and
(ix) with
reasonable promptness, such other information and data as such Purchaser may
from time to time reasonably request.
(b) The
foregoing financial statements shall be prepared on a consolidated basis if the
Company then has any subsidiaries. The financial statements delivered pursuant
to clauses (ii) and (iii) shall be accompanied by a certificate of
the chief financial officer of the Company stating that such statements have
been prepared in accordance with generally accepted accounting principles consistently
applied (except as noted) and fairly present the financial condition and
results of operations of the Company at the date thereof and for the periods
covered thereby. At the request of any Major Purchaser, the financial
statements provided pursuant to Section 4.3(a)(ii) shall contain a
management discussion and analysis and a budget variance analysis.
4.4
Material Changes and Litigation. The Company shall promptly notify the
Major Purchasers of any material change in the business, prospects, assets or
condition, financial or otherwise, of the Company and of any litigation or
governmental proceeding or investigation brought or, to the best of the
Company’s knowledge, threatened against the Company, or against
19
any officer, director, key
employee or principal stockholder of the Company which, if adversely
determined, would have a material adverse effect on the business, prospects,
assets or condition (financial or otherwise) of the Company.
4.5
Insurance.
(a) The
Company shall maintain term life insurance, naming the Company as the
beneficiary, upon the life of each of (i) E. Wayne Jackson, III,
(ii) Thomas McDonough, and (iii) Martin Roesch, in the minimum amount
of at least $1,000,000. The cancellation of each policy will require the prior
approval of the Board of Directors.
(b) The
Company shall obtain and maintain, during the term of this Agreement,
(i) director and officer liability insurance with an underwriter and with
terms acceptable to the Board of Directors, with coverage limits of at least
$3,000,000 per occurrence, and (ii) employment practice liability
insurance with an underwriter and with terms acceptable to the Board of
Directors, with coverage limits of at least $1,000,000 per occurrence. If
requested by Purchasers holding at majority of the Registrable Securities, the
Company will add one designee of such Purchasers as a notice party for such
policy and shall request that the issuer of such policy provide such designee
with ten (10) days’ notice before such policy is terminated (for
failure to pay premiums or otherwise) or assigned or before any change is made
in the beneficiary thereof.
(c) The
Company shall obtain and maintain, during the term of this Agreement, valid policies
of workers’ compensation insurance and of insurance with respect to its
properties and business of the kinds and in the amounts not less than is
customarily obtained by corporations of established reputation engaged in the
same or similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability and other risks,
all with terms acceptable to the Board of Directors.
4.6
Agreements with Employees; Recruitment.
(a) The
Company shall require (i) all persons now or hereafter employed by the
Company, as a condition to their employment, and (ii) all independent
contractors utilized by the Company who have access to confidential or
proprietary information of the Company, as a condition to their consulting
relationship with the Company, to enter into an Assignment of Inventions,
Non-Disclosure, Non-Competition and Non-Solicitation Agreement substantially in
the form of Exhibit D to the Purchase Agreement, or such other form
as may be approved by the Board of Directors of the Company (including at least
one of the Preferred Designees).
(b) The
Company agrees that it will not, without the prior written consent of the Board
of Directors (including at least one of the Preferred Designees) terminate,
materially amend or waive any material rights under any inventions,
confidentiality, non-competition or restricted stock agreement between the
Company and any employees of the Company.
20
(c) Unless
otherwise approved by the Board of Directors of the Company (including the
affirmative vote of all of the Preferred Designees) all options or restricted
stock granted or issued by the Company shall become exercisable at the rate of
twenty-five percent (25%) on the first (1st) anniversary of grant or issue and
two point zero eight three percent (2.083%) per month thereafter over the
subsequent three (3) years (for a 4 year total vesting) so long as
the holder continues to be an employee or consultant of the Company. Any
acceleration of the vesting of such options or restricted stock granted or
issued by the Company (other than as set forth in the Company’s 2002
Stock Incentive Plan) must be approved by the Board of Directors of the Company
(including all of the Preferred Designees). With respect to any shares of
restricted stock issued by the Company or any shares issued by the Company
pursuant to an early exercise provision, the Company’s repurchase option
shall provide that upon such person’s termination of employment or
service with the Company, with cause, the Company or its assignee shall have
the option to purchase any unvested shares of stock held by such person at the
lesser of cost or fair market value.
4.7
Board of Directors.
(a) The
Company shall promptly reimburse in full each director of the Company who is
not an employee of the Company for all of his or her reasonable out-of-pocket
expenses incurred in attending each meeting of the Board of Directors of the
Company or any committee thereof.
(b) The
Board of Directors shall meet on at least a monthly basis, unless otherwise
agreed by a majority of the members of the Board of Directors.
(c) The
Audit Committee and Compensation Committee (together the “Committees”),
previously established by the Board of Directors shall continue to exist as
currently structured and shall continue to advise the Board of Directors in
accordance with the charters adopted by the Board of Directors for each such
Committee.
4.8
Related Party Transactions.
(a) To
the extent permitted under Delaware law, the Company shall not enter into any
agreement with any stockholder, officer or director of the Company, or any
“affiliate” of such persons (as such term is defined in the rules
and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity, without the consent of at least a
majority of the members of the Company’s Board of Directors having no
interest in such agreement or arrangement.
(b) The
approval of the Board of Directors of the Company (including at least one of
the Preferred Designees) shall be required to (i) establish or increase
the compensation of executive officers of the Company, (ii) grant stock
options to any officer of the Company or (iii) hire individuals to serve
as executive officers of the Company, provided that,
21
such actions may be approved
by a committee of the Board of Directors if the Board specifically delegates
such authority to any such committee.
4.9
International Investment and Trade in Services Survey Act. The Company
shall use its best efforts to file on a timely basis all reports required to be
filed by it under 22 U.S.C. Section 3104, or any similar statute, relating
to a foreign person’s direct or indirect investment in the Company.
4.10
Market Standoff. As a condition to the obligation of the Purchasers
under Section 2.8 above, the Company agrees to use its commercially
reasonable efforts (a) to obtain a similar market standoff agreement for
each current and future stockholder, warrantholder or optionholder of the
Company and (b) to cause the “standoff” obligation of the
Purchasers under Section 2.8, and any agreement entered into by the
Purchasers as a result of their obligations under Section 2.8, to provide
that all Purchasers subject to such “standoff” obligations will
participate on a pro-rata basis in any early release from the
“standoff” obligations of any stockholder, warrantholder or
optionholder.
4.11 Visitation Rights. The Company shall allow one representative designated by each of NEA Partners 10, Limited Partnership, Sierra Ventures VIII, L.P., Inflection Point Ventures II, L.P., Core Capital Partners, L.P., the Maryland Department of Business and Economic Development, Sequoia Capital Franchise Fund (“Sequoia”) and Meritech Capital Partners III, L.P. to attend all meetings of the Company’s Board of Directors and committees (including Executive Sessions, as defined below) in a nonvoting capacity, and in connection therewith, the Company shall give such representative copies of all notices, minutes, consents and other materials, financial or otherwise, which the Company provides to its Board of Directors; provided, however, that the Company reserves the right to invoke an executive session of the Board of Directors or committee (an “Executive Session”). The Company reserves the right to withhold any information and to exclude a representative from any Executive Session or portion thereof if access to such information or attendance at such Executive Session could adversely affec






