HZO, INC.
INVESTOR RIGHTS
AGREEMENT
This Investor Rights Agreement (this “
Agreement ”) is made as of September 25, 2009,
by and among hZo, Inc., a Delaware corporation (the “
Company ”), and the persons and entities listed
on Exhibit A hereto (each, an “
Investor ” and collectively, the “
Investors ”). Unless otherwise
defined herein, capitalized terms used in this Agreement have the
meanings ascribed to them in Section 1 .
RECITALS
WHEREAS, the Investors are parties to the
Series A Preferred Stock Purchase Agreement of even date
herewith, among the Company and the Investors listed on the
Schedule of Investors thereto (the “ Purchase
Agreement ”), and it is a condition to the closing of
the sale of the Series A Preferred Stock to the Investors
listed on such Schedule of Investors that the Investors and the
Company execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the mutual
promises and covenants set forth herein, and other consideration,
the receipt of and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
AGREEMENT
Section 1
Definitions
. As used in this Agreement, the following
terms have the meanings set forth below:
(a) “
Change of Control ” means (i) the acquisition
of the Company by another entity by means of any transaction or
series of related transactions to which the Company is party
(including, without limitation, any stock acquisition,
reorganization, merger or consolidation but excluding any sale of
stock for capital raising purposes) other than a transaction or
series of transactions in which the holders of the voting
securities of the Company outstanding immediately prior to such
transaction continue to retain (either by such voting securities
remaining outstanding or by such voting securities being converted
into voting securities of the surviving entity), as a result of
shares in the Company held by such holders prior to such
transaction, at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such
surviving entity outstanding immediately after such transaction or
series of transactions; (ii) a sale, lease or other conveyance of
all or substantially all of the assets of the Company; or (iii) any
liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary.
(b) “
Commission ” means the Securities and Exchange
Commission or any other federal agency at the time administering
the Securities Act.
(c) “
Common Stock ” means the Common Stock of the
Company.
(d) “
Conversion Stock ” means shares of Common Stock
issued upon conversion of the Preferred Stock.
(e) “
Exchange Act ” means the Securities Exchange
Act of 1934, as amended, or any similar successor federal statute
and the rules and regulations thereunder, all as the same shall be
in effect from time to time.
(f) “
Holder ” means any Investor who holds
Registrable Securities and any holder of Registrable Securities to
whom the registration rights conferred by this Agreement have been
duly and validly transferred in accordance with
Section 2.12 of this Agreement.
(g) “
Indemnified Party ” has the meaning set forth
in Section 2.6(c) hereto.
(h) “
Indemnifying Party ” has the meaning set forth
in Section 2.6(c) hereto.
(i) “
Initial Public Offering ” means the closing of
the Company’s first firm commitment underwritten public
offering pursuant to an effective registration statement filed
under the Securities Act covering the offer and sale of the
Company’s Common Stock.
(j) “
Initiating Holders ” means any Holder or
Holders who in the aggregate hold not less than twenty percent
(20%) of the outstanding Registrable Securities.
(k) “
Investors ” means the persons and entities
listed on Exhibit A hereto.
(l) “
Major Investors ” has the meaning set forth in
Section 3.1 hereof, and shall include any general
partners and affiliates of a Major Investor (including in the case
of a venture capital fund partners and funds affiliated with such
fund).
(m) “ New
Securities ” has the meaning set forth in
Section 4.1(a) hereto.
(n) “
Other Selling Stockholders ” means persons
other than Holders who, by virtue of agreements with the Company,
are entitled to include their Other Shares in certain registrations
hereunder.
(o) “
Other Shares ” means shares of Common Stock,
other than Registrable Securities (as defined below), with respect
to which registration rights have been granted or may be granted in
the future (subject to the consents and approvals required by this
Agreement).
(p) “
Preferred Stock ” means the Company’s
Series A Preferred Stock.
(q) “
Purchase Agreement ” has the meaning set forth
in the Recitals hereto.
(r) “
Qualified Public Offering ” means a firm
commitment underwritten public offering pursuant to an effective
registration statement filed under the Securities Act, covering the
offer and sale of the Company’s Common Stock with aggregate
offering proceeds to the Company in excess of $25,000,000 (before
deduction of underwriters’ commissions and
expenses).
(s) “
Registrable Securities ” means (i) shares
of Common Stock issued or issuable pursuant to the conversion of
the Preferred Stock, (ii) shares of Common Stock held by
Investors who are parties to the Purchase Agreement, and
(iii) any Common Stock issued as a dividend or other
distribution with respect to or in exchange for or in replacement
of the shares of Common Stock or Preferred Stock referenced in
(i) or (ii) above; provided, however , that Registrable
Securities shall not include any shares of Common Stock described
in clause (i), (ii) or (iii) above which have previously been
registered or which have been sold to the public either pursuant to
a registration statement or Rule 144, or which have been sold
in a private transaction in which the transferor’s rights
under this Agreement are not validly assigned in accordance with
this Agreement.
(t) The terms “
register ,” “ registered
” and “ registration ” shall refer
to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable
rules and regulations thereunder, and the declaration or ordering
of the effectiveness of such registration statement.
(u) “
Registration Expenses ” means all expenses
incurred in effecting any registration pursuant to this Agreement,
including, without limitation, all registration, qualification, and
filing fees, printing expenses, escrow fees, fees and disbursements
of counsel for the Company and one special counsel for the Holders
(not to exceed $50,000 per registration), blue sky fees and
expenses, and expenses of any regular or special audits incident to
or required by any such registration, but shall not include Selling
Expenses, fees and disbursements of other counsel for the Holders
and the compensation of regular employees of the Company, which
shall be paid in any event by the Company.
(v) “
Restricted Securities ” means any Registrable
Securities required to bear the first legend set forth in
Section 2.8(c) hereof.
(w) “
Rule 144 ” means Rule 144 as
promulgated by the Commission under the Securities Act, as such
Rule may be amended from time to time, or any similar successor
rule that may be promulgated by the Commission.
(x) “
Rule 145 ” means Rule 145 as
promulgated by the Commission under the Securities Act, as such
Rule may be amended from time to time, or any similar successor
rule that may be promulgated by the Commission.
(y) “
Rule 415 ” means Rule 415 as
promulgated by the Commission under the Securities Act, as such
Rule may be amended from time to time, or any similar successor
rule that may be promulgated by the Commission.
(z) “
Securities Act ” means the Securities Act of
1933, as amended, or any similar successor federal statute and the
rules and regulations thereunder, all as the same shall be in
effect from time to time.
(aa) “
Selling Expenses ” means all underwriting
discounts, selling commissions and stock transfer taxes applicable
to the sale of Registrable Securities and fees and disbursements of
counsel for any Holder (other than the fees and disbursements of
one special counsel to the Holders included in Registration
Expenses).
(bb) “
Withdrawn Registration ” means a forfeited
demand registration under Section 2.1 in accordance
with the terms and conditions of Section 2.4
.
Section 2
Registration
Rights
2.1
Requested
Registration
(a) Request for
Registration . Subject to the conditions set forth
in this Section 2.1 , if the Company shall receive from
Initiating Holders a written request signed by such Initiating
Holders that the Company effect any registration with respect to
all or a part of the Registrable Securities (such request shall
state the number of shares of Registrable Securities to be disposed
of and the intended methods of disposition of such shares by such
Initiating Holders), the Company will:
(i) promptly give
written notice of the proposed registration to all other Holders;
and
(ii) as soon as
practicable, file and use its commercially reasonable efforts to
effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws, and appropriate
compliance with the Securities Act) and to permit or facilitate the
sale and distribution of all or such portion of such 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
received by the Company within twenty (20) days after such written
notice from the Company is mailed or delivered.
(b) Limitations on
Requested Registration. The Company shall not be
obligated to effect, or to take any action to effect, any such
registration pursuant to this Section 2.1 :
(i) Prior to the
earlier of (A) the five (5) year anniversary of the date of
this Agreement or (B) one hundred eighty (180) days following
the effective date of the Initial Public Offering;
(ii) If the Initiating
Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration statement,
propose to sell Registrable Securities and such other securities
(if any) the aggregate gross proceeds to the Company of which
(without deduction for underwriter’s discounts and expenses
related to the issuance) are less than $10,000,000;
(iii) 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;
(iv) After the Company
has initiated two such registrations pursuant to this
Section 2.1 (counting for these purposes only
(x) registrations which have been declared or ordered
effective and pursuant to which securities have been sold, and
(y) Withdrawn Registrations);
(v) During the period
starting with the date sixty (60) days prior to the Company’s
good faith estimate (as provided in a certificate of such effect
executed by an authorized officer of the Company for the benefit of
Holders) of the date of filing of, and ending on a date one hundred
eighty (180) days after the effective date of, a Company-initiated
registration; provided that the Company is actively
employing in good faith commercially reasonable efforts to cause
such registration statement to become effective; or
(vi) If the Initiating
Holders propose to dispose of shares of Registrable Securities
which may be immediately registered on Form S-3 pursuant to a
request made under Section 2.3 hereof.
(c) Deferral
. If (i) in the good faith judgment of the Board of
Directors of the Company, the filing of a registration statement
covering the Registrable Securities would be detrimental to the
Company and the Board of Directors of the Company concludes, as a
result, that it is in the best interests of the Company to defer
the filing of such registration statement at such time, and
(ii) the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would
be detrimental to the Company for such registration statement to be
filed in the near future and that it is, therefore, in the best
interests of the Company to defer the filing of such registration
statement, then (in addition to the limitations set forth in
Section 2.1(b)(v) above) the Company shall have the right to
defer such filing for a period of not more than ninety (90) days
after receipt of the request of the Initiating Holders, and,
provided further , that the Company shall not defer its
obligation in this manner more than once in any twelve-month
period.
(d) Other
Shares . The registration statement filed pursuant
to the request of the Initiating Holders may, subject to the
provisions of Section 2.1(e) , include Other Shares,
and may include securities of the Company being sold for the
account of the Company.
(e)
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 a
part of their request made pursuant to this Section 2.1
and the Company shall include such information in the written
notice given pursuant to Section 2.1(a)(i) . In
such event, the right of any Holder to include all or any portion
of its Registrable Securities in such registration pursuant to this
Section 2.1 shall be conditioned upon such
Holder’s participation in such underwriting and the inclusion
of such Holder’s Registrable Securities to the extent
provided herein. If the Company shall request inclusion
in any registration pursuant to Section 2.1 of
securities being sold for its own account, or if other persons
shall request inclusion in any registration pursuant to
Section 2.1 , the Initiating Holders shall, on behalf
of all Holders, offer to include such securities in the
underwriting and such offer shall be conditioned upon the
participation of the Company or such other persons in such
underwriting and the inclusion of the Company’s and such
person’s other securities of the Company in the underwriting
and their acceptance of the further applicable provisions of this
Section 2 (including Section 2.10)
. The Company shall (together with all Holders and other
persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters
selected for such underwriting by a majority in interest of the
Initiating Holders, which underwriters are reasonably acceptable to
the Company.
Notwithstanding any other provision of this
Section 2.1 , if the underwriters advise the Initiating
Holders in writing that marketing factors require a limitation on
the number of shares to be underwritten, the number of Registrable
Securities, securities of the Company and Other Shares that may be
so included shall be allocated as follows: (i) first, among
all Holders requesting to include Registrable Securities in such
registration statement based on the pro rata percentage of
Registrable Securities held by such Holders relative to all Holders
requesting to include Registrable Securities in such registration
statement, assuming conversion; (ii) second, to the Other
Selling Stockholders; and (iii) third, to the Company, which
the Company may allocate, at its discretion, for its own account,
or for the account of other holders or employees of the Company. No
securities of the Company or Other Shares shall be included in such
registration if any Registrable Securities that are requested to be
included in such registration are not included.
If a person who has requested inclusion in such
registration as provided above does not agree to the terms of any
such underwriting, such person shall be excluded therefrom by
written notice from the Company, the underwriter or the Initiating
Holders. The securities (including Registrable
Securities) so excluded shall also be withdrawn from such
registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such
registration was previously reduced as a result of marketing
factors pursuant to this Section 2.1(e) , then the
Company shall then offer to all Holders and Other Selling
Stockholders who have retained rights to include securities in the
registration the right to include additional Registrable Securities
or Other Shares in the registration in an aggregate amount equal to
the number of shares so withdrawn, with such shares to be allocated
among such Holders and other Selling Stockholders requesting
additional inclusion, as set forth above.
(a) Company
Registration . If the Company shall determine to register any
of its securities either for its own account or the account of a
security holder or holders, other than a registration pursuant to
Section 2.1 or 2.3 , a registration relating
solely to employee benefit plans, a registration relating to the
offer and sale of debt securities, a registration relating to a
corporate reorganization or other Rule 145 transaction, a
registration statement relating to an offering on a delayed basis
pursuant to Rule 415, or a registration on any registration
form that does not permit secondary sales, and provided that a
registration statement covering the sale of Registrable Securities
is not then effective and available for sales thereof by the
Holders, the Company will:
(i) promptly give
written notice of the proposed registration to all Holders;
and
(ii) use its
commercially reasonable efforts to include in such registration
(and any related qualification under blue sky laws or other
compliance), except as set forth in Section 2.2(b)
below, and in any underwriting involved therein, all of such
Registrable Securities as are specified in a written request or
requests made by any Holder or Holders received by the Company
within twenty (20) days after such written notice from the Company
is mailed or delivered. Such written request may specify
all or a part of a Holder’s Registrable
Securities.
(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
Section 2.2(a)(i) . In such event, the right
of any Holder to registration pursuant to this
Section 2.2 shall be conditioned upon such
Holder’s participation in such underwriting and the inclusion
of 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 any Other Selling Stockholders)
enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by the
Company.
Notwithstanding any other provision of this
Section 2.2 , if the underwriters advise the Company in
writing that marketing factors require a limitation on the number
of shares to be underwritten, the underwriters may (subject to the
limitations set forth below) limit the number of Registrable
Securities to be included in the registration and underwriting (but
not to less than 30% of the Registrable Securities that the
requesting Holders propose to distribute through such underwriting
unless such underwriting is in connection with the Initial Public
Offering, in which case up to 100% of the Registrable Securities
may be so excluded, so long as, in such case, all securities to be
offered in such Initial Public Offering are for the account of the
Company and not for the account of a security holder or
holders). The Company shall so advise all holders of
securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and
underwriting shall be allocated, as follows: (i) first, to the
Company for securities being sold for its own account,
(ii) second, to the Holders requesting to include Registrable
Securities issued or issuable upon conversion of shares of
Series A Preferred Stock purchased pursuant to the Purchase
Agreement in such registration statement up to the full amount of
such Registrable Securities held by such Holders; (iii) third,
to the Holders requesting to include Registrable Securities in such
registration statement whose Registrable securities have not been
included in such registration pursuant to subsection (ii) of
this paragraph based on the pro rata percentage of such Registrable
Securities held by such Holders relative to all such Holders
requesting to include Registrable Securities in such registration
statement, assuming conversion; and (iv) fourth, to Other
Selling Stockholders requesting to include Other Shares in such
registration statement based on the pro rata percentage of Other
Shares held by such Other Selling Stockholders, assuming
conversion.
If a person who has requested inclusion in such
registration as provided above does not agree to the terms of any
such underwriting, such person shall also be excluded therefrom by
written notice from the Company or the underwriter. The
Registrable Securities or other securities so excluded shall also
be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares of
Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors pursuant to
Section 2.2(b) , the Company shall then offer to all persons
who have retained the right to include securities in the
registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares
so withdrawn, with such shares to be allocated among the persons
requesting additional inclusion, in the manner set forth
above.
(c) Right to
Terminate Registration . The Company shall have the
right to terminate or withdraw any registration initiated by it
under this Section 2.2 prior to the effectiveness of
such registration whether or not any Holder has elected to include
securities in such registration.
2.3
Registration on
Form S-3
(a) Request for
Form S-3 Registration . After the Company has
qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Section 2
and subject to the conditions set forth in this
Section 2.3 , if the Company shall receive from a
Holder or Holders of at least 20% of the Registrable Securities a
written request that the Company effect any registration on
Form S-3 or any similar short form registration statement with
respect to all or part of the Registrable Securities (such request
shall state the number of shares of Registrable Securities to be
disposed of and the intended methods of disposition of such shares
by such Holder or Holders), the Company will take all such action
with respect to such Registrable Securities as required by
Section 2.1(a)(i) and (ii) .
(b) Limitations on
Form S-3 Registration . The Company shall not
be obligated to effect, or take any action to effect, any such
registration pursuant to this Section 2.3 :
(i) In the
circumstances described in either Sections 2.1(b)(i) ,
2.1(b)(iii) or 2.1(b)(v) ; or
(ii) If the Holders,
together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) on
Form S-3 at an aggregate price to the public of less than
$1,000,000; or
(iii) If, in a given
twelve-month period, the Company has effected two (2) such
registrations in such period.
(c) Deferral
. The provisions of Section 2.1(c) shall
apply to any registration pursuant to this Section 2.3
.
(d)
Underwriting . If the Holders of Registrable
Securities requesting registration under this
Section 2.3 intend to distribute the Registrable
Securities covered by their request by means of an underwriting,
the provisions of Sections 2.1(e) shall apply to such
registration. Notwithstanding anything contained herein
to the contrary, registrations effected pursuant to this
Section 2.3 shall not be counted as requests for
registration or registrations effected pursuant to
Section 2.1 .
2.4
Expenses of
Registration
. All Registration Expenses incurred in
connection with registrations pursuant to Sections 2.1
, 2.2 and 2.3 hereof shall be borne by the Company;
provided, however , that the Company shall not be required
to pay for any expenses of any registration proceeding begun
pursuant to Sections 2.1 and 2.3 if the
registration request is subsequently withdrawn at the request of
the Holders of a majority of the Registrable Securities to be
registered or because a sufficient number of Holders shall have
withdrawn so that the minimum offering conditions set forth in
Sections 2.1 and 2.3 are no longer satisfied (in
which case all participating Holders shall bear such expenses pro
rata among each other based on the number of Registrable Securities
requested to be so registered), unless the Holders of a majority of
the Registrable Securities agree to forfeit their right to a demand
registration pursuant to Section 2.1 ; provided,
however , in the event that a withdrawal by the Holders is
based upon material adverse information relating to the Company
that is different from the information known or publicly available
to the Holders requesting registration at the time of their request
for registration under Section 2.1 , such registration
shall not be treated as a counted registration for purposes of
Section 2.1 hereof or for purposes of determining
previously registered shares in the definition of Registrable
Securities, even though the Holders do not bear the Registration
Expenses for such registration. All Selling Expenses
relating to securities registered on behalf of the Holders pursuant
to Sections 2.1, 2.2 or 2.3 shall be borne by the holders of
securities included in such registration pro rata among each other
on the basis of the number of Registrable Securities so
registered.
2.5
Registration
Procedures
. In the case of each registration
effected by the Company pursuant to Section 2 , the
Company will keep each Holder advised in writing as to the
initiation of each registration and as to the completion
thereof. At its expense, the Company will use its
commercially reasonable efforts to:
(a) Keep such
registration effective for a period ending on the earlier of the
date which is sixty (60) days from the effective date of the
registration statement or such time as the Holder or Holders have
completed the distribution described in the registration statement
relating thereto;
(b) Prepare and file
with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement for the
period set forth in subsection (a) above;
(c) Furnish such
number of prospectuses, including any preliminary prospectuses, and
other documents incident thereto, including any amendment of or
supplement to the prospectus, as a Holder from time to time may
reasonably request;
(d) 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.
(e) Notify each seller
of Registrable Securities covered by such registration statement at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as
a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or incomplete in light of the circumstances then
existing, and following such notification promptly prepare and
furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of
such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or incomplete in light of the circumstances then
existing;
(f) Provide a transfer
agent and registrar for all Registrable Securities registered
pursuant to such registration statement and a CUSIP number for all
such Registrable Securities, in each case not later than the
effective date of such registration;
(g) Cause all such
Registrable Securities registered pursuant hereunder to be listed
on each securities exchange on which similar securities issued by
the Company are then listed; and
(h) In connection with
any underwritten offering pursuant to a registration statement
filed pursuant to Section 2.1, Section 2.2 or
Section 2.3 hereof, enter into an underwriting agreement
in form reasonably necessary to effect the offer and sale of the
Registrable Securities, provided such underwriting agreement
contains reasonable and customary provisions, and provided
further , that each Holder participating in such underwriting
shall also enter into and perform its obligations under such an
agreement.
(a) To the extent
permitted by law, the Company will indemnify and hold harmless each
Holder, each of its current, former and future: (i)&