Registration Rights Agreement

EXHIBIT 10.1


REGISTRATION RIGHTS AGREEMENT


THIS AGREEMENT is entered into as of December 29, 1995 by and among APEX PC SOLUTIONS, INC., a Washington corporation (the "Company"), the entities named as Purchasers on Exhibit A hereto (the "Purchasers"), and the persons or entities named as Founders on Exhibit A hereto (the "Founders").


RECITALS


A. The Purchasers hold or, on the date hereof, are acquiring an aggregate of 200,000 shares of the Company's Common Stock, no par value (the "Common Shares") and an aggregate of 300,000 shares of the Company's Series A Convertible Preferred Stock, no par value (the "Preferred Shares") (together, the Common Shares and the Preferred Shares are referred to as the "Purchaser Shares"), pursuant to the terms of a Stock and Subordinated Note Purchase Agreement dated the date hereof among the Company, the Purchasers and the Founders (the "Purchase Agreement").


B. The execution and delivery of this Agreement is a condition of the Purchase Agreement and the Company desires to grant registration rights to the Purchasers and the Founders.


C. The Founders hold on the date hereof an aggregate of 1,000,000 shares of Common Stock of the Company ("Founders Shares") pursuant to the terms of the Purchase Agreement, 500,000 of which shares shall be repurchased by the Company pursuant to Section 6.3 of the Purchase Agreement.


NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the Purchasers, the Founders and the Company agree as follows:


REGISTRATION


1. DEFINITIONS.


As used herein:


1.1 The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.


1.2 The term "Registrable Shares" means and includes any shares of Common Stock issued or issuable upon the conversion of the Purchaser Shares and, for the purposes of Section 2.1 but not Sections 2.2, 2.3, 2.10, 2.11 and 5, the Founders Shares; provided that Registrable Shares shall not include any shares of Common Stock which have previously been registered or which have


been sold to the public, or which have been sold in a private transaction in which the transferor's rights pursuant to this Agreement were not assigned.


1.3 The term "Ownership Percentage" means and includes, with respect to each holder of Registrable Shares requesting inclusion of Registrable Shares in an offering pursuant to this Agreement, the number of Registrable Shares held by such holder divided by the total of (a) all Registrable Shares held by all holders requesting registration in such offering and (b) the total number of all other securities entitled to registration pursuant to any agreement with the Company approved by a majority in interest of the Purchasers and held by others participating in the underwriting.


1.4 The term "Public Offering" shall mean a fully distributed, underwritten public offering of shares of Common Stock registered under the Securities Act.


1.5 The term "Securities Act" means the Securities Act of 1933, as amended.


2. REGISTRATION RIGHTS.


2.1 "PIGGY BACK" REGISTRATION. If at any time the Company shall determine to register under the Securities Act (including pursuant to a demand of any shareholder of the Company exercising registration rights) any of its Common Stock (except shares to be issued solely in connection with any acquisition of any entity or business, shares issuable solely upon exercise of stock options, or shares issuable solely pursuant to employee benefit plans), it shall send to each holder of Registrable Shares written notice of such determination and, if within fifteen (15) days after delivery of such notice, such holder shall so request in writing, the Company shall include in such registration all or any part of the Registrable Shares that such holder requests to be registered, except that if, in connection with any offering involving an underwriting of Common Stock to be issued by the Company, the managing underwriter advises the Company that marketing factors require a limitation on the number of shares of Common Stock to be included in any such registration, then the number of shares that are entitled to be included in the registration shall be allocated, first, to the Common Stock to be sold by the Company and then to the Common Stock held by the holders of Common Stock having an incidental ("piggy back") right to include such Common Stock in the registration statement as provided below. To the extent that any Registrable Shares may be included in the registration after the underwriter's cut-back (the "Available Shares"), the Company shall be obligated to include in such registration statement, with respect to each requesting holder, the amount equal to (i) the number of Available Shares multiplied by (ii) such holder's Ownership Percentage. Notwithstanding the foregoing, in any underwriting of Common Stock that occurs after the Company's initial Public Offering, the underwriter shall not reduce the number of Registrable Shares requested for inclusion hereunder to be included to less than thirty percent (30%) of all shares to be underwritten. No incidental right under this Section 2.1 shall be construed to limit any registration required under Section 2.2.


2.2 REQUIRED REGISTRATION. (a) If at any time after the earlier to occur of (i) 120 days after the Company has completed a Public Offering, or (ii) the twelve (12) month anniversary date hereof, one or more holders of at least forty percent (40%) of the Registrable Shares, shall notify the


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Company in writing that it or they intend to offer or cause to be offered for public sale any portion or all of the Registrable Shares, the Company will so notify all holders of Registrable Shares. Upon written request of any holder received by the Company within twenty (20) days after written notice is delivered by the Company, the Company will cause all or any part of the Registrable Shares that may be requested by any holder thereof (including the holder or holders giving the initial notice of intent to offer) to be registered under the Securities Act as expeditiously as possible. The Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to this Section 2.2:


(i) 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;


(ii) After the Company has initiated two such registrations pursuant to this Section 2.2 (counting for these purposes only registrations which have been declared or ordered effective and pursuant to which securities have been sold and registrations which have been withdrawn by the holders as to which the holders have not elected to bear the expenses of registration pursuant to Section 2.9 hereof and would, absent such election, have been required to bear such expenses);


(iii) During the period starting with the date 60 days prior to the Company's good faith estimate of the date of filing of, and ending on a date 120 days after the effective date of, a Company-initiated initial Public Offering; provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or


(iv) If the initiating holders propose to dispose of Registrable Shares which may be immediately registered on Form S-3 pursuant to a request made under Section 2.3 hereof;


(b) Notwithstanding anything contained in this Section 2.2 to the contrary, if the Company furnishes to the holders of Registrable Shares requesting any registration pursuant to such section, a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, such registration would be detrimental to the Company and that it is in the best interests of the Company to defer the filing of a registration statement, then the Company shall have the right to defer the filing of a registration statement with respect to such offering for a period of not more than 120 days from receipt by the Company of the request by the initiating holder; provided, however, that the Company may not exercise such right more than once in any twelve month period.


2.3 REGISTRATION ON FORM S-3.


(a) In addition to the rights provided to the holders of Registrable Shares in Section 2.1 and Section 2.2 above, if the registration of Registrable Shares pursuant to the Securities Act can be effected on Form S-3 (or any similar form promulgated by the Securities and Exchange


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Commission), upon the request of one or more holders of at least twenty percent (20%) of the Registrable Shares, the Company will promptly so notify each holder of Registrable Shares and then will, as expeditiously as possible thereafter, effect the registration under the Securities Act on said Form S-3 of all or such portion of the Registrable Shares as the holder or holders shall specify.


(b) Notwithstanding the foregoing, Company shall not be required to register Registerable Shares on Form S-3 pursuant to Section 2.3(a), (i) on more than one occasion in any calendar year or (ii) if the Company furnishes to the holders of Registrable Shares requesting any registration pursuant to such section, a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, such registration would be detrimental to the Company and that it is in the best interests of the Company to defer the filing of a registration statement, then the Company shall have the right to defer the filing of a registration statement with respect to such offering for a period of not more than 90 days from receipt by the Company of the request by the initiating holder; provided, however, that the Company may not exercise such right more than three times, nor may the Company exercise such right consecutively.


2.4 EFFECTIVENESS. The Company will use its best efforts to maintain the effectiveness for of any registration statement pursuant to which any of the Registrable Shares are being offered until the earlier of (a) such time as all of the Registrable Shares registered thereby are sold or (b) nine (9) months after the effective date of the registrable statement, and from time to time will amend or supplement such registration statement and the prospects contained therein as and to the extent necessary to comply with the Securities Act and any applicable state securities statute or regulation.


2.5 INDEMNIFICATION OF HOLDERS OF REGISTRABLE SHARES. In the event that the Company registers any of the Registrable Shares under the Securities Act, the Company will indemnify and hold harmless each holder and each underwriter of the Registrable Shares so registered (including any broker or dealer through whom such shares may be sold) and each person, if any, who controls such holder or any such underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities, joint or several, to which they or any of them become subject under the Securities Act or under any other statute or at common law, or otherwise, and, except as hereinafter provided, will reimburse each such holder, each such underwriter and each such controlling person, if any, for any legal or other expenses reasonably incurred, as incurred, by them or any of them in connection with investigating or defending any actions whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the registration statement or prospectus as from time to time amended or supplemented by the Company) or arise out of or are based upon the omission or alleged omission ...