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EXHIBIT 4.2
IMMERSION CORPORATION
CYBERNET REGISTRATION RIGHTS AGREEMENT
This CYBERNET REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
as of March 5, 1999, by and between Immersion Corporation (the "IMMERSION") and
Cybernet Systems Corporation ("Cybernet").
WHEREAS, IMMERSION and Cybernet have entered into that certain Plan
of Reorganization among IMMERSION, Immersion Acquisition Corporation ("Sub"),
Cybernet and Cybernet Haptic Systems ("Cybernet Sub") dated March 4, 1999 (the
"Merger Agreement") pursuant to which Sub will merge with and into Cybernet Sub
with Cybernet Sub surviving as a wholly-owned subsidiary of IMMERSION (the
"Merger").
WHEREAS, as a result of the Merger, Cybernet shall receive 1,600,000
shares of Common Stock of IMMERSION.
WHEREAS, IMMERSION and Cybernet have entered into that certain
Consulting Services Agreement of even date herewith pursuant to which IMMERSION
has granted Cybernet warrants to purchase 400,000 shares of Common Stock of
IMMERSION (the "Warrant") in exchange for certain consulting services.
WHEREAS, IMMERSION entered into the Information and Registration Rights
Agreement with the holders of Series C and Series D Preferred Stock dated April
13, 1998 (the "Preferred Stock Rights Agreement") pursuant to which IMMERSION
may grant certain "piggyback" registration rights to any other holder of
IMMERSION's securities without the prior approval of a majority of the holders
of Series C and Series D Preferred Stock.
WHEREAS, in order to induce Cybernet to enter into the Merger Agreement
and the Consulting Services Agreement, IMMERSION desires to provide Cybernet
with the rights set forth in this Agreement with respect to shares of Common
Stock of IMMERSION acquired by Cybernet pursuant to the Warrant and the Merger
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties hereby agree as follows:
1. Registration Rights.
1.1. Definitions. The following terms shall have the following
respective meanings:
(a) The terms "Holder" or "Holders" means any person or persons
to whom Registrable Securities were originally issued or qualifying transferees
under Section 1.10 hereof who hold Registrable Securities.
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(b) 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.
(c) The term "Registrable Securities" means (i) any and all of
the shares of the Common Stock issued pursuant to the Merger Agreement or
issuable upon exercise or conversion of the Warrant (collectively, the
"Shares"), which have not been sold to the public, (ii) shares of Common Stock
issued in respect of the stock referred to in (i) above as a result of a
dividend or other distribution with respect to, in exchange for or in
replacement of, all such shares of Common Stock, which have not been sold to the
public.
(d) "Qualified IPO" shall mean the sale of stock pursuant to a
registration statement under the Securities Act for an underwritten public
offering (other than a registration on Form ▇-▇, ▇▇▇▇ ▇-▇ or comparable or
successor forms) covering IMMERSION's Common Stock which results in aggregate
gross proceeds (prior to underwriter's commissions and expenses) to the
Corporation of more than $5,000,000.
(e) "SEC" shall mean the Securities and Exchange Commission.
(f) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.2. IMMERSION Registration.
(a) Participation in IMMERSION Registration. If IMMERSION shall
determine to register any of its securities, for its own account or the account
of a shareholder (other than a Holder) exercising demand registration rights
(other than a registration relating to employee stock option or purchase plans,
or a registration on SEC Form S-4 relating to an SEC Rule 145 transaction, or a
registration on any form other than SEC Forms ▇-▇, ▇-▇ or S-3, or their
successor forms or any successor to such forms, which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities) IMMERSION
will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within thirty (30) days after receipt of such written notice
from IMMERSION, by any Holder or Holders, except as set forth in Section
1.2((b)) below.
(b) Underwriting. If the registration of which IMMERSION gives
notice is for a registered public offering involving an underwriting, IMMERSION
shall so advise the Holders as a part of the written notice given pursuant to
Section 1.2((a))((i)). In such event the right of any Holder to registration
pursuant to Section 1.2 shall be conditioned upon such
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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 IMMERSION and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by
IMMERSION. Notwithstanding any other provision of this Section 1.2, in an
initial public offering, the underwriter may limit the number of Registrable
Securities and other securities of IMMERSION held by shareholders (other than
Holders) having contractual rights to registration to be included in the
registration and underwriting, or may exclude Registrable Securities and
Additional Registrable Securities (as defined in Section 1.3) entirely from such
registration and underwriting, and in any public offering following an initial
public offering, the underwriter may limit the number of outstanding securities
of IMMERSION held by shareholders having contractual rights to registration,
including the Registrable Securities and Additional Registrable Securities (the
"Aggregate Registrable Securities"), to an amount equal to 25% of the Common
Stock to be included in such registration and underwriting. The IMMERSION shall
so advise all holders of Registrable Securities and Additional Registrable
Securities which would otherwise be registered and underwritten pursuant hereto,
and the number of shares of the Aggregate Registrable Securities that may be
included in the registration and underwriting shall be allocated among holders
requesting registration in proportion, as nearly as practicable, to the
respective amounts of the Aggregate Registrable Securities held by each of such
holders as of the date of the notice pursuant to Section 1.2((a))((i)) above,
subject to the provisions of this Section 1.2((b)). If any Holder disapproves of
the terms of any such underwriting, such Holder may elect to withdraw therefrom
by written notice to IMMERSION and the underwriter. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
1.3. Registration Rights of Employees, Etc. The IMMERSION may provide
its employees, directors and advisors participation in IMMERSION initiated
registrations with respect to their shares ("Additional Registrable
Securities"); provided that inclusion of such shares does not diminish the
number of shares included by IMMERSION in such registration. Moreover, in any
such registration, stock held by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇
(collectively the "Founders") and by employees shall be cut-back prior to any
cut-back of the Registrable Securities or Additional Registrable Securities,
notwithstanding any provision of Section 1.2.
1.4. Lock-Up Provision. Upon receipt of a written request by IMMERSION
or by its underwriters, the Holders agree not to sell, sell short, grant an
option to buy, or otherwise dispose of their shares of Common Stock issued or
issuable upon conversion of the Option or Warrant for one hundred eighty (180)
days after the date of the effectiveness of the registration statement covering
IMMERSION's securities, or any shorter period as may be agreed to by IMMERSION
and any holder of five percent (5%) or more of the then outstanding Common Stock
of IMMERSION including shares of Common Stock, issued or issuable upon exercise
or conversion of outstanding shares of capital stock of IMMERSION or any
security exercisable or convertible into such capital stock (the "Fully Diluted
Common Stock").
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1.5. Expenses of Registration. All expenses incurred in connection
with any registration pursuant to this Section 1.5, including without
limitation, all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel for IMMERSION and expenses of any special
audits incidental to or required by such registration, shall be borne by
IMMERSION except as follows:
(a) The IMMERSION shall not be required to pay fees or
disbursements of legal counsel of the Holders.
(b) The IMMERSION shall not be required to pay underwriters'
fees, discounts or commissions relating to Registrable Securities.
All expenses of any registered offering not otherwise borne by
IMMERSION shall be borne pro rata among the Holders participating in the
offering (and IMMERSION, if it is selling securities in the offering) on the
basis of the number of Registrable Shares.
1.6. Registration Procedures. In the case of each registration
effected by IMMERSION pursuant to this Agreement, IMMERSION will keep each
Holder participating therein advised in writing as to the initiation of each
registration and as to the completion thereof. Except as otherwise provided in
Section 1.5, at its expense IMMERSION will furnish such number of prospectuses
and other documents incident thereto as a Holder from time to time may
reasonably request.
1.7. Indemnification.
(a) To the extent permitted by law, IMMERSION will indemnify
each Holder of Registrable Securities, each of its officers, directors and
partners, and each person controlling such Holder, with respect to which such
registration has been effected pursuant to this Section 1.7, and each
underwriter, if any, and each person who controls any underwriter of the
Registrable Securities held by or issuable to such Holder from and against all
claims, losses, expenses, damages and liabilities (or actions in respect
thereto) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
IMMERSION of any rule or regulation promulgated under the Securities Act or any
state securities law applicable to IMMERSION and relating to action or inaction
required of IMMERSION in connection with any such registration and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any reasonable legal and any other expenses
incurred in connection with investigating, defending or settling any such claim,
loss, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 1.7 shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability, or action if such
settlement is effected without the consent of IMMERSION (which consent shall not
be unreasonably withheld); and provided further, that IMMERSION will not be
liable in any such case to the extent that any such claim, loss, damage or
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liability arises out of or is based on any untrue statement or omission based
upon written information furnished to IMMERSION by an instrument duly executed
by such Holder or underwriter specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in the securities as to which such
registration is being effected, indemnify IMMERSION, each of its directors and
officers, each underwriter, if any, of IMMERSION's securities covered by such a
registration statement, each person who controls IMMERSION within the meaning of
the Securities Act, and each other such Holder, each of its officers, directors
and partners and each person controlling such Holder, against all claims,
losses, expenses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse IMMERSION, such
Holders, such directors, officers, partners, persons or underwriters for any
reasonable legal or any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to IMMERSION by an instrument duly executed by such Holder specifically for use
therein; provided, however, the total amount for which any Holder shall be
liable under this Section 1.7 shall not in any event exceed the aggregate
proceeds received by such Holder from the sale of Registrable Securities held by
such Holder in such registration.
(c) Each party entitled to indemnification under this Section
1.7 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in actual detriment to
the Indemnifying Party. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
1.8. Information by Holder. Holder or Holders of Registrable
Securities included in any registration shall promptly furnish to IMMERSION
such information regarding
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such Holder or Holders as IMMERSION may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein.
1.9. Rule 144 Reporting. With a view to making available to Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, IMMERSION
agrees at all times after ninety (90) days after the effective date of the first
registration filed by IMMERSION for an offering of its securities to the general
public to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144;
(b) Use commercially reasonable efforts to file with the SEC in
a timely manner all reports and other documents required of IMMERSION under
the Securities Act and the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, to
furnish to such Holder forthwith upon request a written statement by IMMERSION
as to its compliance with the reporting requirements of said Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by IMMERSION for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of IMMERSION, and such other reports and documents
so filed by IMMERSION as the Holder may reasonably request in complying with
any rule or regulation of the SEC allowing the Holder to sell any such
securities without registration.
1.10. Transfer of Registration Rights. The rights to cause IMMERSION
to register Registrable Securities pursuant to this Agreement may be assigned to
a transferee or assignee reasonably acceptable to IMMERSION in connection with
any transfer or assignment of Registrable Securities provided that: such
transfer may otherwise be effected in accordance with applicable securities
laws, and such assignee or transferee acquires at least 500,000 shares of
Registrable Securities (appropriately adjusted for stock splits, stock
dividends, recapitalization or the like).
1.11. Termination of Registration Rights. The registration rights
contained in this Agreement shall terminate as to any Holder of Registrable
Securities at the earlier of (i) three (3) years from the closing date of a
Qualified IPO or (ii) as to each Holder, at such time as such Holder is eligible
to sell all of such Holder's Registrable Securities then held in any three (3)
month period under SEC Rule 144.
2. Board Attendance.
2.1. The Right. As long as Cybernet holds five percent (5%) of the
Fully Diluted Common Stock (as defined in Section 1.4), Cybernet shall have the
right to appoint a representative reasonably acceptable to IMMERSION to attend
all Board meetings and meetings of committees thereof as an observer only and
without any voting privileges (the
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"Representative"). The IMMERSION and Cybernet agree that ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall
serve as the initial Representative of Cybernet. The IMMERSION shall provide the
Representative copies of all notices and materials provided to the Board at the
same time and in the same manner as provided to the Board.
2.2. Confidential Information with respect to the Representative.
The Representative shall maintain the confidentiality of all financial,
confidential and proprietary information of IMMERSION obtained by the
Representative as a result of these rights, and represent and agree that the
information provided by IMMERSION pursuant to these rights shall not be used by
Cybernet or its affiliates in any manner inconsistent with the fiduciary
obligations of a director of IMMERSION and shall be kept confidential. In
addition, all oral communications at, or regarding, the Board meetings and
meetings of committees thereof between the Representatives and members of the
Board of Directors shall be deemed Confidential Information.
2.3. Right to Withhold Information. The IMMERSION reserves the right
to withhold any information or to exclude the Representative from any meeting or
portion thereof if delivery of such information or attendance by such
Representative could, in the sole opinion of IMMERSION and its counsel, conflict
with the Board of Directors' fiduciary obligations to IMMERSION's stockholders,
adversely affect the attorney-client privilege between IMMERSION and its counsel
or a third party, or pose a material conflict of interest for such Cybernet or
its Representative. If information is withheld or the Representative is excluded
from a meeting of the Board of Directors (or a committee thereof) pursuant to
the preceding sentence, IMMERSION shall notify the Representative of the fact
that information was withheld or attendance was excluded and shall provide the
Representative with a general description of the reason for the exclusion.
2.4. Assignment and Termination. The rights granted under this
Section 2 may not be assigned or otherwise conveyed by the Representative,
Cybernet or by any subsequent transferee of any such rights without the prior
written consent of IMMERSION. The rights granted under this Section 2 shall
terminate immediately prior to the first to occur of (i) sale of stock of
IMMERSION pursuant to a Qualified IPO or (ii) the closing of a Corporate Sale.
Each of the following events shall be deemed to be a "Corporate Sale": (i) a
consolidation or merger of IMMERSION with or into any other corporation or
corporations (other than a wholly-owned subsidiary) in which the shareholders of
IMMERSION immediately prior to such transaction hold fifty percent (50%) or less
of the total voting power for the election of directors of the acquiring or
surviving entity immediately following the transaction, or (ii) the sale,
transfer or other disposition of all or substantially all of the assets of
IMMERSION or (iii) the consummation of any transaction or series of related
transactions which results in IMMERSION's shareholders immediately prior to such
transaction holding fifty percent (50%) or less of the voting power of the
acquiring or surviving entity immediately following the transaction.
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3. Miscellaneous.
3.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts entered into by and between California residents and to be wholly
performed within the State of California.
3.2. Adjustments for Stock Splits and Certain Other Changes.
Wherever in this Agreement there is a reference to a specific number of shares
of Common Stock of IMMERSION of any class or series, then, upon the occurrence
of any subdivision, combination or stock dividend of such stock, the specific
number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the effect on the outstanding shares of such
stock by such subdivision, combination or stock dividend.
3.3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4. Headings. The headings of the Sections of this Agreement are
for convenience and shall not by themselves determine the interpretation of this
Agreement.
3.5. Notices. Any notice required or permitted hereunder shall be
given in writing and shall be conclusively deemed effectively given upon
personal delivery, or five (5) days after deposit in the United States mail, by
registered or certified mail (or by airmail, if notice shall be sent outside the
United States), postage prepaid, addressed (i) if to IMMERSION, as set forth
below IMMERSION's name on the signature page of this Agreement, and (ii) if to
Cybernet, as set forth below Cybernet's name on the signature page of this
Agreement, or at such other address as IMMERSION or Cybernet may designate by
ten (10) days' advance written notice to Cybernet or IMMERSION, respectively.
Any notice sent outside the United States shall also be telexed or telecopied.
3.6. Amendment of Agreement. Except as otherwise provided in Section
1, any provision of this Agreement may be amended and the observance thereof may
be waived, only by a written instrument signed by IMMERSION and by persons
holding at a majority of the Registrable Securities as defined in Section 1 of
this Agreement. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Registrable Securities then
outstanding, each subsequent holder of all such Registrable Securities and
IMMERSION.
3.7. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof, and no party shall be liable or bound to any other party
in any manner by any warranties, representations or covenants relating to such
subject matter, except as specifically set forth herein.
3.8. Severability. In case any provision of this Agreement shall be
declared invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
IMMERSION CORPORATION
a California corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
Corporate Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
[Signature Page to the Cybernet Information and Registration Rights Agreement]
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IMMERSION CORPORATION
CYBERNET INFORMATION AND REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
March 5, 1999
"CYBERNET"
CYBERNET SYSTEMS CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: President
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