EXHIBIT 10.3
INVENTA CORPORATION
______________________________
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
______________________________
May 11, 1998
TABLE OF CONTENTS
Page
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1. Purchase and Sale of Series C Preferred Stock.......................... 1
1.1 Sale and Issuance of Series C Preferred Stock..................... 1
1.2 Closing Date; Delivery............................................ 1
2. Representations and Warranties of the Company.......................... 1
2.1 Organization, Good Standing and Qualification.................... 1
2.2 Capitalization................................................... 2
2.3 Subsidiaries..................................................... 2
2.4 Authorization.................................................... 2
2.5 Valid Issuance of Securities..................................... 2
2.6 Governmental Consents............................................ 3
2.7 Litigation....................................................... 3
2.8 Patent and Trademarks............................................ 3
2.9 Compliance with Other Instruments................................ 4
2.10 Disclosure....................................................... 4
2.11 Registration Rights.............................................. 4
2.12 Title to Property and Assets..................................... 4
2.13 Financial Statements............................................. 5
2.14 Changes.......................................................... 5
2.15 Minute Books..................................................... 6
2.16 Labor Agreements and Actions..................................... 6
2.17 Employee Plans................................................... 7
2.18 Employees........................................................ 7
2.19 Tax Returns and Payments......................................... 7
2.20 Agreements; Action............................................... 7
2.21 Obligations to Related Parties................................... 9
2.22 Real Property Holding Corporation................................ 9
2.23 Insurance........................................................ 9
2.24 Investment Company Act........................................... 9
2.25 Qualified Small Business......................................... 9
3. Representations and Warranties of the Investors........................ 9
3.1 Authorization.................................................... 9
3.2 Purchase Entirely for Own Account................................ 9
3.3 Disclosure of Information........................................ 10
3.4 Economic Risk.................................................... 10
3.5 Restricted Securities............................................ 10
3.6 Further Limitations on Disposition............................... 10
3.7 Legends.......................................................... 11
4. California Commissioner of Corporations................................ 11
4.1 Corporate Securities Law......................................... 11
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5. Conditions of Investor's Obligations at Closing........................ 12
5.1 Representations and Warranties................................... 12
5.2 Performance...................................................... 12
5.3 Articles of Incorporation........................................ 12
5.4 Compliance Certificate........................................... 12
5.5 Restated Shareholders Agreement.................................. 12
5.6 Restated Registration Rights Agreement........................... 12
5.7 Employment Agreement............................................. 12
5.8 Opinion of Company's Counsel..................................... 12
5.9 Legal Expenses................................................... 12
5.10 Management Rights Agreement...................................... 13
6. Conditions of the Company's Obligations at Closing..................... 13
6.1 Representations and Warranties................................... 13
6.2 Payment of Purchase Price........................................ 13
6.3 Legal Matters.................................................... 13
7. Covenants of the Company............................................... 13
7.1 Delivery of Financial Statements................................. 13
7.2 Inspection Rights................................................ 14
7.3 Reservation of Common Stock...................................... 14
7.4 Proprietary Information Agreement................................ 14
7.5 Termination of Information Covenant.............................. 14
7.6 Key Man Life Insurance........................................... 14
7.7 Chief Executive Officer Recruitment.............................. 14
8. Miscellaneous.......................................................... 14
8.1 Transfer; Successors and Assigns.................................. 14
8.2 Governing Law..................................................... 14
8.3 Counterparts...................................................... 15
8.4 Titles and Subtitles.............................................. 15
8.5 Notices........................................................... 15
8.6 Finder's Fee...................................................... 15
8.7 Expenses.......................................................... 15
8.8 Amendments and Waivers............................................ 15
8.9 Severability...................................................... 15
8.10 Entire Agreement................................................. 15
8.11 Exculpation Among Investors...................................... 16
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EXHIBITS
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EXHIBIT A Schedule of Investors
EXHIBIT B Amended and Restated Articles of Incorporation
EXHIBIT C Schedule of Exceptions to Representations and Warranties
EXHIBIT D Form of Proprietary Information Agreement
EXHIBIT E Restated Shareholders Agreement
EXHIBIT F Restated Registration Rights Agreement
EXHIBIT G Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
EXHIBIT H Management Rights Agreement
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SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
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THIS SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT ("Agreement")
is made as of the 11th day of May 1998 by and between Inventa Corporation, a
California corporation (the "Company"), and the persons and entities listed on
the Schedule of Investors attached hereto as Exhibit A (the "Investors").
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THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Series C Preferred Stock
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1.1 Sale and Issuance of Series C Preferred Stock
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(a) The Company shall adopt and file with the Secretary of State
of California on or before the Closing (as defined below) the Amended and
Restated Articles of Incorporation in the form attached hereto as Exhibit B.
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(b) Subject to the terms and conditions of this Agreement, the
Investors agree to purchase at the Closing and the Company agrees to sell and
issue to the Investors at the Closing that number of shares of the Company's
Series C Preferred Stock (the "Shares") for the aggregate purchase price set
forth opposite each Investor's name on Exhibit A attached hereto, at a purchase
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price equal to $1.25 per share of Series C Preferred Stock.
1.2 Closing Date; Delivery. The purchase and sale of the Shares shall
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take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, at 9:00 a.m., on May 11, 1998, or at such other
time and place as the Company and the Investors mutually agree upon, orally or
in writing (which time and place are designated as the "Closing"). At the
Closing, the Company shall deliver to each Investor a certificate representing
the Shares which such Investor is purchasing against delivery to the Company by
such Investor of a check made payable to the Company or wire transfer of the
aggregate purchase price therefor.
2. Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Investors that, except as set forth on a Schedule
of Exceptions attached hereto as Exhibit C, specifically identifying the
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relevant subparagraph hereof, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
2.1. Organization, Good Standing and Qualification . The Company is a
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corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company will
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consist, immediately prior to the Closing, of (i) 8,119,511 shares of Preferred
Stock, 1,000,000 shares of which are designated Series A Preferred Stock and of
which 800,000 are issued and outstanding, 2,560,000 shares of which are
designated Series B Preferred Stock and of which 2,560,000 are issued and
outstanding, and 4,059,511 shares of which are designated Series C Preferred
Stock of which none are issued and outstanding, and (ii) 25,000,000 shares of
Common Stock, of which 4,642,344 shares are issued and outstanding. The Company
has reserved 1,350,000 shares of its Common Stock for issuance pursuant to its
1993 Stock Option Plan. Except as set forth in the Schedule of Exceptions
attached as Exhibit C hereto, there are no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements, orally or in writing,
for the purchase or acquisition from the Company of any shares of its capital
stock.
2.3 Subsidiaries. Except as set forth in the Schedule of Exceptions,
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the Company does not presently own or control, directly or indirectly, any
interest in any other corporation, association, or other business entity.
2.4 Authorization. All corporate action on the part of the Company,
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its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of the Shares
has been taken or will be taken prior to the Closing, and this Agreement
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms. The Agreement, the Restated Shareholders Agreement
attached hereto as Exhibit E (the "Restated Shareholders Agreement") and the
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Restated Registration Rights Agreement attached hereto as Exhibit F (the
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"Restated Registration Rights Agreement"), when executed and delivered, will be
valid and binding obligations of the Company enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (ii) general principles of equity that
restrict the availability of equitable remedies; and (iii) to the extent that
the enforceability of the indemnification provisions in Section 10 of the
Restated Registration Rights Agreement may be limited by applicable laws. The
sale of the Shares and the subsequent conversion of the Shares into Common Stock
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with.
2.5 Valid Issuance of Securities.
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(a) The Shares that are being issued to the Investors hereunder,
when issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable. The shares of Common Stock issuable upon conversion of the Shares
have been duly and validly reserved for issuance.
(b) The shares of Common Stock and Preferred Stock outstanding
prior to the Closing are all duly and validly authorized and issued, fully paid
and nonassessable and were issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
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2.6 Governmental Consents. No consent, approval, order or
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authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for (a) the filing pursuant to Section
25102(f) of the California Corporate Securities Law of 1968, as amended, and the
rules thereunder, which filing will be effected in accordance with such section,
and (b) compliance with the Blue Sky Laws of the various states in which the
Investors may reside, which compliance will be effected in accordance with such
laws. The Company currently holds all licenses, permits, franchises,
registrations and qualifications which may be required to conduct its business,
and all such licenses, permits, franchises, registrations and qualifications are
valid and in full force and effect.
2.7 Litigation. Except as set forth in the Schedule of Exceptions,
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there is no action, suit, proceeding or investigation pending or currently
threatened against the Company that questions the validity of this Agreement or
the right of the Company to enter into it, or to consummate the transactions
contemplated hereby, or that might result, either individually or in the
aggregate, in any material adverse changes in the assets, condition, affairs or
prospects of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. The foregoing includes, without limitation, actions
pending or threatened (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
2.8 Patent and Trademarks. To its knowledge, the Company owns or
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possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, information and other proprietary rights
and processes necessary for its business as now conducted and as proposed to be
conducted, without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other than such
licenses or agreements arising from the purchase or sale of "off the shelf" or
standard products. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor
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delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
2.9 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any provisions
of its Amended and Restated Articles of Incorporation or Bylaws or of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound or, to its knowledge, of any provision of federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree,
contract, rule, or statute, or of the Company's Restated Articles of
Incorporation or Bylaws, or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement.
2.10 Disclosure. The Company has fully provided the Investors with
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all the information which the Investors have requested for deciding whether to
acquire the Shares and all information which the Company believes is reasonably
necessary to enable the Investors to make such decision. There is no information
known to the Company which materially adversely affects the business or
operations of the Company which has not been disclosed to the Investors. Neither
this Agreement nor any other statements or certificates made or delivered in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein or therein not
misleading, except that, with respect to financial projections, the Company
represents only that such projections were prepared in good faith and that the
Company believes there is a reasonable basis for such projections.
2.11 Registration Rights. Except as set forth in the Restated
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Registration Rights Agreement, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
2.12 Title to Property and Assets. The Company owns its property and
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assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens
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which arise in the ordinary course of business and do not materially impair the
Company's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company is in compliance with such leases
and, to the best of its knowledge, holds a valid leasehold interest free of any
liens, claims or encumbrances. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company are in good
operating condition and repair (normal wear and tear accepted) and are
reasonably fit and usable for the purposes for which they are being used.
2.13 Financial Statements. The Company has delivered to the Investors
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its unaudited financial statements (balance sheet and profit and loss statement
and statement of shareholders equity) at December 31, 1997 and for the fiscal
year then ended and a balance sheet and statement of operations at March 31,
1998 (collectively, the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other. The Financial
Statements accurately set out and describe the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein.
Except as set forth in the Financial Statements, the Company has no liabilities,
contingent or otherwise, of a nature required by generally accepted accounting
principles to be reflected in a balance sheet or disclosed in the notes thereto,
other than liabilities incurred in the ordinary course of business subsequent to
March 31, 1998
2.14 Changes. Since March 31, 1998, there has not been:
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(a) any change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business which have not
been, in the aggregate, materially adverse.
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
to which the Company or any of such assets or properties is subject;
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(f) any resignation or termination of any key officers of the
Company; and the Company, to its knowledge, does not know of the impending
resignation or termination of employment of any such officer;
(g) to the knowledge of the Company any material change, except
in the ordinary course of business, in the contingent obligations of the Company
by way of guaranty, endorsement, indemnity, warranty or otherwise;
(h) any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business or loans to purchase Common Stock;
(i) any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder other than in the
ordinary course of business;
(j) any declaration or payment of any dividend or other
distribution of the assets of the Company;
(k) any labor organization activity;
(l) any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(m) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets; or
(n) to the Company's knowledge, any other event or condition of
any character which might materially and adversely affect the assets,
properties, financial condition, operating results or business of the Company
(as such business is presently conducted and as it is proposed to be conducted).
2.15 Minute Books. The Company has offered to provide to the
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Investors the minute books of the Company, which contain a complete summary of
all meetings of directors and shareholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.16 Labor Agreements and Actions . The Company is not bound by or
----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the
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assets, properties, financial condition, operating results, or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted), nor is the Company aware of any labor organization activity
involving its employees.
2.17 Employee Plans. The Company has no "employee welfare benefit
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plans" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"). The Company (i) has not been required to contribute to, (ii)
has not terminated or withdrawn from, and (iii) is not aware of any withdrawal
liability assessed against the Company with respect to any defined benefit plan
as defined in Section 3(35) of ERISA or multiemployer plan as defined in Section
4001 of ERISA in which employees or former employees of the Company have
participated.
2.18 Employees. The Company has not knowingly violated any
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employment-related laws, including, without limitation, laws relating to equal
employment opportunity, overtime pay and collective bargaining. The Company is
not aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Except as set forth in the Schedule of Exceptions, the employment of each
officer and employee of the Company is terminable at the will of the Company.
Each former and current United States employee and consultant of the Company
with access to confidential or proprietary information has executed a
Proprietary Information Agreement, the form of which is attached hereto as
Exhibit D. To the Company's knowledge, no employee of the Company, nor any
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consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company has not received any notice alleging that any such violation has
occurred. The Company's relations with its employees is good.
2.19 Tax Returns and Payments. The Company has timely filed all tax
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returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised except as set forth in the Schedule
of Exceptions (i) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof, or (ii) of any deficiency in assessment
or proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
2.20 Agreements; Action.
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(a) Except for agreements explicitly contemplated hereby
including proprietary agreements and agreements between the Company and its
employees with respect to the
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sale of the Company's Common Stock, and agreements between the Company and the
Investors with respect to their investment, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the license of any patent, copyright, trade secret
or other proprietary right to or from the Company (other than licenses arising
from the purchase or sale of "off the shelf" or other standard products), or
(iii) provisions restricting or affecting the development, manufacture or
distribution of the Company's products or services, or (iv) indemnification by
the Company with respect to infringements of proprietary rights (other than
indemnification obligations arising from purchase or sale agreements entered
into in the ordinary course of business).
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities except as set forth in the Schedule of Exceptions (other than
with respect to dividend obligations, distributions, indebtedness and other
obligations incurred in the ordinary course of business or as disclosed in the
Financial Statements) individually in excess of $25,000 or, in the case of
indebtedness and/or liabilities individually less than $25,000, in excess of
$50,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any material amount of its assets or rights, other than the sale of
its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) Except as set forth in the Schedule of Exceptions, the
Company has not engaged in the past three (3) months in any material discussion
(i) with any representative of any corporation or corporations regarding the
consolidation or merger of the Company with or into any such corporation or
corporations, (ii) with any corporation, partnership, association or other
business entity or any individual regarding the sale, conveyance or disposition
of all or substantially all of the assets of the Company, or a transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of, or (iii) regarding any other form of
acquisition, liquidation, dissolution or winding up of the Company.
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2.21 Obligations to Related Parties. There are no obligations of the
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Company to officers, directors, shareholders or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). Except as set forth in the Schedule of Exceptions
none of the officers, directors or shareholders of the Company, or any members
of their immediate families, are indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, except that officers, directors
and/or shareholders of the Company may own stock in publicly traded companies
which may compete with the Company. No officer, director or shareholder, or any
member of their immediate families, is, directly or indirectly, interested in
any material contract with the Company (other than such contracts as relate to
any such person's ownership of capital stock or other securities of the
Company). Except as may be disclosed in the Financial Statements, the Company
is not a guarantor or indemnitor of any indebtedness of any other person, firm
or corporation.
2.22 Real Property Holding Corporation. The Company is not a real
---------------------------------
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
2.23 Insurance. The Company has or will obtain promptly following
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Closing fire and casualty insurance policies with coverage customary for
companies similarly situated to the Company.
2.24 Investment Company Act. The Company is not an "investment
----------------------
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
2.25 Qualified Small Business. The Company represents and warrants to
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the Investors that, to its knowledge, the Shares should qualify as "Qualified
Small Business Stock" as defined in Section 1202(c) of the Internal Revenue Code
of 1986, as amended (the "Code") as of the date hereof.
3. Representations and Warranties of the Investors. Each Investor for
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itself hereby represents and warrants to the Company that:
3.1 Authorization. This Agreement constitutes its valid and legally
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binding obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Shares will be acquired for
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investment for the Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Investor
further represents that the Investor does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares. The Investor represents that it has full power and authority to enter
into this Agreement.
3.3 Disclosure of Information. The Investor believes it has
-------------------------
received information that it considers necessary or appropriate for deciding
whether to acquire the Shares. The Investor further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Shares. The foregoing, however,
does not limit or modify the representations and warranties of the Company in
Section 2 of this Agreement or the right of the Investor to rely thereon.
3.4 Economic Risk. The Investor has the capacity to protect his own
-------------
interests in connection with the purchase of the Shares, is capable of
evaluating the merits and risks of investment in the Company, can make an
informed investment decision by reason of (i) his preexisting personal or
business relationship with the Company or any of its officers, directors, or
control persons, or (ii) his business and financial knowledge and experience or
the business and financial knowledge and experience of my professional advisers,
if any, and is able to bear the substantial economic risks of an investment in
the Shares for an indefinite period of time.
3.5 Restricted Securities. It understands that the shares of Common
---------------------
Stock sold hereunder are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such shares may be resold without registration under the
Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, the Investor represents that he is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.6 Further Limitations on Disposition. Without in any way
----------------------------------
limiting the representations set forth above, the Investor further agrees not to
make any disposition of all or any portion of the Shares unless and until:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) The Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, the Investor
-10-
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
under the Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by the Investor to a shareholder, partner or other affiliate of
the Investor, if the transferee or transferees agree in writing to be subject to
the terms hereof to the same extent as if they were the Investor hereunder.
3.7 Legends. It is understood that the Shares, and the shares of
-------
Common Stock issuable upon conversion thereof and any securities issued in
respect thereof or exchanged therefor may bear one or all of the following
legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION.
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
(c) Any legend required by the Blue Sky laws of any other state
to the extent such laws are applicable to the shares represented by the
certificate so legended:
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT IS THE
-------------------------
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
-11-
5. Conditions of Investor's Obligations at Closing. The obligations of
-----------------------------------------------
the Investors under Section 1.1 of this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true and correct in
all material respects as of the Closing.
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Articles of Incorporation. The Company shall have filed with,
-------------------------
and have had accepted for filing by, the California Secretary of State the
Amended and Restated Articles of Incorporation of the Company attached as
Exhibit B hereto.
- ---------
5.4 Compliance Certificate. The President of the Company shall
----------------------
deliver to the Investors at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.5 Restated Shareholders Agreement. Each key employee of the
-------------------------------
Company who holds at least 100,000 shares of the capital stock of the Company
(on an as-converted basis and as adjusted for any stock split, stock dividends,
combinations, recapitalization and the like with respect to such shares) shall
have entered into a Restated Shareholders Agreement with the Company, in
substantially the form attached hereto as Exhibit E.
---------
5.6 Restated Registration Rights Agreement. The Company shall
--------------------------------------
deliver to the Investors at the Closing copies of the Restated Registration
Rights Agreement executed by the necessary majority of the signatories thereto.
5.7 Employment Agreement. The Company shall at or prior to the
--------------------
Closing enter into an employment agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ mutually
acceptable to the Company, ▇▇. ▇▇▇▇▇▇▇▇▇ and the Investors.
5.8 Opinion of Company's Counsel. The Purchasers shall have received
----------------------------
from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Company, an opinion
addressed to them, dated the Closing Date, in substantially the form of Exhibit
-------
G.
- -
5.9 Legal Expenses. The Company shall pay the legal expenses of the
--------------
Investors in connection with the Series C Preferred Stock financing in an
aggregate amount not to exceed $15,000.
-12-
5.10 Management Rights Agreement. The Company shall deliver to the
---------------------------
Technology Crossover Ventures entities executed copies of the Management Rights
Agreement attached hereto as Exhibit H.
---------
6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to the Investors under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions by
the Investors:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Section 3 shall be true and correct in
all material respects as of the Closing.
6.2 Payment of Purchase Price. The Investors shall have delivered
-------------------------
to the Company the purchase price specified in Section 1.1 hereof.
6.3 Legal Matters. All material matters of a legal nature which
-------------
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
7. Covenants of the Company.
------------------------
7.1 Delivery of Financial Statements. The Company shall deliver the
--------------------------------
following financial information to each Investor who continues to hold at least
50,000 Shares (or the Common Stock into which the Shares have been converted)
(as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such Shares)(for purposes of
satisfying the 50,000 share threshold herein, shares owned by partners,
subsidiaries, parents, shareholders or affiliates will be aggregated; provided,
however, that the Company shall only be required to deliver financial
information to one representative of each group of affiliated persons or
entities), and as long as such Investor or a principal, partner or manager of
such Investor, is not employed by or associated with a competitor of the
Company:
(a) as soon as practicable after the end of each fiscal year of
the Company an income statement for such fiscal year, a balance sheet of the
Company as of the end of such year and in any event within 120 days thereafter,
and a schedule as to the sources and applications of funds for such year, such
year-end financial reports to be audited by a "Big Six" accounting firm and in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("GAAP");
(b) prior to the commencement of each fiscal year of the
Company, an operating budget and updated three year strategic plan; and
(c) within thirty (30) days of the end of each month, an
unaudited balance sheet and statement of operations as of the end of such month.
-13-
7.2 Inspection Rights. Each Investor shall have the right to visit
-----------------
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 7.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
7.3 Reservation of Common Stock. The Company will at all times
---------------------------
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion (the "Conversion Stock").
7.4 Proprietary Information Agreement. The Company shall require
---------------------------------
all employees and consultants to execute and deliver a Proprietary Information
Agreement in the form attached hereto as Exhibit D.
---------
7.5 Termination of Information Covenant. The covenant set forth in
-----------------------------------
Section 7.1 shall terminate as to the Investors and be of no further force or
effect at such time as the initial sale of securities pursuant to a registration
statement filed by the Company under the Securities Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated.
7.6 Key Man Life Insurance. The Company shall obtain and maintain a
----------------------
key man life insurance policy for $1,000,000 with respect to the Chief Executive
Officer of the Company with proceeds payable to the Company.
7.7 Chief Executive Officer Recruitment. The Company shall, within
-----------------------------------
six months from the date of Closing, engage an executive recruitment firm which
shall conduct a search for a Chief Executive Officer acceptable to the Board of
Directors of the Company.
8. Miscellaneous.
-------------
8.1 Transfer; Successors and Assigns. The terms and conditions of
--------------------------------
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.2 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
-14-
8.3 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.
8.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address or
addresses indicated for such party on Exhibit A hereto, or at such other address
---------
or addresses as such party may designate by ten (10) days' advance written
notice to the other parties.
8.6 Finder's Fee. Except as elsewhere disclosed in this Agreement,
------------
or in Exhibit C hereto, each party represents that it neither is nor will be
---------
obligated for any finder's fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, employees, or
representatives are responsible.
The Company agrees to indemnify and hold harmless the Investor from
any liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
8.7 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
8.8 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and a majority-in-
interest of the Investors.
8.9 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.10 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements existing between the parties
hereto are expressly canceled.
-15-
8.11 Exculpation Among Investors. Each Investor acknowledges that it
---------------------------
is not relying upon any person, firm or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each investor agrees that no Investor nor the respective
controlling persons, officers, directors, partners, agents or employees of any
Investor shall be liable for any action heretofore or hereafter taken or omitted
to be taken by any of them in connection with the Shares.
(Remainder of page left intentionally blank)
-16-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INVENTA CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INVESTORS:
Battery Ventures L.P.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Partner
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: ▇▇▇▇ Partners Limited Partnership,
its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
General Partner
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
- -----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ A. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
- -----------------------------------
A. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
- -----------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
- ----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
- ----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
- ----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
- ----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
- ----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
- ----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
- ----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
- ----------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
-18
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
- ----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
- ----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
- ----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
- ----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
RESTATED ARTICLES OF INCORPORATION
OF
INVENTA CORPORATION
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇ certify that:
1. They are the duly elected and acting President and Assistant
Secretary, respectively, of Inventa Corporation, a California corporation (the
"Corporation").
2. The Articles of Incorporation of this Corporation are hereby amended
and restated in full to read as set forth in Exhibit A attached hereto.
3. The attached amendment and restatement of the Articles of
Incorporation of this Corporation has been duly approved by the Board of
Directors of this Corporation.
4. The attached amendment and restatement of the Articles of
Incorporation of this Corporation has been approved by the holders of the
requisite number of shares of this Corporation in accordance with Sections 902
and 903 of the California Corporations Code. The total number of outstanding
shares of each class entitled to vote with respect to the attached amendment and
restatement was 800,000 shares of Series A Preferred Stock, 2,560,000 shares of
Series B Preferred and 4,642,344 shares of Common Stock. The number of shares
voting in favor of the attached amendment and restatement equaled or exceeded
the vote required, such required vote being a majority of the outstanding shares
of the Series A Preferred Stock, Series B Preferred Stock and Common Stock,
voting as separate classes.
The undersigned further declare under penalty of perjury that the matters
set forth in this Certificate are true and correct of their own knowledge.
Executed at Santa Clara, California on April 8, 1998.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
President
/s/ ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇,
Assistant Secretary
-2-
EXHIBIT A
---------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
INVENTA CORPORATION
I.
The name of this corporation is Inventa Corporation (the "Corporation").
II.
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is 33,119,511
shares, of which 25,000,000 shares shall be Common Stock with a par value of
$0.001 per share and of which 8,119,511 shares shall be Preferred Stock,
1,000,000 of which are designated Series A Preferred Stock with a par value of
$0.001 per share, 2,560,000 of which are designated Series B Preferred Stock
with a par value of $0.001 per share and 4,059,511 of which are designated
Series C Preferred Stock with a par value of $0.001 per share. The Board of
Directors is authorized to fix the number of shares of any series of Preferred
Stock and to determine or alter the rights, preferences, privileges, and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series of Preferred Stock, to increase or decrease (but not
below the number of shares of any such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that series.
IV.
The rights, preferences, privileges and restrictions granted to or imposed
upon the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. The holders of shares of Series A Preferred
-------------------
Stock ("Series A Preferred"), Series B Preferred Stock ("Series B Preferred")
and Series C Preferred Stock ("Series C Preferred") shall be entitled to receive
dividends, out of any assets legally available therefor, prior and in preference
to any declaration or payment of any dividend (payable other than in Common
Stock or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock of
this Corporation) on the Common Stock of this Corporation, at the rate of $0.03
per annum per share of Series A Preferred (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares), $0.075 per annum per share of Series B Preferred (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares) and $0.10 per annum per share of Series C Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) or, if greater (as determined on a per
annum basis and on an as converted basis for the Series A Preferred, Series B
Preferred and Series C Preferred), an amount equal to that paid on the Common
Stock. Such dividends shall be payable when, as, and if declared by the Board of
Directors, and shall not be cumulative, and no right shall accrue to holders of
Common Stock or Preferred Stock by reason of the fact that dividends on said
shares are not declared in any prior period. After payment has been made to the
holders of Preferred Stock of the full amounts to which they shall be entitled
as set forth in this Section 1, the holders of Preferred Stock and Common Stock
shall be entitled to receive ratably on a per-share basis any remaining funds
declared as dividends.
2. Liquidation Preference.
----------------------
(a) Preferred Preference. In the event of any liquidation,
--------------------
dissolution, or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series C Preferred shall be entitled to receive on a pro rata
basis, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Series A Preferred,
Series B Preferred and Common Stock, by reason of their ownership of such stock,
an amount per share equal to the sum of $1.25 per share of Series C Preferred
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like with respect to such shares) plus declared and unpaid dividends,
for each share of Series C Preferred then held by them. If upon the occurrence
of such event, the assets and funds thus distributed among the holders of the
Series C Preferred shall be insufficient to permit the payment to such holders
of the full aforesaid preferential amounts, then the entire assets and funds of
the Corporation legally available for distribution shall be distributed among
the holders of the Series C Preferred in proportion to the number of shares of
Series C Preferred held by each such holder.
(b) After payment has been made to the holders of the Series C
Preferred of the full amount to which they shall be entitled as set forth in
paragraph 2(a) above, the holders of
-2-
Series A Preferred and Series B Preferred shall be entitled to receive, prior
and in preference to any distribution of any of the assets of this Corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to $0.50 for each outstanding share of Series A Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares), and $1.25 for each outstanding share of
Series B Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), plus an amount
equal to any declared but unpaid dividends for each share of Series A Preferred
and Series B Preferred then held by them. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of Series A Preferred
and Series B Preferred shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then the entire assets and
funds of this Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred and Series B
Preferred in proportion to the aggregate Series A Preferred liquidation
preference and the Series B Preferred liquidation preference.
(c) After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled to as set forth in
paragraphs 2(a) and 2(b) above, the holders of the Common Stock shall then be
entitled to receive the amount of $0.40 per share for each share of Common Stock
then held by them (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), plus an amount
equal to all declared but unpaid dividends for each share of Common Stock then
held by them. If the assets and funds thus distributed among the holders of the
Common Stock shall be insufficient to permit the payment to such holders of the
full aforesaid amount, then the entire assets and funds of the Corporation
legally available for distribution, shall be distributed among the holders of
the Common Stock ratably on a per-share basis.
(d) After payment has been made to the holders of the Preferred
Stock and the Common Stock of the full amount to which they shall be entitled as
set forth in paragraphs 2(a), 2(b) and 2(c) above, the holders of the Preferred
Stock and Common Stock shall be entitled to receive ratably on a per-share basis
all the remaining assets based upon the number of shares of Common Stock into
which each share of Preferred Stock is then convertible; provided, however, that
the holders of Preferred Stock shall not be entitled to receive pursuant to this
paragraph (d) (including amounts received pursuant to paragraphs 2 (a) and 2(b)
above) more than a total of $1.00 per share of Series A Preferred, $2.50 per
share of Series B Preferred and $2.50 per share of Series C Preferred then held
by them (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) plus declared and
unpaid dividends.
(e) After payment has been made to the holders of the Preferred
Stock and the Common Stock of the full amounts to which they shall be entitled
as set forth in paragraphs 2(a), 2(b), 2(c) and 2(d) above, the holders of the
Common Stock shall be entitled to receive ratably on a per-share basis all the
remaining assets.
-3-
(f) Mergers. Unless waived by the approval (by vote or written
-------
consent, as provided by law) of the holders of 66 2/3% of the then outstanding
Series C Preferred, for purposes of this Section 2, a merger or consolidation of
the Corporation with or into any other corporation or corporations, the merger
of any other corporation or corporations into the Corporation, in which the
shareholders of the Corporation receive distributions in cash or securities of
another corporation or corporations as a result of such consolidation or merger,
a reorganization, including a sale of the capital stock of the Corporation,
where the shareholders of the Corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction, or a sale of all or substantially all
of the assets of the Corporation, shall be treated as a liquidation, dissolution
or winding up of the Corporation; provided that the holders of the Preferred
Stock and the Common Stock shall each be paid in cash or in the securities
received or in a combination thereof (which combination shall be in the same
proportions as the consideration received in the transaction). Any securities to
be delivered to the holders of the Preferred Stock and Common Stock upon merger,
reorganization or sale of substantially all the assets of the Corporation shall
be valued as follows:
(i) if traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) business days prior to the
closing;
(ii) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing; and
(iii) if there is no active public market, the value shall be
the fair market value thereof as mutually determined by the Corporation and the
holders of not less than a majority of the outstanding shares of the Preferred
Stock, provided that if the Corporation and the holders of a majority of the
outstanding shares of the Preferred Stock are unable to reach agreement, then by
independent appraisal by an investment banker hired and paid by the Corporation,
but acceptable to the holders of a majority of the outstanding shares of
Preferred Stock.
(g) As authorized by Section 402.5(c) of the California Corporations
Code, the provisions of Sections 502 and 503 of the California Corporations Code
shall not apply with respect to repurchase by the Corporation of shares of
Common Stock issued to or held by employees or consultants of the Corporation or
its subsidiaries upon termination of their employment or services pursuant to
agreement providing for the right of said repurchase.
3. Conversion. The holders of the Series A Preferred, Series B
----------
Preferred and Series C Preferred shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred, Series B
----------------
Preferred and Series C Preferred shall be convertible into share(s) of Common
Stock without the payment of any additional consideration by the holder thereof
and, at the option of the holder thereof, at any time after the date of issuance
of such share, at the office of the Corporation or any transfer agent for the
-4-
Series A Preferred, Series B Preferred and Series C Preferred. Each share of
Series A Preferred, Series B Preferred and Series C Preferred shall be
convertible into the number of fully paid and nonassessable shares of Common
Stock which results from dividing the Conversion Price (as hereinafter defined)
per share in effect for the Series A Preferred, Series B Preferred and Series C
Preferred at the time of conversion into the per share Conversion Value (as
hereinafter defined) of such series. The initial Conversion Price per share of
Series A Preferred shall be $.50, and the Conversion Value per share of the
Series A Preferred shall be $.50. The initial Conversion Price per share of the
Series B Preferred shall be $1.25, and the Conversion Value per share of the
Series B Preferred shall be $1.25. The initial Conversion Price per share of
the Series C Preferred shall be $1.25, and the Conversion Value per share of the
Series C Preferred shall be $1.25. The initial Conversion Price of Series A
Preferred, Series B Preferred and Series C Preferred shall be subject to
adjustment from time to time as provided below. The number of shares of Common
Stock into which a share of Series A Preferred, Series B Preferred and Series C
Preferred is convertible is hereinafter referred to as the "Conversion Rate" of
such series.
(b) Automatic Conversion. Each share of Series A Preferred shall
--------------------
automatically be converted into shares of Common Stock at the applicable
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock in which (a) the public offering price equals or exceeds $1.75 per
share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and (b) the aggregate proceeds raised equals or exceeds
$5,000,000.
Each share of Series B Preferred and Series C Preferred shall
automatically be converted into shares of Common Stock at the applicable
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock in which (a) the public offering price equals or exceeds $4.00 per
share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and (b) the aggregate proceeds raised equals or exceeds
$10,000,000.
Notwithstanding the foregoing, each share of Series A Preferred,
Series B Preferred and Series C Preferred shall automatically be converted into
shares of Common Stock at the applicable effective Conversion Rate upon the
approval (by vote or written consent, as provided by law) of the holders of at
least 2/3 of the then outstanding shares of Preferred Stock including the
holders of at least 2/3 of the then outstanding shares of Series C Preferred.
(c) Mechanics of Conversion. Before any holder of the Preferred
-----------------------
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Preferred Stock and
shall give written notice to the Corporation at such office that he elects to
convert the same (except that no such written notice of election to convert
shall be necessary in the event of an automatic conversion pursuant to Section
3(b) hereof). The Corporation shall, as soon as practicable thereafter, issue
and deliver at such office to such holder of Series A Preferred, Series B
Preferred or Series C Preferred a certificate or certificates for the number of
shares of Common
-5-
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred, Series B Preferred
or Series C Preferred to be converted (except that in the case of an automatic
conversion pursuant to Section 3(b) hereof such conversion shall be deemed to
have been made immediately prior to the closing of the offering referred to in
Section 3(b)) and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(d) Fractional Shares. In lieu of any fractional shares to which the
-----------------
holder of Series A Preferred, Series B Preferred or Series C Preferred would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the fair market value of one share of each such series of
Preferred Stock as determined by the Board of Directors of the Corporation.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Series A Preferred,
Series B Preferred or Series C Preferred of each holder to be converted at such
time into Common Stock and the number of shares of Common Stock issuable upon
such aggregate conversion.
(e) Adjustment of Conversion Price. The applicable Conversion Price
------------------------------
of the Series A Preferred, Series B Preferred and Series C Preferred shall be
subject to adjustment from time to time as follows:
(i) If the Corporation shall issue any Common Stock other than
"Excluded Stock", as defined below, for a consideration per share less than the
applicable Conversion Price for such series in effect immediately prior to the
issuance of such Common Stock (excluding stock dividends, subdivisions, split-
ups, combinations, dividends or recapitalizations which are covered by Section
3(e)(iii), (iv), (v) and (vi)), the Conversion Price in effect for each such
series immediately after each such issuance shall forthwith (except as provided
in this Section 3(e)) be adjusted to a price equal to the quotient obtained by
dividing:
(1) an amount equal to the sum of
(x) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Series A Preferred, Series B Preferred and Series C Preferred, or deemed to
have been issued pursuant to subdivision (3) of this clause (i) and to clause
(ii) below) immediately prior to such issuance multiplied by the Conversion
Price in effect for each such series immediately prior to such issuance, plus
(y) the consideration received by the Corporation
upon such issuance, by
(2) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Series A Preferred, Series B
-6-
Preferred and Series C Preferred or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately prior
to such issuance plus the additional shares of Common Stock issued in such
issuance (but not including any additional shares of Common Stock deemed to be
issued as a result of any adjustment in the Conversion Price resulting from such
issuance).
For purposes of any adjustment of the Conversion Price pursuant
to this clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor after
deducting any discounts or commissions paid or incurred by the Corporation in
connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined by the
Board of Directors of the Corporation, in accordance with generally accepted
accounting treatment; provided, however, that if, at the time of such
-------- -------
determination, the Corporation's Common Stock is traded in the over-the-counter
market or on a national or regional securities exchange, such fair market value
as determined by the board of directors of the Corporation shall not exceed the
aggregate "Current Market Price" (as defined below) of the shares of Common
Stock being issued.
(3) In the case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock (other than Excluded Stock),
(ii) securities by their terms convertible into or exchangeable for Common Stock
(other than Excluded Stock), or (iii) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof, shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration received by the Corporation for any
such securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation
-7-
upon the conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be determined in
the manner provided in subdivisions (1) and (2) above);
(C) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options or rights or conversion of
or exchange for such convertible or exchangeable securities, or on any change in
the minimum purchase price of such options, rights or securities, other than a
change resulting from the antidilution provisions of such options, rights or
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustment made upon (x)
the issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change, as the case may be, been made upon the basis of
such change or (y) the options or rights related to such securities not
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change; and
(D) on the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price shall forthwith be readjusted to such Conversion Price as
would have been obtained had the adjustment made upon the issuance of such
options, rights, convertible or exchangeable securities or options or rights
related to such convertible or exchangeable securities, as the case may be, been
made upon the basis of the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such convertible or exchangeable securities or upon the exercise
of the options or rights related to such convertible or exchangeable securities,
as the case may be.
(iii) "Excluded Stock" shall mean:
(1) all shares of Common Stock issued and outstanding on
the date this document is filed with the California Secretary of State and all
shares issuable upon exercise of options or warrants outstanding on the date
this document is filed with the California Secretary of State;
(2) all shares of Series A Preferred, Series B Preferred
and Series C Preferred and the Common Stock into which the shares of Series A
Preferred, Series B Preferred and Series C Preferred are convertible; and
(3) up to 1,461,429 shares of Common Stock, warrants or
options to purchase Common Stock or other securities issued to officers,
directors, consultants or employees of the Corporation pursuant to any plan or
arrangement approved by the Board of Directors of the Corporation.
-8-
(4) shares of Common Stock, warrants or options to
purchase Common Stock or other securities issued to officers, directors,
consultants or employees of the Corporation pursuant to any plan or arrangement
approved by a 2/3 vote of the Board of Directors of the Corporation.
All outstanding shares of Excluded Stock (including any
shares issuable upon conversion of the Preferred Stock) shall be deemed to be
outstanding for all purposes of the computations of Section 3(e)(i) above.
(iii) If the number of shares of Common Stock outstanding at
any time after the date hereof is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is effective, the
respective Conversion Prices of Series A Preferred, Series B Preferred and
Series C Preferred shall be appropriately decreased so that the number of shares
of Common Stock issuable on conversion of any shares of such series of Series A
Preferred, Series B Preferred and Series C Preferred shall be increased in
proportion to such increase of outstanding shares of Common Stock.
(iv) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
respective Conversion Prices of Series A Preferred, Series B Preferred and
Series C Preferred shall be appropriately increased so that the number of shares
of Common Stock issuable on conversion of any shares of a series of Series A
Preferred, Series B Preferred and Series C Preferred shall be decreased in
proportion to such decrease in outstanding shares of Common Stock.
(v) In case the Corporation shall declare a cash dividend
upon its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of its capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Series A Preferred, Series B Preferred and Series C Preferred shall,
concurrent with the distribution to holders of Common Stock, receive a like
distribution based upon the number of shares of Common Stock into which Series A
Preferred, Series B Preferred or Series C Preferred is convertible.
(vi) In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock of the Corporation
(other than as a result of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or merger of the Corporation with
or into another person (other than a consolidation or merger in which the
Corporation is the continuing entity and which does not result in any change in
the Common Stock), or of the sale or other disposition of all or substantially
all the properties and assets of the Corporation, the shares of
-9-
Series A Preferred, Series B Preferred and Series C Preferred shall, after such
reorganization, reclassification, consolidation, merger, sale or other
disposition, be convertible into the kind and number of shares of stock or other
securities or property of the Corporation or otherwise to which such holder
would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition he had
converted his shares of Series A Preferred, Series B Preferred or Series C
Preferred into Common Stock. The provisions of this clause (vi) shall similarly
apply to successive reorganizations, reclassifications, consolidations, mergers,
sales or other dispositions.
(vii) All calculations under this Section 3 shall be made to
the nearest cent or to the nearest one hundredth (1/100) of a share, as the case
may be.
(viii) For the purpose of any computation pursuant to this
Section 3(e), the "Current Market Price" at any date of one share of Common
Stock, shall be deemed to be the average of the highest reported bid and the
lowest reported offer prices on the preceding business day as furnished by the
National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); provided, however, that if the Common Stock is not traded in such
-------- -------
manner that the quotations referred to in this clause (viii) are available for
the period required hereunder, Current Market Price shall be determined in good
faith by the Board of Directors of the Corporation, but if challenged by the
holders of more than 50% of the outstanding Series A Preferred, Series B
Preferred and Series C Preferred, voting as separate classes, then as determined
by an independent appraiser selected by the Board of Directors of the
Corporation, the cost of such appraisal to be borne equally by the Corporation
and the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion Price need
-------------------
be made if such adjustment would result in a change in the Conversion Price of
less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price.
(g) No Impairment. Without the consent of the majority of the
-------------
outstanding shares of Preferred Stock, the Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Series A Preferred, Series B Preferred
and Series C Preferred against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Rate pursuant to this Section 3,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
-10-
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Series A Preferred, Series B Preferred or Series C Preferred,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Conversion Rate of such series
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversions of such holder's shares of Series A Preferred, Series B Preferred or
Series C Preferred.
(i) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred, Series B Preferred and Series C
Preferred at least ten (10) days prior to such record date, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution or right, and the amount and character of such
dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series A Preferred, Series B Preferred and Series C Preferred such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Series A Preferred, Series B
Preferred and Series C Preferred; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Series A Preferred, Series B
Preferred and Series C Preferred, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(k) Notices. Any notice required by the provisions of this Section
-------
3 to be given to the holder of shares of Series A Preferred, Series B Preferred
and Series C Preferred shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of the Corporation.
(l) Reissuance of Converted Shares. No shares of Series A Preferred,
------------------------------
Series B Preferred and Series C Preferred which have been converted into Common
Stock after the original issuance thereof shall ever again be reissued and all
such shares so converted shall upon such conversion cease to be a part of the
authorized shares of the Corporation.
4. Voting Rights. The holder of each share of Series A Preferred, Series
-------------
B Preferred and Series C Preferred shall be entitled to the number of votes
equal to the number of shares of Common Stock into which each share of Series A
Preferred, Series B Preferred and Series C Preferred could be converted on the
record date for the vote or consent of shareholders written
-11-
consent and, except as otherwise required by law or provided for herein, shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock. The holder of each share of Series A Preferred, Series B Preferred
and Series C Preferred shall be entitled to notice of any shareholders' meeting
in accordance with the bylaws of the Corporation and shall vote with holders of
the Common Stock upon the election of directors, except as provided in Section 5
herein, and upon any other matter submitted to a vote of shareholders, except
those matters required by law to be submitted to a class vote. Fractional votes
shall not, however, be permitted and any fractional voting rights resulting from
the above formula (after aggregating all shares of Common Stock into which
shares of Series A Preferred, Series B Preferred and Series C Preferred held by
each holder could be converted) shall be rounded to the nearest whole number
(with one-half rounded upward to one).
5. Election of Directors. At each election of the Corporation's
---------------------
directors, (i) the holders of the Corporation's Series A Preferred shall have
the right, voting as a separate class (with cumulative voting rights as among
themselves in accordance with Section 708 of the California Corporations Code)
to elect one (1) member of the Board of Directors, (ii) the holders of the
Corporation's Series B Preferred shall have the right, voting as a separate
class (with cumulative voting rights as among themselves in accordance with
Section 708 of the California Corporations Code) to elect one (1) member of the
Board of Directors, (iii) the holders of the Corporation's Series C Preferred
shall have the right, voting as a separate class (with cumulative voting rights
as among themselves in accordance with Section 708 of the California
Corporations Code) to elect two (2) members of the Board of Directors, and (iv)
the holders of the Corporation's Common Stock shall have the right, voting as a
separate class (with cumulative voting rights as among themselves in accordance
with Section 708 of the California Corporations Code) to elect two (2) members
of the Board of Directors. Any additional directors shall be elected by all of
the holders of Common Stock and Preferred Stock, voting as a single class.
6. Protective Provisions.
---------------------
(a) In addition to any other class vote that may be required by law,
this Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding shares of Preferred Stock:
(i) sell, convey or otherwise dispose of all or substantially
all of its property or business, or merge into or effect a reorganization with
any other corporation (other than a wholly owned subsidiary corporation) in
which the shareholders of this Corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction, or sell the capital stock of the
Corporation where the shareholders of this Corporation immediately prior to the
transaction possess less than 50% of the voting power of the Corporation
immediately after the transaction;
(ii) change the rights, preferences, privileges or restrictions
of the Preferred Stock;
-12-
(iii) increase or decrease the aggregate number of authorized
shares of Preferred Stock, other than as provided in either subdivision (b) of
Section 405 or subdivision (c) of Section 902 of the California Corporations
Code;
(iv) create a new class or series of shares having rights,
preferences or privileges or increase the number of authorized shares of any
class or shares having rights, preferences or privileges equal to or senior to
any outstanding class or series;
(v) pay any dividend on or purchase, redeem or otherwise
acquire any security junior to the Preferred Stock other than repurchases at
cost from employees, consultants, lessors or suppliers upon termination of
employment, consulting, lessor-lessee, or supplier-purchaser relationship,
respectively; or
(vi) voluntarily dissolve or liquidate the Corporation.
(b) Notwithstanding the foregoing Section 6(a), in addition to
any other series vote that may be required by law, so long as 40% of the
originally issued Series C Preferred are outstanding, this Corporation shall not
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of at least a majority of the then outstanding shares of
Series C Preferred:
(i) materially adversely change the rights, preferences,
privileges or restrictions of the Series C Preferred;
(ii) increase or decrease the aggregate number of authorized
shares of Series C Preferred, other than as provided in either subdivision (b)
of Section 405 or subdivision (c) of Section 902 of the California Corporations
Code; and
(iii) create a new class or series of shares having rights,
preferences or privileges senior to the Series C Preferred.
(c) Notwithstanding the foregoing Sections 6(a) and 6(b), in
addition to any other series vote that may be required by law, so long as 40% of
the originally issued Series C Preferred are outstanding, this Corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of 66 2/3% of the then outstanding shares of
Series C Preferred, voluntarily dissolve or liquidate, sell, convey or otherwise
dispose of all or substantially all of its property or business, or merge into
or effect a reorganization with any other corporation (other than a wholly owned
subsidiary corporation) in which the shareholders of this Corporation
immediately prior to the transaction possess less than 50% of the voting power
of the surviving entity (or its parent) immediately after the transaction if the
consideration received by the holders of the Series C Preferred as a result of
any such liquidation, dissolution, merger or sale of all or substantially all of
the assets of the Corporation is less than $2.50 per share (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares)
-13-
(d) Unless otherwise required by California law or except as provided
herein, the holders of Common Stock will not have the right to vote as a
separate class on any matter.
7. Repurchase of Shares. In connection with repurchases by this
--------------------
Corporation of its Common Stock, pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
8. Series B Preferred - Right of Redemption.
----------------------------------------
(a) Subject to Section 8(e) herein, the Corporation shall be
obligated to redeem the Series B Preferred as follows:
(i) At any time after March 31, 2004, the holders of a
majority of the then outstanding shares of Series B Preferred (the "Series B
Initiating Holders") may require the Corporation to the extent it may lawfully
do so, to redeem all of the outstanding Series B Preferred in three (3) equal
annual installments with the first installment date being the date forty-five
(45) days after receipt by the Corporation of the Series B Exercise Notice (as
defined below), the second installment being the date one (1) year from the
first installment date and the last installment date being a date two (2) years
from such first installment date (each a "Series B Redemption Date"). The
Corporation shall effect such redemptions on the applicable Series B Redemption
Date by paying in cash in exchange for each share of Series B Preferred to be
redeemed on each applicable Series B Redemption Date a sum equal to the fair
market value per share of Series B Preferred as of the date of receipt by the
Corporation of the Series B Exercise Notice plus all accrued and unpaid
dividends thereon. The fair market value per share of Series B Preferred for
the purposes of this Section 8, shall be determined by the Board of Directors of
the Corporation. If such determination is unacceptable to the holders of a
majority of the Series B Preferred, then the fair market value per share of
Series B Preferred shall be determined by an investment banking firm mutually
acceptable to the Corporation and the holders of a majority of the Series B
Preferred. The Series B Initiating Holders shall have the right to revoke a
Series B Exercise Notice by giving written notice to the Corporation within
fifteen (15) days after their receipt of the Series B Redemption Notice (as
defined below). The total amount to be paid for the Series B Preferred is
hereinafter referred to as the "Series B Redemption Price." The number of shares
of Series B Preferred that the Corporation shall be required to redeem on any
one Series B Redemption Date shall be equal to the amount determined by dividing
(i) the aggregate number of shares of Series B Preferred outstanding immediately
prior to the Series B Redemption Date by (ii) the number of remaining Series B
Redemption Dates (including the Series B Redemption Date to which such
calculation applies). Shares subject to redemption pursuant to this Section
8(a) shall be redeemed from each holder of Series B Preferred on a pro rata
basis.
(ii) At any time after March 31, 2004, the Series B Initiating
Holders can elect to exercise the right of first redemption pursuant to this
Section 8(a) by providing written notice (the "Series B Exercise Notice") to the
Corporation. Within fifteen (15) days after the receipt
-14-
of the Series B Exercise Notice, the Corporation shall (i) send a notice (a
"Series B Redemption Notice") to each holder of record of the Series B Preferred
to be redeemed at the address of such holder appearing on the books of the
Corporation setting forth (a) the Series B Redemption Price for the shares to be
redeemed and (b) the place at which such holders may obtain payment of the
Series B Redemption Price upon surrender of their share certificates, and (ii)
send a notice to each holder of record of the Series C Preferred at the address
of such holder appearing on the books of the Corporation notifying such holders
of the election of the holders of the Series B Preferred to exercise the right
of redemption of the Series B Preferred. If the Corporation does not have
sufficient funds legally available to redeem all shares to be redeemed at any
Series B Redemption Date (including, if applicable, those to be redeemed at the
option of the Corporation), then it shall redeem such shares pro rata (based on
the portion of the aggregate Series B Redemption Price payable to them) to the
extent possible and shall redeem the remaining shares to be redeemed as soon as
sufficient funds are legally available.
(b) On each Series B Redemption Date, the Corporation shall deposit
the portion of the Series B Redemption Price sufficient to redeem the shares to
be redeemed upon such Series B Redemption Date with a bank or trust corporation
having aggregate capital and surplus in excess of $100,000,000, as a trust fund,
with irrevocable instructions and authority to the bank or trust corporation to
pay, on and after such Series B Redemption Date, the applicable portion of the
Series B Redemption Price to their respective holders upon the surrender of
their share certificates. Any monies deposited by the Corporation pursuant to
this Section 8(b) for the redemption of shares thereafter converted into shares
of Common Stock pursuant to Section 3 hereof no later than the fifth (5th) day
preceding the applicable Series B Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any funds deposited
by the Corporation pursuant to this Section 8(b) remaining unclaimed at the
expiration of one (1) year following such Series B Redemption Date shall be
returned to the Corporation.
(c) On or after such Series B Redemption Date, each holder of shares
of Series B Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Redemption Notice, and thereupon the applicable portion of the
Series B Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. In the event less
than all the shares represented by such certificates are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and after
the date the Corporation deposits funds pursuant to Section 8(b) hereof with
respect to shares to be redeemed on such Series B Redemption Date, unless there
shall have been a default in payment of the applicable portion of the Series B
Redemption Price or the Corporation is unable to pay the applicable portion of
the Series B Redemption Price due to not having sufficient legally available
funds, all rights of the holders of such shares as holders of Series B Preferred
(except the right to receive the Series B Redemption Price without interest upon
surrender of their certificates), shall cease and terminate with respect to such
shares, provided that in the event that shares of Series B Preferred are not
redeemed due to a default in payment by the Corporation or because the
-15-
Corporation does not have sufficient legally available funds, such shares of
Series B Preferred shall remain outstanding and shall be entitled to all of the
rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series B
Preferred, the Conversion Rights (as defined in Section 3) for the shares of
Series B Preferred to be redeemed on a particular Series B Redemption Date shall
terminate at the close of business on the fifth (5th) day preceding such Series
B Redemption Date, unless default is made in payment of the Series B Redemption
Price.
(e) In the event that the Series B Initiating Holders have elected to
exercise their right of redemption pursuant to this Section 8 and to the extent
that the Company receives the Series C Exercise Notice (as defined below) from
the Series C Initiating Holders (as defined below) prior to the deposit by the
Company of funds pursuant to Section 8(b) hereof with respect to any applicable
Series B Redemption Date, the right of redemption of the Series C Preferred
shall be superior and in preference to the right of redemption of the Series B
Preferred and the holders of the Series C Preferred shall be entitled to receive
the full amount of the Series C Redemption Price out of legally available funds
of the Corporation prior to the payment of any portion of the Series B
Redemption Price not previously deposited by the Company pursuant to Section
8(b) or required to be paid to the holders of the Series B Preferred pursuant to
the last sentence of Section 8(a)(ii) hereof. In such event, after the full
amount of the Series C Redemption Price has been deposited pursuant to Section
9(b) below, the holders of the Series B Preferred shall be entitled to receive
the full amount of the Series B Redemption Price of the Series B Preferred. If
the funds of the Corporation legally available for redemption of shares of the
Series C Preferred or Series B Preferred are insufficient to redeem the total
number of shares of Series C Preferred or Series B Preferred to be redeemed on a
Series B Redemption Date or Series C Redemption Date those funds which are
legally available will be used to redeem the maximum possible number of such
shares from first the holders of the Series C Preferred to the extent of the
full amount of the Series C Redemption Price and next to the holders of the
Series B Preferred to the extent of the full amount of the Series B Redemption
Price. The shares of Series C Preferred or Series B Preferred not redeemed, as
the case may be, shall remain outstanding and entitled to all the rights and
preferences provided herein, including the rights of conversion set forth in
Section 3. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of shares of Series C Preferred or Series B
Preferred, as the case may be, such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obliged to redeem on any
Redemption Date but which it has not redeemed.
9. Series C Preferred - Right of Redemption.
----------------------------------------
(a) Subject to Section 8(e) above, the Corporation shall be obligated
to redeem the Series C Preferred as follows:
(i) Beginning on or after March 31, 2004, the holders of 66 2/3%
of the then outstanding shares of Series C Preferred (the "Series C Initiating
Holders") may require the
-16-
Corporation to the extent it may lawfully do so, to redeem all of the
outstanding Series C Preferred. Such redemption shall occur on the 45th day
following the Corporation's receipt of the Series C Exercise Notice (as defined
below) (such date being herein referred to as the "Initial Series C Redemption
Date"), provided that the Series C Initiating Holders shall have the right to
--------
revoke a Series C Exercise Notice by giving written notice to the Corporation
within fifteen (15) days after their receipt of the Series C Redemption Notice,
and provided further that in lieu of redeeming all of the Series C Preferred on
-------- -------
the Initial Series C Redemption Date the Corporation shall have the right to
redeem the Series C Preferred in three (3) equal installments, with the first
installment date being the Initial Series C Redemption Date, the second
installment being the first anniversary of the Initial Series C Redemption Date
and the last installment being the second anniversary of the Initial Series C
Redemption Date (the Initial Series C Redemption Date and each of such other
redemption dates being herein referred to as a "Series C Redemption Date"). The
Corporation shall effect such redemptions on the applicable Series C Redemption
Date by paying in cash in exchange for each share of Series C Preferred to be
redeemed on each applicable Series C Redemption Date, a sum equal to the fair
market value per share of Series C Preferred as of the date of receipt by the
Corporation of the Series C Exercise Notice plus all accrued and unpaid
dividends with respect to such shares thereon plus interest at the rate of 10%
per annum payable on the amount of the unpaid Series C Redemption Price (as
hereinafter defined) accruing from the Initial Series C Redemption Date until
paid. The fair market value per share of Series C Preferred for the purposes of
this Section 9, shall be determined by the Board of Directors of the
Corporation. If such determination is unacceptable to the holders of a majority
of the Series C Preferred, then the fair market value per share of Series C
Preferred shall be determined by an investment banking firm mutually acceptable
to the Corporation and the holders of a majority of the Series C Preferred. The
total amount to be paid for the Series C Preferred is hereinafter referred to as
the "Series C Redemption Price." The number of shares of Series C Preferred that
the Corporation shall be required to redeem on any one Series C Redemption Date
shall be equal to the amount determined by dividing (i) the aggregate number of
shares of Series C Preferred outstanding immediately prior to the Series C
Redemption Date by (ii) the number of remaining Series C Redemption Dates
(including the Series C Redemption Date to which such calculation applies).
Shares subject to redemption pursuant to this Section 9(a) shall be redeemed
from each holder of Series C Preferred on a pro rata basis.
(ii) At any time after March 31, 2004, the Series C Initiating Holders
can elect to exercise the right of first redemption pursuant to this Section
9(a) by providing written notice (the "Series C Exercise Notice") to the
Corporation. Within fifteen (15) days after the receipt of the Series C Exercise
Notice, the Corporation shall (i) send a notice (a Series C "Redemption Notice")
to each holder of record of the Series C Preferred to be redeemed at the address
of such holder appearing on the books of the Corporation setting forth (a) the
Series C Redemption Price for the shares to be redeemed and (b) the place at
which such holders may obtain payment of the Series C Redemption Price upon
surrender of their share certificates. If the Corporation does not have
sufficient funds legally available to redeem all shares to be redeemed at the
Series C Redemption Date (including, if applicable, those to be redeemed at the
option of the Corporation), then it shall redeem such shares pro rata (based on
the portion of the aggregate
-17-
Series C Redemption Price payable to them) to the extent possible and shall
redeem the remaining shares to be redeemed as soon as sufficient funds are
legally available.
(b) On or prior to the Series C Redemption Date, the Corporation shall
deposit the applicable portion of the Series C Redemption Price of the shares to
be redeemed on such Series C Redemption Date with a bank or trust corporation
having aggregate capital and surplus in excess of $100,000,000, as a trust fund,
with irrevocable instructions and authority to the bank or trust corporation to
pay, on and after such Series C Redemption Date, the applicable portion of the
Series C Redemption Price of the shares to their respective holders upon the
surrender of their share certificates. Any monies deposited by the Corporation
pursuant to this Section 9(b) for the redemption of shares thereafter converted
into shares of Common Stock pursuant to Section 3 hereof no later than the fifth
(5th) day preceding the Series C Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any funds deposited
by the Corporation pursuant to this Section 9(b) remaining unclaimed at the
expiration of one (1) year following such Series C Redemption Date shall be
returned to the Corporation.
(c) On or after such Series C Redemption Date, each holder of shares
of Series C Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Series C Redemption Notice, and thereupon the applicable
portion of the Series C Redemption Price of such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be canceled. In the
event less than all the shares represented by such certificates are redeemed, a
new certificate shall be issued representing the unredeemed shares. From and
after the date the Corporation deposits funds pursuant to Section 9(b) hereof
with respect to shares to be redeemed on such Series C Redemption Date, unless
there shall have been a default in payment of the applicable portion of the
Series C Redemption Price or the Corporation is unable to pay the applicable
portion of the Series C Redemption Price due to not having sufficient legally
available funds, all rights of the holders of such shares as holders of Series C
Preferred (except the right to receive the Series C Redemption Price without
interest upon surrender of their certificates), shall cease and terminate with
respect to such shares, provided that in the event that shares of Series C
Preferred are not redeemed due to a default in payment by the Corporation or
because the Corporation does not have sufficient legally available funds, such
shares of Series C Preferred shall remain outstanding and shall be entitled to
all of the rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series C
Preferred, the Conversion Rights (as defined in Section 3) for the shares of
Series C Preferred to be redeemed on a particular Series C Redemption Date shall
terminate at the close of business on the fifth (5th) day preceding such Series
C Redemption Date, unless default is made in payment of the Series C Redemption
Price.
-18-
V.
1. Limitation of Directors' Liability. The liability of the directors of
----------------------------------
this Corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
2. Indemnification of Corporate Agents. This Corporation is authorized to
-----------------------------------
indemnify its agents to the fullest extent permissible under California law. For
purposes of this provision the term "agent" has the meaning set forth in Section
317 of the California Corporations Code.
3. Repeal or Modification. Any repeal or modification of the foregoing
----------------------
provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of this Corporation
relating to acts or omissions occurring prior to such repeal or modification.
-19-
================================================================================
[LOGO]
SECRETARY OF STATE
I, ▇▇▇▇ ▇▇▇▇▇, Secretary of State of the State of California, hereby
certify:
That the attached transcript has been compared with the record on file in
this office, of which it purports to be a copy, and that it is full, true and
correct.
IN WITNESS WHEREOF, I execute this
certificate and affix the Great
Seal of the State of California this
[ILLEGIBLE]
-----------------------------------
[SEAL]
/s/ ▇▇▇▇ ▇▇▇▇▇
Secretary of State
================================================================================
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of the Closing Date, is made and
given pursuant to Section 2 of the Inventa Corporation Series C Convertible
Preferred Stock Purchase Agreement dated May 11, 1998 (the "Agreement").
The section numbers in this Schedule of Exceptions correspond to the
section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would be
appropriate. Unless the context otherwise requires, all capitalized terms shall
have the same meanings assigned to them in the Agreement.
2.1 Organization and Standing; Certificate and Bylaws.
-------------------------------------------------
The Company is not qualified to do business in any state other than
California, its jurisdiction of incorporation. The Company is currently in the
process of qualifying to do business in New Jersey.
2.2 Capitalization.
--------------
On October 22, 1991, the Company granted a warrant to purchase 7,502
shares of common stock of the Company (after taking into account the Company's
October 22, 1993 4.5-for-1 stock split) (15,004 shares after taking into account
the Company's January 29, 1997 2-for-1 stock split). The warrant, with a post-
split exercise price of $1.33 per share, is subject to antidilution adjustment.
On July 8, 1994, the Company granted warrants to purchase 100,000 shares of
Series A Preferred Stock of the Company (200,000 shares after taking into
account the Company's January 29, 1997 2-for-1 stock split). The Series A
Preferred Stock warrants are exercisable at $0.50 per share. The Company has
reserved a total of 1,350,000 shares of common stock under the Company's 1993
Stock Option Plan (the "Plan"). As of the Closing, options for 395,658 shares
were outstanding under the Plan and 811,998 shares remained available for future
issuance under the Plan.
2.3 Subsidiaries.
------------
The Company has a wholly-owned subsidiary in Singapore called ICG
Systems (Far East) Pte. Ltd. The Company has two wholly-owned subsidiaries in
Malaysia called ICG Systems Sdn. Bhd and Baktimaka Sdn. Bhd.
2.7 Litigation.
----------
The Internal Revenue Service ("IRS") has made assessments on the
Company's former Indian subsidiary called Inventa Software India Pvt. Ltd. (now
called Ventura Data Systems Pvt. Ltd. since the Company's divestiture of its
ownership) with respect to federal tax returns filed by
the Company for tax years 1990 and 1991 which included payments of certain
expenses (the "Disputed Payments") for work done for the Company in the United
States by employees of the Company's former subsidiary. The Company has appealed
the assessments. No determination has yet been made by the IRS. Should the IRS
determine that the Company has a tax liability with respect to the Disputed
Payments, the Company expects that such tax liability, including penalties will
not exceed $150,000.
The Company has filed a legal petition for the liquidation of the
Malaysian company Inventa Software (M) SDN.BHD which petition has been approved.
2.8 Patents.
-------
The Company does not currently have the legal right to the name
"Inventa" in Singapore. Further, the Company does not currently have the legal
right to the name "Inventa" in Malaysia subject to liquidation of the Malaysian
company Inventa Software (M) SDN.BHD (see Section 2.7). A Company trademark
status report is attached hereto as Exhibit A.
2.9 Compliance with Other Instruments.
---------------------------------
(a) On February 9, 1998, Silicon Valley Bank notified the Company that
it is in violation of certain financial covenants and ratios under the Company's
revolving credit facility with Silicon Valley Bank. In that same letter, Silicon
Valley Bank's waived such defaults as of December 31, 1997. The Company is
currently in default of certain financial covenants and ratios under the credit
facility.
2.14 Changes.
-------
(a) Based upon its own internal audit, the Company believes that audit
adjustments of approximately $100,000 in bad debt and other expenses may be
required for fiscal year 1997.
(f) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the Company's Director of Operations, recently
notified the Company of his intent to resign from the Company in order to pursue
other opportunities. The parties expect that ▇▇. ▇▇▇▇▇▇▇▇'▇ resignation will be
effective within the next two months.
(i) As a condition to the closing of the Company's Series C Preferred
Stock Financing, the Company will enter into an employment agreement for a term
of three years with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. The employment agreement will contain,
among other terms, severance arrangements for certain terminations and upon a
"change of control" of the Company
-2-
2.17 Employee Plans.
--------------
The Company has adopted a 401(k) savings plan (the "401(k) Plan").
Participants in the 401(k) Plan may defer compensation in an amount not in
excess of the annual statutory limit. The Company makes matching contributions
in an amount equal to twenty five percent (25%) of the first four percent (4%)
of an individual employee's salary contributed to the 401(k) Plan.
On January 15, 1996, the Company adopted a performance incentive bonus
plan for key management employees (the "KMIP") which provides for bonus payments
to participants of the KMIP upon the attainment of specific performance
criteria.
2.18 Employees.
---------
Subsequent to July 8, 1994, every United States employee and
consultant with access to confidential or proprietary information of the Company
has executed a Proprietary Information Agreement ("Proprietary Information
Agreement"), substantially in the form attached to the Agreement as Exhibit D.
Prior to July 8, 1994, the Company did not require its employees or consultants
to sign a Proprietary Information Agreement. Certain employees and consultants
of the Company's foreign subsidiaries have not signed a Proprietary Information
Agreement.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the Company's Director of Operations, recently
notified the Company of his intent to resign from the Company in order to pursue
other opportunities. The parties expect that ▇▇. ▇▇▇▇▇▇▇▇'▇ resignation will be
effective within the next two months.
The Company currently has severance agreements with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ which provide for severance
payments upon a "change of control" of the Company (as such term is defined in
such agreement).
2.19 Tax Returns and Payments.
------------------------
See Section 2.7 above regarding the examination of the Company by the
Internal Revenue Service.
2.20 Agreements; Action.
------------------
(a) The Company currently has severance agreements with ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ which provide for
severance payments upon a "change of control" of the Company (as such term is
defined in such agreement).
-3-
As a condition to the closing of the Company's Series C Preferred
Stock Financing, the Company will enter into an employment agreement for a term
of three years with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. The employment agreement will contain,
among other terms, severance arrangements for certain terminations and upon
changes of control of the Company.
In November, 1996, the Company entered into a thirty six (36)
month automobile lease agreement for the benefit of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the
Company's President. The lease agreement is personally guaranteed by ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇.
(b) Pursuant to a Development Agreement with ADP, Inc. dated February
19, 1998, the Company has agreed that for a period of twenty-four (24) months
following the termination of such agreement, the Company will not (i) provide
any Deliverable (as defined in the agreement) to any provider of payroll
software, payroll or payroll related services or (ii) develop a self-service
application which contains similar functionality to the EasyPay self-service
application developed pursuant to the agreement.
The Company leases office space at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇
▇▇▇▇▇ under three lease agreements expiring, respectively, in October 1999,
February 2000 and June 2000. The monthly lease payments under such agreements
are, respectively, approximately $3,076, $6,524 and $3,777. The Company also
lease office space at ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇▇ under a lease agreement expiring in
September 1998 which space the Company is currently subleasing to a third party.
The monthly lease payment under the master lease agreement is approximately
$2,300.
The Company leases various equipment under operating lease
arrangements. At December 31, 1997, the minimum aggregate payments under
operating equipment leases for the 1998 and 1999 fiscal years are, respectively,
$180,909 and $136,882.
The Company leases various equipment under capital lease
arrangements. At December 31, 1997, the minimum aggregate payments under
operating equipment leases for the 1998 and 1999 fiscal years are, respectively,
$145,163 and $119,857.
(c) On May 30, 1995, the Company entered into an agreement for a
$200,000 revolving credit facility with Silicon Valley Bank. On July 29, 1996,
the parties signed a loan modification agreement increasing the revolving credit
facility to $500,000. In July 1997, the agreement was modified to increase the
revolving credit facility to $1.2 million. This credit facility expires on July
28, 1997 and as of March 31, 1998, $300,000 was outstanding on the credit
facility. The credit facility bears interest at the bank's prime rate plus 2
percent (2%).
(e) During the last three months from the date hereof, the Company
has engaged in either merger or sale discussions with C-Bridge Internet
Solutions, Inc., Renaissance Worldwide, Lucent Technologies and Internet
Business Advantages.
-4-
2.21 Obligations to Related Parties.
------------------------------
In September 1996, the Company's President, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, acquired
a majority interest in Apson Software International Inc., a California
corporation (now known as "Challenger Systems"). Challenger Systems provided
services to the Company of approximately $598,849 for the fiscal year ended
December 31, 1997.
-5-
EXHIBIT A
Inventa Corporation Global Trademark Status Report
09-Apr-98
Country Name Trademark Classes Filing Date Application # Registration Date Registration #
---------------------------------------------------------------------------------------------------------------------------------
Malaysia INVENTA 42
Malaysia INVENTA 16 08-Mar-94 94-01756
Malaysia INVENTA 9 08-Mar-94 94-01755
Malaysia INVENTA (STYLIZED) 16 08-Mar-94 94-01757
Malaysia INVENTA (STYLIZED) 9 08-Mar-94 94-01754
Malaysia LIGHTSPEED 35
Malaysia LIGHTSPEED 9 27-Oct-97 97-15528
Malaysia LIGHTSPEED 42
Malaysia RAPIDWEB 9 27-Oct-97 97-15527
Malaysia RAPIDWEB 42
Singapore LIGHTSPEED 42 15-Apr-97 4435/97
Singapore RAPIDWEB 42 25-Apr-97 4845/97
Singapore RAPIDWEB 9 25-Apr-97 4844/97
United States of America INVENTA 42 10-Oct-96 75/179,420 18-Nov-97 2,113,928
United States of America LIGHTSPEED 35,42 15-Oct-96 75/818,303
United States of America RAPIDWEB 9,42 10-Oct-96 75/179,617
Country Name Status CaseNumber
-----------------------------------------------------------
Malaysia Mailed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Filed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Filed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Filed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Filed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Mailed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Filed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Mailed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Filed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Mailed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Filed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Filed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Filed ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America Registered ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇* ▇▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America Allowed 09231-TM1002
* Request for Extension of Time to Oppose filed against application
STATUS CODE KEY FOR GLOBAL TRADEMARK STATUS REPORT
Definition of Status Codes
S-Inactive The company has considered adoption or registration of the
▇▇▇▇/▇▇▇▇ has been searched, but has not filed an
application.
Mailed The application has been authorized/sent to the trademark
office for filing, but we have not yet received the filing
details.
Filed The application has been filed and is in the initial
examination period.
Published The ▇▇▇▇ has been published for opposition by third parties.
Allowed The application for the ▇▇▇▇ was filed as an intent to use
application and the company is now required to submit proof
of use. (This status generally applies to U.S. applications
- may have different meaning for a foreign application)
Registered A certificate of registration has been issued (some cases
published) by the respective country.
EXHIBIT D
---------
INVENTA CORPORATION
EMPLOYMENT, CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Inventa Corporation, its subsidiaries,
affiliates, successors or assigns (the "Company"), and in consideration of my
employment with the Company and my receipt of the compensation now and hereafter
paid to me by the Company, I agree to the following:
1. At-Will Employment. I understand and acknowledge that my employment
------------------
with the Company is for an unspecified duration and constitutes "at-will"
employment. I acknowledge that this employment relationship may be terminated at
any time, with or without good cause or for any or no cause, at the option
either of the Company or myself, with or without notice.
2. Confidential Information.
------------------------
(a) Company Information. I agree at all times during the term of my
-------------------
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any of the Company's proprietary information,
technical data, trade secrets or know-how, including, but not limited to,
research, product plans, products, services, customer lists and customers
(including, but not limited to, customers of the Company on whom I called or
with whom I became acquainted during the term of my employment), markets,
software, developments, inventions, processes, formulas, technology, designs,
drawings, engineering, hardware configuration information, marketing, finances
or other business information disclosed to me by the Company either directly or
indirectly in writing, orally or by drawings or observation of parts or
equipment. I further understand that Confidential Information does not include
any of the foregoing items which has become publicly known and made generally
available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not, during my
---------------------------
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring onto the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
(c) Third Party Information. I recognize that the Company has
-----------------------
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for
certain limited purposes. I agree to hold all such confidential or proprietary
information in the strictest confidence and not to disclose it to any person,
firm or corporation or to use it except as necessary in carrying out my work for
the Company consistent with the Company's agreement with such third party.
3. Inventions.
----------
(a) Inventions Retained and Licensed. I have attached hereto, as
--------------------------------
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior Inventions"),
which belong to me, which relate to the Company's proposed business, products or
research and development, and which are not assigned to the Company hereunder;
or, if no such list is attached, I represent that there are no such Prior
Inventions. If in the course of my employment with the Company, I incorporate
into a the Company product, process or machine a Prior Invention owned by me or
in which I have an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such Prior Invention as part of or in connection
with such product, process or machine.
(b) Assignment of Inventions. I agree that I will promptly make
------------------------
full written disclosure to the Company, will hold in trust for the sole right
and benefit of the Company, and hereby assign to the Company, or its designee,
all my right, title, and interest in and to any and all inventions, original
works of authorship, developments, concepts, improvements or trade secrets,
whether or not patentable or registrable under copyright or similar laws, which
I may solely or jointly conceive or develop or reduce to practice, or cause to
be conceived or developed or reduced to practice, during the period of time I am
in the employ of the Company (collectively referred to as "Inventions"), except
as provided in Section 3(f) below. I further acknowledge that all original works
of authorship which are made by me (solely or jointly with others) within the
scope of and during the period of my employment with the Company and which are
protectible by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign to the
----------------------------------------
United States government all my right, title, and interest in and to any and all
Inventions whenever such full title is required to be in the United States by a
contract between the Company and the United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate and
----------------------
current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
-2-
(e) Patent and Copyright Registrations. I agree to assist the Company,
----------------------------------
or its designee, at the Company's expense, in every proper way to secure the
Company's rights in the Inventions and any copyrights, patents, mask work rights
or other intellectual property rights relating thereto in any and all countries,
including the disclosure to the Company of all pertinent information and data
with respect thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments which the Company shall deem necessary in
order to apply for and obtain such rights and in order to assign and convey to
the Company, its successors, assigns, and nominees the sole and exclusive
rights, title and interest in and to such Inventions, and any copyrights,
patents, mask work rights or other intellectual property rights relating
thereto. I further agree that my obligation to execute or cause to be executed,
when it is in my power to do so, any such instrument or papers shall continue
after the termination of this Agreement. If the Company is unable because of my
mental or physical incapacity or for any other reason to secure my signature to
apply for or to pursue any application for any United States or foreign patents
or copyright registrations covering Inventions or original works of authorship
assigned to the Company as above, then I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as my agent and
attorney in fact, to act for and in my behalf and stead to execute and file any
such applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by me.
(f) Exception to Assignments. I understand that the provisions of this
------------------------
Agreement requiring assignment of Inventions to the Company do not apply to any
invention which qualifies fully under the provisions of California Labor Code
Section 2870 (attached hereto as Exhibit B). I will advise the Company promptly
---------
in writing of any inventions that I believe meet the criteria in California
Labor Code Section 2870 and not otherwise disclosed on Exhibit A.
---------
(4) Conflicting Employment. I agree that, during the term of my employment
----------------------
with the Company, I will not engage in any other employment, occupation,
consulting or other business activity directly related to the business in which
the Company is now involved or becomes involved during the term of my
employment, nor will I engage in any other activities that conflict with my
obligations to the Company.
(5) Returning the Company Documents. I agree that, at the time of leaving
-------------------------------
the employ of the Company, I will deliver to the Company (and will not keep in
my possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications, drawings
blueprints, sketches, materials, equipment, other documents or property, or
reproductions of any aforementioned items developed by me pursuant to my
employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I agree
to sign and deliver the "Termination Certification" attached hereto as Exhibit
-------
C.
-
-3-
(6) Notification of New Employer. In the event that I leave the employ of
----------------------------
the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
(7) Solicitation of Employees. I agree that for a period of twelve (12)
-------------------------
months immediately following the termination of my relationship with the Company
for any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or attempt to solicit,
induce, recruit, encourage or take away employees of the Company, either for
myself or for any other person or entity.
(8) Conflict of Interest Guidelines. I agree to diligently adhere to the
-------------------------------
Conflict of Interest Guidelines attached as Exhibit D hereto.
---------
(9) Representations. I agree to execute any proper oath or verify any
---------------
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any oral or written agreement in
conflict herewith.
(10) Arbitration and Equitable Relief.
--------------------------------
(a) Arbitration. Except as provided in Section 10(b) below, I agree
-----------
that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in San Francisco County, California, in
accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction. The
Company and I shall each pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
------------------
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 2, 3, and 5 herein. Accordingly, I agree that if
I breach any of such Sections, the Company will have available, in addition to
any other right or remedy available, the right to obtain an injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security shall be required in obtaining such equitable
relief and I hereby consent to the issuance of such injunction and to the
ordering of specific performance.
11. General Provisions.
------------------
-4-
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement
-----------------------------------------------
will be governed by the laws of the State of California. I hereby expressly
consent to the personal jurisdiction of the state and federal courts located in
California for any lawsuit filed there against me by the Company arising from or
relating to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire agreement
----------------
and understanding between the Company and me relating to the subject matter
herein and merges all prior discussions between us. No modification of or
amendment to this Agreement, nor any waiver of any rights under this agreement,
will be effective unless in writing signed by the party to be charged. Any
subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this Agreement
------------
are deemed void by law, then the remaining provisions will continue in full
force and effect.
(d) Successors and Assigns. This Agreement will be binding upon my
----------------------
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.
Date: _________________
___________________________________
Signature
___________________________________
Name of Employee (typed or printed)
________________________
Witness
-5-
EXHIBIT A
---------
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number
Title Date or Brief Description
--------- --------- ----------------------
____ No inventions or improvements
____ Additional Sheets Attached
Signature of Employee: __________________________
Print Name of Employee: _________________________
Date: _________________
EXHIBIT B
---------
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
EXHIBIT C
---------
INVENTA CORPORATION
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to the Company, its subsidiaries, affiliates, successors or
assigns (the "Company").
I further certify that I have complied with all the terms of the Company's
Employment Confidential Information and Invention Assignment Agreement signed by
me, including the reporting of any inventions and original works of authorship
(as defined therein), conceived or made by me (solely or jointly with others)
covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary information
relating to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not hire
any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:________________
____________________
(Employee's Signature)
__________________________
(Type/Print Employee's Name)
EXHIBIT D
---------
INVENTA CORPORATION
CONFLICT OF INTEREST GUIDELINES
It is the policy of the Company to conduct its affairs in strict compliance
with the letter and spirit of the law and to adhere to the highest principles of
business ethics. Accordingly, all officers, employees and independent
contractors must avoid activities which are in conflict, or give the appearance
of being in conflict, with these principles and with the interests of the
Company. The following are potentially compromising situations which must be
avoided. Any exceptions must be reported to the President and written approval
for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment,
favors or payments which may be deemed to constitute undue influence or
otherwise be improper or embarrassing to the Company.
3. Participating in civic or professional organizations that might
involve divulging confidential information of the Company.
4. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
5. Initiating or approving any form of personal or social harassment of
employees.
6. Investing or holding outside directorship in suppliers, customers, or
competing companies, including financial speculations, where such investment or
directorship might influence in any manner a decision or course of action of the
Company.
7. Borrowing from or lending to employees, customers or suppliers.
8. Acquiring real estate of interest to the Company.
9. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
10. Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.
11. Making any unlawful agreement with distributors with respect to
prices.
12. Improperly using or authorizing the use of any inventions which are
the subject of patent claims of any other person or entity.
13. Engaging in any conduct which is not in the best interest of the
Company.
Each officer, employee and independent contractor must take every necessary
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this conflict of
interest policy may result in discharge without warning.
INVENTA CORPORATION
_____________________________
RESTATED SHAREHOLDERS AGREEMENT
_____________________________
May 11, 1998
TABLE OF CONTENTS
Page
ARTICLE I - Right of First Refusal on Shareholder Transfer.................................................... 2
1.1 Company Right............................................................................... 2
1.2 Preferred Holders' Right.................................................................... 2
1.3 Failure to Exercise Rights.................................................................. 2
1.4 Price....................................................................................... 2
1.5 Transfer of Rights.......................................................................... 3
1.6 Prohibited Transfers........................................................................ 3
1.7 Definition of "Shares"...................................................................... 3
1.8 Permitted Transfers......................................................................... 3
ARTICLE II - Right of Co-Sale on Shareholder Transfer......................................................... 3
2.1 Right of Co-Sale............................................................................ 3
2.2 Agreement not to Transfer................................................................... 4
2.3 Definition of Shares........................................................................ 4
2.4 Permitted Transfers......................................................................... 4
2.5 Prohibited Transfers........................................................................ 4
ARTICLE III - Right of First Refusal on Company Issuances..................................................... 5
3.1 Grant of Right to Purchasers................................................................ 5
3.2 Grant of Right ............................................................................. 5
3.3 New Securities.............................................................................. 6
3.4 Notice...................................................................................... 6
3.5 Sale after Company Notice................................................................... 7
3.6 Assignment.................................................................................. 7
ARTICLE IV - Termination of Rights............................................................................ 8
ARTICLE V - Specific Performance.............................................................................. 8
ARTICLE VI - Legends.......................................................................................... 8
ARTICLE VII - Board of Directors.............................................................................. 8
7.1 Board of Directors.......................................................................... 8
7.2 Compensation Committee...................................................................... 9
7.3 Audit Committee............................................................................. 9
-i-
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE VIII - Reorganizations................................................................................ 9
ARTICLE IX - General Provisions............................................................................... 10
9.1 Governing Law............................................................................... 10
9.2 Entire Agreement............................................................................ 10
9.3 Amendment................................................................................... 10
9.4 Successors.................................................................................. 10
9.5 Invalidity of Provisions.................................................................... 10
9.6 Notice...................................................................................... 10
9.7 No Waiver................................................................................... 11
9.8 Cooperation................................................................................. 11
9.9 Addition of Parties......................................................................... 11
9.10 Counterparts................................................................................ 11
EXHIBIT A - Schedule of Purchasers
EXHIBIT B - Schedule of Holders of Series A Preferred Stock
EXHIBIT C - Schedule of Holders of Series B Preferred Stock
EXHIBIT D - Schedule of Certain Common Stock Holders
EXHIBIT E - Form of Instrument of Accession
-ii-
INVENTA CORPORATION
RESTATED SHAREHOLDERS AGREEMENT
THIS RESTATED SHAREHOLDERS AGREEMENT is made this 11th day of May, 1998,
between Inventa Corporation, a California corporation (the "Company"), the
purchasers of the Company's Series C Preferred Stock (the "Purchasers") as
listed on Exhibit A attached hereto, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("Founder"), the holders
---------
of the Company's Series A Preferred Stock (the "Series A Holders") listed on
Exhibit B attached hereto, the holders of the Company's Series B Preferred Stock
---------
(the "Series B Holders") listed on Exhibit C attached hereto, and certain
---------
holders of the Company's Common Stock (the "Common Holders") as listed on
Exhibit D attached hereto. The Purchasers, Series A Holders and the Series B
---------
Holders shall collectively be referred to as the "Preferred Holders". The
Purchasers, the Founder, the Preferred Holders and the Common Holders shall
collectively be referred to as the "Shareholders".
WHEREAS, Founder is the beneficial owner or may be deemed to be the
beneficial owner of 4,500,000 shares of the Common Stock of the Company.
WHEREAS, the Series A Holders and the Company are parties to the Series A
Preferred Stock Purchase Agreement dated July 8, 1994 (the "Series A
Agreement").
WHEREAS, the Series B Holders and the Company are parties to the Series B
Preferred Stock Purchase Agreement dated February 14, 1997 (the "Series B
Agreement").
WHEREAS, the Common Holders are the owners of 42,696 shares of the Common
Stock of the Company.
WHEREAS, the parties desire that this Agreement supersede the Shareholders
Rights Agreement dated February 14, 1997 in its entirety.
WHEREAS, the Purchasers have requested, as a condition to entering into the
Series C Convertible Preferred Stock Purchase Agreement of even date herewith
(the "Series C Agreement") that the Founder and the Shareholders enter into this
Agreement, and the Founder and the Shareholders, as an inducement to the
Purchasers to enter into the Series C Agreement of even date herewith, are
willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
terms hereof, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
ARTICLE I
Right of First Refusal on Shareholder Transfer
----------------------------------------------
1.1 Company Right. If at any time a Shareholder desires (or is required)
-------------
to sell or transfer in any manner any Shares (as hereinafter defined) pursuant
to the terms of a bona fide offer received from a third party (a "Buyer"), the
Shareholder shall submit a written offer to sell such Shares (the "Offered
Shares") to the Company on terms and conditions, including price, not less
favorable to the Company than those on which the Shareholder proposes to sell
such Offered Shares to Buyer (the "Offer"). The Offer shall disclose the
identity of the Buyer, the number of Offered Shares, the terms of the proposed
sale or transfer and any other material facts relating to the sale or transfer.
Within fifteen (15) days after receipt of the Offer, the Company shall give
notice to the Shareholder of its intent to purchase all or some of the Offered
Shares from the Shareholder on the terms and conditions set forth in the Offer.
1.2 Preferred Holders' Right. If, for any reason whatsoever, the Company
------------------------
shall not exercise its right to purchase all of the Offered Shares as provided
herein, the Company shall promptly provide to the Preferred Holders, written
notice (the "Notice") of same (which shall include a copy of the Offer provided
to the Company pursuant to Section 1.1 hereof), and then the Preferred Holders
shall have the right, for a period of fifteen (15) days from the date of the
Notice to purchase, on a pro rata basis, on the same terms and conditions as are
set forth in the Offer, that portion of the Offered Shares which the Company
shall not have agreed to purchase from the Shareholder (all such remaining
Shares being referred to as the "Remaining Offered Shares"). For purposes of
this Section 1.2, Preferred Holder's pro rata right shall be calculated by
dividing the number of shares of Common Stock issuable upon conversion of
Preferred Stock held by such Preferred Holder by the total number of shares of
Common Stock issuable upon conversion of Preferred Stock held by all Preferred
Holders.
1.3 Failure to Exercise Rights. In the event that the Company and the
--------------------------
Preferred Holders, taken together, do not purchase all of the Offered Shares
pursuant to and within the time periods set forth above, any remaining Offered
Shares may be sold or transferred by the Shareholder at any time within 90 days
thereafter, subject to compliance with Article II. Any such sale or transfer
shall be at not less than the price nor upon other terms and conditions, if any,
not more favorable to the Buyer than those specified in the Offer. Any Offered
Shares not sold within such 90-day period shall thereafter again be subject to
the requirements of this Article I. In the event that Shares are sold or
transferred to the Preferred Holders pursuant to this subsection, said Offered
Shares shall no longer be subject to this Agreement.
1.4 Price. With respect to any Shares to be transferred pursuant to
-----
Section 1.1 hereof and as to which a price has not been set by the Shareholder
under Section 1.1 hereof, the price per Share shall be a price set by the Board
of Directors of the Company which will reflect the current value of the Shares
in terms of present earnings and future prospects of the Company. The Company
shall notify the Shareholder of the price so determined within fifteen (15) days
after receipt by it of the Offer. If the Shareholder disputes the price as set
by the Board of Directors by giving notice to the Company within ten (10) days
after being informed of the price, the price of the Shares shall be determined
by an
-2-
independent financial analyst selected by the Board of Directors of the Company,
with the cost of such determination to be divided equally between the Company
and the Shareholder. The Board of Directors shall select such analyst within
fifteen (15) days after receipt of notice that the Shareholder is disputing the
price set by the Board of Directors. If the Board is not notified of any such
dispute within such ten (10) day period, the decision of the Board of Directors
as to the purchase price shall be final. Any time required to determine a
purchase price or to resolve a dispute shall be added to the fifteen (15) day
period in which the Company may exercise its right to purchase the Offered
Shares.
1.5 Transfer of Rights. The right of the Preferred Holders to purchase
------------------
Offered Shares hereunder may not be assigned except to a transferee or assignee
who qualifies as a partner, subsidiary or affiliate of one of the Preferred
Holders, or a parent of one of the Preferred Holders, or any entity which has
the same parent corporation as one of the Preferred Holders.
1.6 Prohibited Transfers. The Shareholder shall not sell, assign,
--------------------
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber, all or any part of the Shares owned by him during the term
of this Agreement other than in compliance with the terms of this Article I.
1.7 Definition of "Shares". For purposes of this Article I, the term
----------------------
"Shares" shall mean and include all shares of capital stock of the Company owned
by the Shareholder, whether presently held or hereafter acquired.
1.8 Permitted Transfers. The right of first refusal contained in this
-------------------
Article I shall not apply to: (a) any transfer of Shares by the Shareholder by
gift or bequest or through inheritance to, or for the benefit of, any family
member; (b) any transfer of Shares by the Shareholder to a trust for the benefit
of any family member; (c) any sale or transfer of Shares to the Company (or any
assignee of the Company) pursuant to the terms of a stock restriction or stock
repurchase agreement (which provides for such sale upon the Shareholder's
termination of employment); (d) any sale of Common Stock in a public offering
pursuant to a registration statement filed by the Company with the Securities
and Exchange Commission; (e) any pledge made pursuant to a bona fide loan
transaction that creates a mere security interest; or (f) any transfer of Shares
by the Shareholder that is a partnership to its partners. In the event of any
transfer pursuant to (a), (b) or (f), the transferee of the Shares shall hold
the Shares so acquired with all the rights conferred by, and subject to all the
restrictions imposed by, this Agreement.
ARTICLE II
Right of Co-Sale on Shareholder Transfer
----------------------------------------
2.1 Right of Co-Sale. In the event that the Shareholder desires (or is
----------------
required) to sell or transfer in any manner any Shares (as hereinafter defined)
pursuant to the terms of a bona fide offer received from a Buyer, and the
Company and the Preferred Holders do not exercise their right of first refusal
as to all of the Offered Shares as set forth in Article I hereof, each Preferred
Holder shall have the right (the "Right of Co-Sale") to require, as a condition
to such sale or transfer, that the Buyer purchase from each Preferred Holder at
the same price per share and on the same terms and conditions as involved in
such sale or disposition by the Shareholder that percentage of the Offered
Shares not
-3-
purchased by the Company or the Preferred Holders pursuant to Article I above,
expressed by a fraction, the numerator of which is the number of shares of
Preferred Stock (on an as-converted into Common Stock basis) and Common Stock
held by such Preferred Holder and the denominator of which is the aggregate
number of shares of Preferred Stock (on an as-converted into Common Stock basis)
and Common Stock held by all Preferred Holders and the number of Shares held by
the Shareholder. The Preferred Holders shall act upon the Buyer's offer to buy
as soon as practicable after receipt from the Company of the Notice and in all
events within fifteen (15) days after receipt of the Notice. In the event that
the Preferred Holders shall elect to exercise their Right of Co-Sale, the
Preferred Holders shall communicate in writing such election to the Shareholder.
2.2 Agreement not to Transfer. The Shareholder shall not sell, assign,
-------------------------
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber, all or any part of the Shares (as hereinafter defined)
owned by him during the term of this Agreement other than in compliance with the
terms of this Article II.
2.3 Definition of Shares. For purposes of this Article II, the term
--------------------
"Shares" shall mean and include all shares of capital stock of the Company owned
by the Shareholder, whether presently held or hereafter acquired.
2.4 Permitted Transfers. The Right of Co-Sale contained in this Article
-------------------
II shall not apply to: (a) any transfer of Shares by the Shareholder by gift or
bequest or through inheritance to, or for the benefit of, any family member; (b)
any transfer of Shares by the Shareholder to a trust for the benefit of any
family member; (c) any sale or transfer of Shares to the Company pursuant to the
terms of a stock restriction or stock repurchase agreement (which provides for
such sale upon the Shareholder's termination of employment with the Company, if
applicable); (d) any sale or transfer of Shares to the Company or the Preferred
Holders pursuant to the provisions of Article I hereof; (e) any sale of Common
Stock in a public offering pursuant to a registration statement filed by the
Company with the Securities and Exchange Commission; (f) any pledge made
pursuant to a bona fide loan transaction that creates a mere securities
interest; or (g) any transfer of Shares by the Shareholder that is a partnership
to its partners. In the event of any transfer pursuant to (a), (b) or (f) the
transferee of the Shares shall hold the Shares so acquired with all the rights
conferred by, and subject to all the restrictions imposed by, this Agreement.
2.5 Prohibited Transfers.
--------------------
(a) In the event that the Shareholder should sell any Shares in
contravention of the co-sale rights of each Preferred Holder under this
Agreement (a "Prohibited Transfer"), each Preferred Holder, in addition to such
other remedies as may be available at law, in equity or hereunder, shall have
the put option provided below, and such Shareholder shall be bound by the
applicable provisions of such option.
(b) In the event of a Prohibited Transfer, each Preferred Holder
shall have the right to sell to such Shareholder the type and number of shares
of Common Stock equal to the number of shares each Preferred Holder would have
been entitled to transfer to the Buyer under Section 2.1 hereof
-4-
had the Prohibited Transfer been effected pursuant to and in compliance with the
terms hereof. Such sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to
the Shareholder shall be equal to the price per share paid by the Buyer to such
Shareholder in such Prohibited Transfer. The Shareholder shall also reimburse
each Preferred Holder for any and all fees and expenses, including legal fees
and expenses, incurred pursuant to the exercise or the attempted exercise of the
Preferred Holder's rights under this Article II.
(ii) Within ninety (90) days after the date on which a
Preferred Holder received notice of the Prohibited Transfer or otherwise became
aware of the Prohibited Transfer, such Preferred Holder shall, if exercising the
option created hereby, deliver to the Shareholder the certificate or
certificates representing the shares to be sold, each certificate to be properly
endorsed for transfer.
(iii) Such Shareholder shall, upon receipt of the certificate or
certificates for the shares to be sold by a Preferred Holder, pursuant to this
Section 2.5(b), pay the aggregate purchase price therefor and the amount of
reimbursable fees and expenses, as specified in Section 2.5(b)(i), in cash or by
other means acceptable to the Preferred Holder.
(iv) Notwithstanding the foregoing, any attempt by the
Shareholder to transfer Shares in violation of Article II hereof shall be
voidable at the option of a majority in interest of the Preferred Holders if the
Preferred Holders do not elect to exercise the put option set forth in this
Section 2.5, and the Company agrees it will not effect such a transfer nor will
it treat any alleged transferee as the holder of such shares without the written
consent of a majority in interest of the Preferred Holders.
ARTICLE III
Right of First Refusal on Company Issuances
-------------------------------------------
3.1 Grant of Right to Purchasers. Except as set forth in Article IV, the
----------------------------
Company hereby grants to each of the Purchasers who continue to hold shares of
Series C Preferred Stock purchased pursuant to the Series C Agreement, the right
of first refusal to purchase, on a pro rata basis based on the number of shares
of Common Stock issuable upon conversion of shares of Series C Preferred Stock
then held by them, in the aggregate, fifty (50) percent of the New Securities
(as defined in Section 3.3) which the Company may, from time to time propose to
sell and issue. The Purchasers may purchase said New Securities on the same
terms and at the same price at which the Company proposes to sell the New
Securities. The right of first refusal granted pursuant to this Section 3.1
shall terminate upon the closing of the first sale of the next series or several
series of Preferred Stock of the Company authorized by the shareholders of the
Company subsequent to the date hereof with aggregate proceeds to the Company
from the sale of the next series or several series of Preferred Stock of at
least $5,000,000.
3.2 Grant of Right. Except as set forth in Article IV, the Company hereby
--------------
grants to each Preferred Holder who continues to hold, respectively, shares of
Series A Preferred Stock purchased
-5-
pursuant to the Series A Agreement, Series B Preferred Stock purchased pursuant
to the Series B Agreement and Series C Preferred Stock purchased pursuant to the
Series C Agreement (the "Preferred Shares"), the right of first refusal to
purchase all or any part of such Preferred Holder's Pro Rata Share (as
hereinafter defined) of the New Securities (as defined in Section 3.3) which the
Company may, from time to time, propose to sell and issue, with a right of over-
subscription (as provided in Section 3.4 below); provided, however, that with
respect to the Purchasers, the right of first refusal pursuant to this Section
3.2 shall only commence after the termination of the Purchasers' right of first
refusal pursuant to Section 3.1 above. The Preferred Holders may purchase said
New Securities on the same terms and at the same price at which the Company
proposes to sell the New Securities. The "Pro Rata Share" of each Preferred
Holder, for purposes of this right of first refusal, is the ratio of the total
number of shares of Common Stock held by such Preferred Holder, including (i)
any shares of Common Stock into which shares of Preferred Stock held by such
Preferred Holder are convertible, and (ii) any shares deliverable upon the
exercise of options of other rights to purchase Common Stock held by such
Preferred Holder, to the total number of shares of Common Stock outstanding
immediately prior to the issuance of the New Securities (including (i) any
shares of Common Stock into which outstanding shares of Preferred Stock are
convertible and (ii) any shares deliverable upon the exercise of options or
other rights to purchase Common Stock).
3.3 New Securities. "New Securities" shall mean any capital stock of the
--------------
Company, whether now authorized or not, and any rights, options or warrants to
purchase said capital stock, and securities of any type whatsoever that are, or
may become, convertible into said capital stock; provided, however, that "New
-------- -------
Securities" does not include (i) the Preferred Shares or other securities issued
or issuable upon conversion of the Preferred Shares ("Conversion Shares"), (ii)
securities offered pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the "Act"), (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization, (iv) shares
offered pursuant to lease financing transactions or bank or lending institution
financing transactions that are approved by the Board of Directors, (v)
securities issued in connection with any stock split, stock dividend or
recapitalization of the Company, (vi) all securities hereafter issued or
issuable to officers, directors, employees or consultants of the Company (for
the primary purpose of soliciting or retaining their employment or services)
pursuant to any employee or consultant stock offering, plan or arrangement
approved by the Board of Directors, and (vii) securities issuable pursuant to
warrants outstanding as of May 11, 1998 (the "Warrant Shares") or securities
issued upon conversion of the Warrant Shares.
3.3 Notice. In the event the Company proposes to undertake an issuance
------
of New Securities, it shall give to the Preferred Holders written notice (the
"Company Notice") of its intention, describing the type of New Securities,
number of shares, the price, the terms upon which the Company proposes to issue
the same, and notice to the effect that each Preferred Holder must respond to
such Company Notice within twenty (20) days after the date thereof. The
Preferred Holders shall have twenty (20) days from the date of such Company
Notice to purchase any or all of the New Securities for the price and upon the
terms specified in the Company Notice by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased and
forwarding payment for such New Securities to the Company if immediate payment
is required by such terms, or in any event no later than forty-five (45) days
after the date of the Company Notice. The Company shall promptly, in writing,
inform each
-6-
Preferred Holder which elects to purchase its Pro Rata Share of the New
Securities of any other Preferred Holder's failure to do so (the "Over-
subscription Notice"), in which case the Preferred Holders electing to purchase
their Pro Rata Share of the New Securities shall have the right to purchase
their Pro Rata Share of such shares (the "Over-subscription Right") and any
portion of the remainder of such shares which other Preferred Holders have
elected not to purchase pursuant to the exercise of their Over-subscription
Right, for the price and upon the terms specified in the Company Notice for a
period of thirty (30) days after the date of the Over-subscription Notice. If a
Preferred Holder elects not to exercise such right, then that portion of the
shares which is not purchased may be offered to third parties on terms no less
favorable to the Company for a period of one hundred twenty (120) days.
3.5 Sale after Company Notice. In the event any Preferred Holder fails to
-------------------------
exercise in full the right of first refusal within said twenty (20) day period,
the Company shall have ninety (90) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within thirty (30) days from the date of said agreement) to
sell the New Securities respecting which such Preferred Holder's rights were not
exercised, at a price and upon general terms no more favorable to the Preferred
Holders thereof than specified in the Company Notice. In the event the Company
has not sold the New Securities within said ninety (90) day period (or sold and
issued New Securities in accordance with the foregoing within thirty (30) days
from the date of said agreement), the Company shall not thereafter issue or sell
any New Securities without first offering such securities to the Preferred
Holders in the manner provided above.
3.6 Assignment. The right of first refusal granted under this Article III
----------
is assignable by the Preferred Holders to any transferee of a minimum of fifty
thousand (50,000) shares of Series A Preferred Stock (as adjusted for any stock
split, stock dividends, combinations, recapitalizations and the like with
respect to such shares) or fifty thousand (50,000) shares of Series B Preferred
Stock (as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), or fifty thousand
(50,000) shares of Series C Preferred Stock (as adjusted for any stock split,
stock dividends, combinations, recapitalizations and the like with respect to
such shares), as applicable, or the Common Stock into which each such series of
Preferred Stock has been converted. For the purposes of satisfying the 50,000
share threshold herein, the number of shares of the Common Stock issuable upon
conversion of applicable series of Preferred Stock owned by the Preferred
Holders shall include the holdings of partners, subsidiaries, parents,
shareholders or affiliates of the Preferred Holders (or any entities which have
the same parent corporation as the Preferred Holders) and such holdings shall be
aggregated together and with the holdings of the Preferred Holders with respect
to the applicable series of Preferred Stock.
-7-
ARTICLE IV
Termination of Rights
---------------------
The Right of First Refusal on Shareholder Transfer, Co-Sale Right, Right of
First Refusal on Company Issuances, the right to designate members of the Board
of Directors, Compensation Committee and Audit Committee and the right to direct
the voting of the shares beneficially owned by the Founder created under
Articles I, II, III, VII and VIII of this Agreement, respectively, shall expire
upon (i) the closing of the first public offering of the Common Stock of the
Company to the general public which is effected pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act of 1933, as amended; (ii) upon the closing
of a transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) which results in (a)
the holders of the outstanding voting equity securities of the Company
immediately prior to such transaction or series of related transactions holding
securities representing less than 50% of the voting power of the surviving
entity immediately following such transaction or series of related transactions
or (b) the sale or disposition by the Company of all or substantially all the
Company's assets; or (iii) with respect to the Right of First Refusal on
Shareholder Transfer, the date on which less than 50% of the Preferred Stock of
the Company initially issued remains outstanding (as adjusted for any stock
split, stock dividends, combinations, recapitalizations and the like with
respect to the shares).
ARTICLE V
Specific Performance
--------------------
The rights of the parties under this Agreement are unique and, accordingly,
the parties shall, in addition to such other remedies as may be available to any
of them at law or in equity, have the right to enforce their rights hereunder by
actions for specific performance to the extent permitted by law.
ARTICLE VI
Legends
-------
The certificates representing the Shares shall bear a legend indicating the
existence of the restrictions imposed by Article I, II, III, VII and VIII of
this Agreement. Nothing in this Agreement should be construed as a modification
or amendment of any restrictions on transfer under applicable federal or state
securities laws.
ARTICLE VII
Board of Directors
------------------
7.1 Board of Directors. As soon as practicable after the Closing, the
------------------
Board of Directors of the Company shall be comprised of seven members. The
Purchasers and the Shareholders agree to cause
-8-
to be elected to the Company's Board of Directors (i) one representative elected
by the holders of Series A Preferred Stock, (ii) one representative elected by
the holders of Series B Preferred Stock (who shall be a representative of
Battery Ventures L.P.), (iii) two representatives elected by the holders of the
Series C Preferred Stock (one of whom shall be a representative of the
Technology Crossover Ventures entities, and one of whom shall be a
representative of Boston Millennia Partners Limited Partnership), (iv) two
representatives elected by the holders of Common Stock of the Company (one of
whom shall be ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and the other shall be reasonably approved by the
holders of the Series C Preferred Stock), and (v) the Chief Executive Officer of
the Company. In addition, the Board of Directors of the Company shall elect
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as Chairman of the Board to serve in that capacity as long as he
is a director of the Company. If any Purchaser elects not to designate a
representative to the Board, it shall have the right to appoint an observer who
shall be entitled to attend all meetings of the Board and to consult with
management. The Company shall pay the reasonable out-of-pocket expenses of non-
employee members of the Company's Board of Directors in connection with
attending Board of Directors meetings and will pay the reasonable out-of-pocket
expenses of Board observers in connection with attending Board of Directors
meetings, in accordance with the Company's standard travel policy.
7.2 Compensation Committee. The Company shall use its best efforts and
----------------------
the Purchasers and Shareholders agree to cause the Board of Directors of the
Company to appoint and maintain a Compensation Committee, which shall contain
no more than three persons, one of whom shall be a representative of Boston
Millennia Partners Limited Partnership, one of whom shall be a representative of
Battery Ventures, and one of whom shall be ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. The Compensation
Committee shall administer the Company's stock option plans and make
recommendations to the Board of Directors with respect to management
compensation and terms of employment. The Board of Directors of the Company
shall have the power to accept or reject any recommendation of the Compensation
Committee, but shall not approve an employee's compensation in amounts which
differ from the amounts recommended by the Compensation Committee.
7.3 Audit Committee. The Company shall use its best efforts and the
---------------
Purchasers and Shareholders agree to cause the Board of Directors to appoint and
maintain an Audit Committee, which shall include at least one representative of
the Purchasers.
ARTICLE VIII
Reorganizations
---------------
The Shareholders hereby agree that at any meeting of the shareholders
of the Company, however called, and in any written action by consent of
shareholders of the Company, the Shareholders shall vote all shares of stock of
the Company entitled to vote held by the Shareholder as directed by the holders
of a majority of the outstanding shares of Common Stock and Common Stock
issuable upon conversion of Preferred Stock then held by the Shareholders in
connection with any reorganization of the Company pursuant to Section 1200 et.
seq. of the California Corporations Code; provided, however, that this Article
VIII shall not affect any rights granted to the Preferred Holders or the
Purchasers pursuant to Sections 6(a) and 6(c) of the Company's Amended and
Restated Articles of Incorporation. The Shareholders shall not enter into any
agreement or understanding with any person or entity to vote
-9-
or give instructions in any manner inconsistent with the preceding sentence. In
the event any Shareholder fails to vote in accordance herewith, such
Shareholders shall be deemed to have irrevocably appointed such person or
persons as may be designated by the Board of Directors of the Company as proxy
to vote such Shareholder's stock in accordance herewith.
ARTICLE IX
General Provisions
------------------
9.1 Governing Law. This Agreement shall be governed by the laws of the
-------------
State of California without regard to choice of law provisions.
9.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings between them or any of them
as to such subject matter.
9.3 Amendment. Except as otherwise expressly provided herein, this
---------
Agreement, other than Article VII herein, may be amended only upon the written
consent of the majority of the shares beneficially owned or deemed to be
beneficially owned by the Founder, the majority-in-interest of the Purchasers,
the majority-in-interest of the Common Holders, the Series A Holders, and the
Series B Holders (with the Common Holders, the Series A Holders and the Series B
Holders voting as a single class) and the Company; provided, however, that
Article VII herein may be amended only upon the written consent of 2/3 of (i)
the shares then beneficially owned or deemed to be beneficially owned by the
Founder and the shares then owned by the Common Holders, (ii) the shares then
owned by the Series A Holders (iii) the shares then owned by the Series B
Holders, and (iv) the shares then owned by the Purchasers, with each voting as a
separate class.
9.4 Successors. This Agreement shall be binding upon and shall inure to
----------
the benefit of the parties hereto and their respective heirs, executors, legal
representatives, successors, and permitted transferees, except as may be
expressly provided otherwise herein.
9.5 Invalidity of Provisions. In the case any one or more of the
------------------------
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement and such
invalid, illegal and unenforceable provision shall be reformed and construed so
that it will be valid, legal, and enforceable to the maximum extent permitted by
law.
9.6 Notice. Any notice, demand or request required or permitted to be
------
given by either the Company or the Shareholders pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth on the
Exhibits to this Agreement or such other address as a party may request by
notifying the other in writing.
-10-
9.7 No Waiver. Any party's failure to enforce any provision or provisions
---------
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted to the parties
herein are cumulative and shall not constitute a waiver of any party's right to
assert all other legal remedies available to it under the circumstances.
9.8 Cooperation. The parties agree upon request to execute any further
-----------
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
9.9 Addition of Parties. The Company agrees that until the termination of
-------------------
this Agreement, it will cause each of the key employees of the Company who holds
at least 100,000 shares of the capital stock of the Company (on an as-converted
basis and as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), to enter into this
Agreement and thereby to be bound by the terms hereof, all by execution of an
Instrument of Accession in the form attached as Exhibit E hereto. Any such
---------
person so entering into this Agreement shall be deemed to be a Shareholder for
purposes of this Agreement.
9.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(This space intentionally left blank)
-11-
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" INVENTA CORPORATION
a California corporation
By:_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
"FOUNDER" ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
Trustees of the Santhanam Family Trust U/D/T
dated May 23, 1997
By:_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Trustee
____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee of the ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ 1997 Trust UTA dated May 23, 1997
By:_________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee of the Rishikesh
Santhanam 1997 Trust UTA dated May 23, 1997
By:_________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
-12-
"PURCHASERS"
Battery Ventures L.P.
By:_________________________________
Name:
Title:
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: ▇▇▇▇ Partners Limited Partnership,
its General Partner
By:_________________________________
General Partner
____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
____________________________________
A. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
____________________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
-13-
____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
-14-
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:____________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:____________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:____________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
"OTHER SHAREHOLDERS"
Battery Ventures L.P.
By:____________________________________
Name:
Title:
____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
____________________________________
Electra ▇. ▇▇▇▇▇▇▇▇▇
-15-
____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ G. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Charitable Annuity Trust, u/d/t
By:_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-16-
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
Name and Address
--------------------------------------------------------------------------------
Battery Ventures L.P. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Boston Millennia Partners
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ & ▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
c/o Boston Millennia Partners
30 Rose Wharf, Ste. ▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o Boston Millennia Partners ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇ ▇▇▇ ▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇
c/o Boston Millennia Partners c/o Boston Millennia Partners
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
c/o Boston Millennia Partners
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TCV II (Q), L.P. TCV II Strategic Partners, L.P.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇ Attention: ▇▇▇ ▇. ▇▇▇▇
TCV II, V.O.F. Technology Crossover Ventures II, C.V.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇ Attention: ▇▇▇ ▇. ▇▇▇▇
Technology Crossover Ventures II, L.P.
c/o Technology Crossover Ventures
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
c/o Technology Crossover Ventures
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇
EXHIBIT B
---------
SCHEDULE OF HOLDERS
OF SERIES A PREFERRED STOCK
Name and Address
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Suites 225 & ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Electra ▇. ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ A2 Anand ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDIA
▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇. ▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 2/7 12th Cross
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ G. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Charitable Annuity Trust, u/d/t
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇. ▇ ▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
EXHIBIT C
---------
SCHEDULE OF HOLDERS
OF SERIES B PREFERRED STOCK
Name and Address
--------------------------------------------------------------------------------
Battery Ventures L.P.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ & ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇. ▇ ▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
▇▇▇▇▇▇ G. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Charitable Annuity Trust, u/d/t
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, trustee
▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇. ▇ ▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇
EXHIBIT D
---------
SCHEDULE OF CERTAIN COMMON STOCK HOLDERS
Name and Address
--------------------------------------------------------------------------------
B. ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ #▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ #C305 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
EXHIBIT E
---------
INSTRUMENT OF ACCESSION
-----------------------
The undersigned hereby acknowledges receipt and review of the Restated
Shareholders Agreement dated April ___, 1998 (the "Agreement"). By signing
below, the undersigned agrees to be bound by the terms of the Agreement as if
the undersigned was an original party thereto. The undersigned further agrees
that for purposes of the Agreement, the undersigned shall be deemed to be a
Shareholder as defined in the Agreement.
_______________________
(Print name)
_______________________
(Signature)
INVENTA CORPORATION
-----------------------------
RESTATED SHAREHOLDERS RIGHTS
AGREEMENT
-----------------------------
May 11, 1998
RESTATED REGISTRATION RIGHTS AGREEMENT
This Restated Registration Rights Agreement (the "Agreement"), dated as of
May 11, 1998 is entered into by and among Inventa Corporation, a California
corporation (the "Company") and the holders of the Company's Series A Preferred
Stock listed on Exhibit A attached hereto (collectively, the "Series A
---------
Holders"), the holders of the Company's Series B Preferred Stock listed on
Exhibit B attached hereto (collectively, the "Series B Holders") and the holders
---------
of the Company's Series C Preferred Stock listed on Exhibit C attached hereto
---------
(collectively, the "Series C Holders")(the Series A Holders, the Series B
Holders and the Series C Holders shall collectively be referred to as
"Shareholders").
R E C I T A L S
---------------
A. The Series A Holders, the Series B Holders and the Company are parties
to the Registration Rights Agreement dated February 14, 1997.
B. The Series C Holders and the Company are parties to the Series C
Convertible Preferred Stock Purchase Agreement as of the date hereof (the
"Series C Purchase Agreement").
C. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Series C Purchase Agreement.
D. The Shareholders and the Company desire that the transactions
contemplated by the Series C Purchase Agreement be consummated.
E. The Series A Holders, the Series B Holders and the Company desire that
this Agreement supersede the Registration Rights Agreement dated February 14,
1997 in its entirety.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Holder" shall mean any holder, or an assignee under Section 15
hereof, of outstanding Registrable Securities.
"Initiating Holders" shall mean any Holders who in the aggregate are
Holders of more than fifty percent (50%) of the outstanding Registrable
Securities.
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 the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities", subject to Sections 5(b) and 6(b) hereof,
shall mean shares of Common Stock (i) issued or issuable pursuant to the
conversion of the Shares, and (ii) issued in respect of securities issued
pursuant to the conversion of the Shares upon any stock split, stock dividend,
recapitalization, substitution, or similar event; provided, however, that
Registrable Securities shall not include any (a) shares of Common Stock which
have previously been registered, (b) shares of Common Stock which have
previously been sold to the public, or (c) securities which would otherwise be
Registrable Securities held by a Holder who is then permitted to sell all of
such securities within any three (3) month period following the Company's
initial public offering pursuant to Rule 144 if such securities then held by
such Holder constitute less than one percent of the Company's outstanding equity
securities.
"Registration Expenses" shall mean all expenses (excluding
underwriting discounts and selling commissions) incurred in connection with a
registration under Sections 5, 6 and 8 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, and the
reasonable fees and expenses of one counsel for the selling Shareholders (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"Shares" shall mean shares of the Company's Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock.
2. Restrictions on Transferability. The Restricted Securities held by
-------------------------------
the Shareholders shall not be transferred except upon the conditions specified
in this Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act or, in the case of Section 16 hereof, to assist
in an orderly distribution. Each Shareholder will cause any proposed transferee
of
2
Restricted Securities held by that Shareholder to agree to take and hold those
securities subject to the provisions and upon the conditions specified in this
Agreement.
3. Restrictive Legend. Each certificate representing (i) the Shares,
------------------
and (ii) shares of the Company's Common Stock issued upon conversion of the
Shares, and (iii) any other securities issued in respect of the Shares, or the
Common Stock issued upon conversion of the Shares, upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH
SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICE OF THE
CORPORATION.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 4(i) or
the "no-action" letter referred to in Section 4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws, unless any such
transfer legend may be removed pursuant to Rule 144(k), in which case no such
opinion or "no-action" letter shall be required, and provided that the Company
shall not be obligated to remove any such legends prior to the date of the
initial public offering of the Company's Common Stock under the Securities Act.
4. Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 5, 6 and 8 hereof), the holder thereof shall give written notice to the
Company of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144 promulgated under the Securities Act or for a transfer
to a holder's spouse, ancestors, descendants or a trust for any of their
benefit, or in transactions involving the distribution without consideration of
Restricted Securities by a holder to any of its partners or
3
retired partners or to the estate of any of its partners or retired partners) by
either (i) a written opinion of legal counsel to the holder who shall be
reasonably satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act or (ii) a "no-action" letter from the
Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by such holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear the restrictive legend set forth in Section 3 above,
except that such certificate shall not bear such restrictive legend after the
date of the Company's initial public offering under the Securities Act if the
opinion of counsel or "no-action" letter referred to above expressly indicates
that such legend is not required in order to establish compliance with the
Securities Act or if such legend is no longer required pursuant to Rule 144(k).
5. Demand Registration.
-------------------
(a) Request for Registration. If the Company shall receive from
------------------------
Initiating Holders a written request that the Company effect any registration
with respect to the Registrable Securities, the Company will:
(i) promptly given written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration after January 1, 2000 (including, without
limitation, the execution of an undertaking to file post effective
amendments, appropriate qualification under applicable blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as may be so requested
and as would 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 delivered to the Company within fifteen
(15) days after receipt of such written notice from the Company;
provided that the Company shall not be obligated to effect, or to take
any action to effect, any such registration pursuant to this Section
5:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act;
(B) After the Company has effected two (2) such
registrations pursuant to this Section 5(a) and such registrations
have been declared or ordered effective, or
4
withdrawn at the request of the majority of the Initiating Holders,
and the sales of such Registrable Securities have closed; or
(C) Within one hundred eighty (180) days of the effective
date of any other registration statement on Form S-1.
Subject to the foregoing clauses (A), (B) and (C), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders; provided, however, that if the Company shall
furnish to such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed on or before the time filing would
be required and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
(but not more than once during any twelve month period) for a period of not more
than ninety (90) days after receipt of the request of the Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders, may, subject to the provisions of Section 5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but the Company shall have no right to include any of its securities in any such
registration except as provided in Section 5(b) below.
(b) Underwriting. If the Initiating Holders intend to distribute the
------------
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 5, and the Company shall include such information in the written notice
referred to in Section 5(a)(i) above. The right of any Holder to registration
pursuant to Section 5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority-in-interest of
the Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
If officers or directors of the Company shall request inclusion of
securities of the Company other than Registrable Securities in any registration
pursuant to Section 5, or if holders of securities of the Company who are
entitled by contract with the Company to have securities included in such a
registration (such officers, directors, and other shareholders being
collectively referred to as the "Other Shareholders") request such inclusion,
the Initiating Holders shall, on behalf of all Holders, offer to include the
securities of such Other Shareholders in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Agreement. The Company shall (together with all Holders and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with
5
the representative of the underwriter or underwriters (the "Underwriter")
selected for such underwriting by more than fifty percent (50%) of the
Initiating Holders and reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 5, if the Underwriter determines that marketing
factors require a limitation on the number of shares to be underwritten, the
Underwriter may (subject to the allocation priority set forth below) limit the
number of Registrable Securities to be included in the registration and
underwriting to not less than fifty percent (50%) of the securities which
Holders have requested be included therein. 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 in the following priority: first, among all Holders of
Registrable Securities requesting inclusion (and pro rata among such holders on
the basis of all Registrable Securities then held by such holders); and second,
among all Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of securities which they had requested to be included in such
registration at the time of filing the registration statement. If any Holder or
Other Shareholder disapproves of the terms of any such underwriting, such holder
may elect to withdraw therefrom by written notice to the Company and the
Underwriter. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. If the Underwriter has
not limited the number of Registrable Securities or other securities to be
underwritten, the Company may include its securities for its own account in such
registration if the underwriter so agrees and if the number of Registrable
Securities and other securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
6. Company Registration.
--------------------
(a) If the Company shall determine to register any of its securities
either for its own account or for the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof (which,
to the extent then known, shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting
involved therein, all of the Registrable Securities specified in a
written request or requests made by any Holder within fifteen (15)
days after receipt of the written notice from the Company described in
clause (i) above, except as set forth in Section 6(b) below. Such
written request may specify all or a part of a Holder's Registrable
Securities.
6
(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 6(a)(i). In such event the right of any Holder to
registration pursuant to Section 6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the Underwriter selected for underwriting by the Company.
Notwithstanding any other provision of this Section 6, if the Underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, and (a) if such registration is the first registered
offering of the Company's securities to the public, the Underwriter may (subject
to the allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant hereto, and (b) if such registration is other than the
first registered offering of the sale of the Company's securities to the public,
the Underwriter may (subject to the allocation priority set forth below) limit
the number of Registrable Securities to be included in the secondary portion of
the registration and underwriting to not less than fifty percent (50%) of the
securities which Holders have requested be included therein. 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 by persons other than the Company shall be allocated in the
following priority: first, to Holders of Registrable Securities (and pro rata
among such holders on the basis of all Registrable Securities then held by such
holders); and second, among all Other Shareholders in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration at the time of filing the registration
statement. If any Holder or Other Shareholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the Underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
7. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company, and all Selling Expenses shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that the Company shall
not be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by Initiating Holders, the registration
statement does not become effective, unless such withdrawal is caused by a
material adverse change in the business or operations of the Company after such
request for registration, or unless the Initiating Holders agree to have such
registration considered a registration pursuant to Section 5(a)(ii)(B). If the
Company is not required to pay any Registration Expenses, then the Holders and
Other Shareholders requesting registration shall bear such Registration Expenses
pro rata on the basis of the number of their shares so included in the
registration request, and such registration shall not be considered a
registration for purposes of Section 5(a)(ii)(B).
7
8. Registration on Form S-3. The Company shall use its best efforts to
------------------------
qualify for registration on Form S-3, and to that end, the Company shall comply
with the reporting requirements of the Exchange Act following the effective date
of the first registration of any securities of the Company for a registered
public offering. After the Company has qualified for the use of Form S-3,
Initiating Holders shall have the right to request four (4) registrations on
Form S-3 (such requests shall be in writing and shall state the number of shares
of Registrable Securities to be disposed of and the intended method of
disposition of such shares by each such holder), subject only to the following
limitations:
(a) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to one hundred eighty (180) days following
the effective date of a Company-initiated registration (other than a
registration effected solely to qualify an employee benefit plan or to effect a
business combination pursuant to Rule 145), provided that notice of such
Company-initiated registration is given to Holders prior to receipt of a request
from a holder of Registrable Securities for registration on Form S-3, and
provided that the Company shall use its best efforts to achieve such
effectiveness promptly following such one hundred eighty (180) day period;
(b) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to expiration of one hundred eighty (180)
days following the effective date of the most recent registration pursuant to a
request by a holder of Registrable Securities under this Agreement or pursuant
to a request by a holder of registration rights under any other agreement of the
Company granting Form S-3 demand registration rights; provided, however, that
the Company shall use its best efforts to achieve such effectiveness promptly
following such one hundred eighty (180) day period;
(c) The Company shall not be required to effect a registration
pursuant to this Section 8 more than once in any twelve (12) month period;
(d) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred eighty
(180) days from the effective date thereof. The Company shall give notice to
all Holders and all holders of registration rights under any other agreement of
the Company granting Form S-3 or similar demand registration rights of the
receipt of a request for registration pursuant to this Section 8 and shall
provide a reasonable opportunity for all such other holders to participate in
the registration. Subject to the foregoing, the Company will use its best
efforts to effect promptly the registration of all shares of Registrable
Securities on Form S-3 to the extent requested by the Holder or Holders thereof
for purposes of disposition. In the event the Underwriter, in the case of an
underwritten offering, determines that market factors require a limitation on
the number of shares to be underwritten, then shares shall be excluded from such
registration and underwriting pursuant to the method described in Section 6(b);
and
(e) The value of the aggregate shares of Registrable Securities to be
registered on Form S-3 for each such right of registration shall be at least
$500,000.
8
9. Registration Procedures. In the case of each registration effected by
-----------------------
the Company pursuant to this Agreement, the Company will keep each Holder
advised in writing as to the initiation of such registration and as to the
completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of ninety (90) days
or until the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs; and
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 5 or 8 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions, and provided further that if the underwriter
so requests the underwriting agreement will contain customary indemnification
and contribution provisions, and provided further that the Underwriter is
reasonably acceptable to the Company.
10. Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, and each person controlling such Holder, if Registrable
Securities held by such Holder are included in the securities with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, 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 prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act including any rule or
regulation thereunder applicable to the Company relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement (or alleged untrue statement) or omission (or alleged omission) based
upon written information furnished to the Company by such Holder or underwriter
and stated to be specifically for use therein.
9
(b) Each Holder will, if Registrable Securities or other securities
held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers and agents and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, each other such Holder
and each of their officers, directors and partners, and each person controlling
such Holder, against all claims, losses, 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, in light of the circumstances in
which they were made, not misleading, and will reimburse the Company and such
Holders, directors, officers, agents, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating of defending 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 the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holders hereunder shall be
limited to an amount equal to the net proceeds to each such Holder of securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 10 (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 any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be 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 under this Agreement. An indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. No
Indemnifying Party in the defense of any such claim or litigation shall, except
with the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
10
(d) If the indemnification provided for in this Section 10 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with any untrue or alleged untrue statement of a material fact or
the omission to state a material fact that resulted in such loss, claim, damage
or liability, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by a court of law by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder thereunder exceed
the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 10
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement.
11. Information by Holder. Each Holder holding securities included in any
---------------------
registration shall furnish to the Company such information regarding such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
12. Limitations on Registration of Issues of Securities. From and after
---------------------------------------------------
the date of this Agreement, the Company shall not enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder the right to require the Company to initiate any
registration of any securities of the Company, provided that this Section 12
shall not limit the right of the Company to enter any agreements with any holder
or prospective holder of any securities of the Company giving such holder or
prospective holder the right to require the Company, upon any registration of
any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder. Any right given by the
Company to any holder or prospective holder of the Company's securities in
connection with the registration of securities shall be conditioned such that it
shall be consistent with the provisions of this Agreement and with the rights of
the Holders provided in this Agreement.
13. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following
11
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(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;
(c) So long as a Shareholder owns any Restricted Securities, furnish
to the Shareholder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time from
and after ninety (90) days following the effective date of the first
registration statement filed by the Company 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 the Company, and such other reports and
documents so filed as a Shareholder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Shareholder to sell any such
securities without registration.
14. No-Action Letter or Opinion of Counsel in Lieu of Registration.
--------------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, if at any time after
the date of the Company's initial public offering of its securities under the
Securities Act the Company shall have obtained from the Commission a "no-action"
letter in which the Commission has indicated that it will take no action if,
without registration under the Securities Act, any Holder disposes of
Registrable Securities covered by any request for registration made under this
Agreement in the manner in which such Holder proposes to dispose of the
Registrable Securities included in such request, or if in the opinion of counsel
for the Company concurred in by counsel for such Holder no registration under
the Securities Act is required in connection with such disposition, the
Registrable Securities included in such request shall not be eligible for
registration under this Agreement; provided, however, with respect to any Holder
who may deemed to be an "affiliate," as that term is defined under Rule 144, if,
notwithstanding the opinion of such counsel, the Holder is unable to dispose of
all of the Registrable Securities included in his request in the manner in which
such Holder so proposes without registration, the Registrable Securities
included in such request shall be eligible for registration under this
Agreement.
15. Transfer or Assignment of Registration Rights. The rights to cause
---------------------------------------------
the Company to register Shareholder's securities granted to Shareholder by the
Company under Sections 5, 6 and 8 hereof may be transferred or assigned by
Shareholder to a transferee or assignee of at least 100,000 shares of the
Restricted Securities; provided, however, that a Shareholder may transfer or
assign such rights to a partner or shareholder of Shareholder without
restriction as to minimum shareholding. The Company shall be given written
notice by Shareholder at the time of said transfer or assignment, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned, and provided further that the transferee or assignee of such rights is
not deemed by the Board of Directors of the Company, in its
12
reasonable judgment, to be a competitor of the Company; and provided further
that the transferee or assignee of such rights assumes the obligations of a
Shareholder under this Agreement.
16. "Market Stand-off" Agreement. Each Shareholder agrees, if requested
----------------------------
by the Company and an underwriter of Common Stock (or other securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by Shareholder during a period of time
determined by the Company and its underwriters (not to exceed 180 days)
following the effective date of the Company's initial public offering of its
capital stock, provided that all officers, directors and employees of the
Company holding stock or stock options of at least one (1%) percent of the
Company's outstanding stock prior to the initial public offering of the Company
enter into similar agreements; provided, further, that with respect to the
Series C Holders, the prohibition against the sale, transfer or other
dispostions of any Common Stock (or other securities) of the Company held by
them pursuant to this Section 16 shall not prohibit (i) the sale of any shares
of Common Stock purchased by such Series C Holder pursuant to a directed share
program or otherwise in the Company's initial public offering, or (ii) the sale,
in the open market, of any shares of Common Stock by such Series C Holder
provided that such shares are purchased in the open market after the completion
of the Company's initial public offering.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the Shares (or securities) subject to the foregoing restriction
until the end of said period.
17. Governing Law. This Agreement and the legal relations between the
-------------
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
18. Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties regarding rights to
registration. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
19. Notices, Etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a)
if to a Shareholder, at the address or addresses set forth on Exhibit A,
---------
Exhibit B or Exhibit C attached hereto, or at such other address or addresses as
--------- ---------
the Shareholder shall have furnished to the other parties hereto in writing, or
(b) if to any other holder of any securities, at such address as such holder
shall have furnished the other parties hereto in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of the
last holder of such Shares who has so furnished an address to the Company, or
(c) if to the Company,
13
at the address of its principal offices set forth on the signature page of this
Agreement, or at such other address as the Company shall have furnished to the
other parties hereto in writing.
20. Other Registration Rights. This Agreement supersedes any previous
-------------------------
agreement between the Company and any party with respect to the grant by the
Company of registration rights, including but not limited to Registration Rights
Agreement dated February 14, 1997.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
22. Amendments. Any provision of this Agreement may be amended, waived or
----------
modified upon the written consent of the Company, and the Shareholders (or their
assignees to whom Shareholders have expressly assigned their rights in
compliance with Section 15 hereof) who then hold more than fifty percent (50%)
of the Registrable Securities then held by persons entitled to registration
rights hereunder, provided further, any such amendment, waiver or modification
applies by its terms to each applicable Shareholder and each such assignee and,
provided further, that a Shareholder or such assignee hereunder may waive any of
such Holder's rights or the Company's obligations hereunder without obtaining
the consent of any other Shareholder or assignee.
(Remainder of this page left intentionally blank)
14
IN WITNESS WHEREOF, the parties have executed this Restated Registration
Rights Agreement as of the date first above written.
"INVENTA CORPORATION"
By:______________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
"SHAREHOLDERS"
Battery Ventures L.P.
By:______________________________
Name:
Title:
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: ▇▇▇▇ Partners Limited Partnership,
its General Partner
By:______________________________
General Partner
_________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
_________________________________
A. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
_________________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇
_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________
Electra ▇. ▇▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ G. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Charitable Annuity Trust, u/d/t
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Trustee
16
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
_________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:_________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
17
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
18
EXHIBIT A
---------
SCHEDULE OF HOLDERS
OF SERIES A PREFERRED STOCK
Name and Address
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Suites 225 & ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Electra ▇. ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ A2 Anand ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDIA
▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇. ▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 2/7 12th Cross
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ G. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Charitable Annuity Trust, u/d/t
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, trustee
▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇. ▇ ▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
EXHIBIT B
---------
SCHEDULE OF HOLDERS
OF SERIES B PREFERRED STOCK
Name and Address
--------------------------------------------------------------------------------
Battery Ventures L.P.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ & ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇. ▇ ▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
▇▇▇▇▇▇ G. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Charitable Annuity Trust, u/d/t
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, trustee
▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇. ▇ ▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇
EXHIBIT C
---------
SCHEDULE OF HOLDERS
OF SERIES C PREFERRED STOCK
Name and Address
--------------------------------------------------------------------------------
Battery Ventures L.P. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Boston Millennia Partners
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ & ▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
c/o Boston Millennia Partners
30 Rose Wharf, Ste. ▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o Boston Millennia Partners ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇ ▇▇▇ ▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ TCV II (Q), L.P.
c/o Boston Millennia Partners c/o Technology Crossover Ventures
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
c/o Boston Millennia Partners with a copy to:
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇ c/o Technology Crossover Ventures
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇ Attention: ▇▇▇ ▇. ▇▇▇▇
c/o Boston Millennia Partners
▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TCV II Strategic Partners, L.P. TCV II, V.O.F.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇ Attention: ▇▇▇ ▇. ▇▇▇▇
Technology Crossover Ventures II, C.V. Technology Crossover Ventures II, L.P.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇ Attention: ▇▇▇ ▇. ▇▇▇▇
[LETTERHEAD OF ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇]
May 11, 1998
To: Each Investor listed on
the Schedule of Investors
to the Inventa Corporation
Series C Convertible Preferred
Stock Purchase Agreement
Ladies and Gentlemen:
Reference is made to the Series C Convertible Preferred Stock Purchase
Agreement dated as of May 11, 1998 (the "Agreement"), complete with all listed
exhibits thereto, by and among Inventa Corporation, a California corporation,
(the "Company") and each of you, providing for the issuance by the Company to
the Investors of shares of Series C Preferred Stock of the Company (the
"Shares"). This opinion is rendered to you in compliance with Section 5.8 of the
Agreement, and all terms used herein have the meanings defined for them in the
Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the negotiation
of the Agreement and the issuance of the Shares. As such counsel, we have made
such legal and factual examinations and inquiries as we have deemed advisable or
necessary for the purpose of rendering this opinion. In addition, we have
examined originals or copies of such corporate records of the Company,
certificates of public officials and such other documents which we consider
necessary or advisable for the purpose of rendering this opinion. In such
examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us
and the due execution and delivery of all documents (except as to due execution
and delivery by the Company) where due execution and delivery are a prerequisite
to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to us"
or similar language with reference to matters of fact means that, after an
examination of documents made available to us by the Company, and after
inquiries of officers of the Company, but without any further independent
factual investigation, we find no reason to believe that the opinions expressed
herein are factually incorrect. Further, the expression "to our knowledge,"
"known to us" or similar language with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company. Except to the extent expressly set forth herein or as
we otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact, and
no inference as to our knowledge
of the existence or absence of any fact should be drawn from our representation
of the Company or the rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Agreement, and we are assuming
that the representations and warranties made by the Investors in the Agreement
and pursuant thereto are true and correct. We are also assuming that each
Investor has purchased the Shares for value, in good faith and without notice of
any adverse claims within the meaning of the California Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity);
(c) We express no opinion as to compliance with the anti-fraud
provisions of applicable securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of the Registration Rights Agreement, to the extent
the provisions thereof may be subject to limitations of public policy and the
effect of applicable statutes and judicial decisions; and
(e) We are members of the Bar of the State of California and we
express no opinion as to any matter relating to the laws of any jurisdiction
other than the federal laws of the United States of America and the laws of the
State of California. To the extent this opinion addresses applicable securities
laws of states other than the State of California, we have not retained nor
relied on the opinion of counsel admitted to the bar of such states, but rather
have relied on compilations of the securities laws of such states contained in
reporting services presently available to us.
Based upon and subject to the foregoing, and except as set forth in the
Schedule of Exceptions to the Agreement, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
under, and by virtue of, the laws of the State of California and is in good
standing under such laws. The Company has requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted. The Company is duly qualified to do business, and in good standing
in all foreign jurisdictions where its ownership or leasing of properties or the
conduct of its business requires such qualification, except where the failure to
be so qualified would not have a material adverse effect on the Company's
business as now conducted.
2
2. The Company has all requisite legal and corporate power to execute and
deliver the Agreement, the Shareholder Agreement and the Registration Rights
Agreement, to sell and issue the Shares under the Agreement, to issue the Common
Stock issuable upon conversion of the Shares and to carry out and perform its
obligations under the terms of the Agreement, the Shareholders Agreement, and
the Registration Rights Agreement.
3. The authorized capital of the Company consists of (i) 8,119,511 shares
of Preferred Stock, 1,000,000 shares of which are designated Series A Preferred
Stock and of which 800,000 are issued and outstanding, and 2,560,000 shares of
which are designated Series B Preferred and of which 2,560,000 are issued and
outstanding, and 4,059,511 shares of which are designated Series C Preferred
Stock and of which none are issued and outstanding, and (ii) 25,000,000 shares
of Common Stock, of which 4,642,344 shares are issued and outstanding. All
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued and are fully paid and nonassessable. The Shares,
when issued pursuant to the terms of the Agreement (including Common Stock
issued upon conversion of the Shares), will be duly authorized, validly issued,
fully paid and nonassessable. Except as set forth in the Agreement, the
Shareholders Agreement, and the Registration Rights Agreement and all the
exhibits thereto, to out knowledge, there are no options, warrants or other
rights (including conversion or preemptive rights) or agreements outstanding to
purchase any of the Company's authorized and unissued capital stock.
4. All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of the Agreement, the Shareholders Agreement and the Registration
Rights Agreement, the authorization, sale, issuance and delivery of the Shares
and the performance of the Company's obligations under the Agreement, the
Shareholders Agreement, and the Registration Rights Agreement has been taken.
The Agreement, the Shareholders Agreement, and the Registration Rights Agreement
have been duly and validly executed and delivered by the Company and constitute
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms. The Shares will have the rights, preferences and
privileges described in the Restated Articles. To our knowledge, the Shares and
the Common Stock issuable on conversion of the Shares will be free of any liens,
encumbrances or preemptive rights contained in the Company's Restated Articles
or Bylaws.
5. The execution, delivery and performance of and compliance with the
terms of the Agreement, and the issuance of the Shares do not violate any
provision of the Restated Articles or Bylaws, or, to our knowledge, any
provisions of any applicable federal or state law, rule or regulation. To our
knowledge, the execution, delivery and performance of and compliance with the
Agreement, the Shareholders Agreement, and the Registration Rights Agreement and
the issuance of the Shares do not violate or constitute a default under, any
material contract, agreement, instrument, judgment or decree binding upon the
Company.
6. To our knowledge, there are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to our knowledge, has the Company received any written
threat thereof), which, either in any case or in the
3
aggregate, are likely to result in any material adverse change in the business
or financial condition of the Company, or in any material impairment of the
right or ability of the Company to carry on its business as now conducted, or
which questions the validity of the Agreement, the Shareholders Agreement or the
Registration Rights Agreement or any action taken or to be taken by the Company
in connection therewith.
7. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
in connection with the valid execution and delivery of the Agreement, the
Shareholders Agreement, and the Registration Rights Agreement or other offer,
sale or issuance of the Shares or the consummation of any other transaction
contemplated thereby, except (a) filing of the Restated Articles in the Office
of the Secretary of State of the State of California, and (b) qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) under the California Corporate Securities Law and
other applicable blue sky laws (but excluding jurisdictions outside of the
United States) of the offer and sale of the Shares (and the Common Stock
issuable upon conversion thereof) and the modification of rights of shareholders
contemplated by the Agreement. The filing referred to in clause (a) above has
been accomplished and is effective, and to our knowledge there are no
proceedings or written threat thereof which question the validity of such
filing. Our opinion herein is otherwise subject to the timely and proper
completion of all filings and other actions contemplated by clause (b) above
where such filings and actions are to be undertaken on or after the date hereof.
8. Subject to the accuracy of each Investor's representations in Section
3 of the Agreement we are of the opinion that the offer, sale and issuance of
the Shares in conformity with the terms of the Agreement constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended.
This opinion is furnished to the Investors solely for their benefit in
connection with the purchase of the Shares, and may not be relied upon by any
other person or for any other purpose without our prior written consent.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
A Professional Corporation
4
MANAGEMENT RIGHTS AGREEMENT
This MANAGEMENT RIGHTS AGREEMENT ("Agreement") is entered into as of May
11, 1998 by and between Inventa Corporation, a California corporation (the
"Company") and TCV II (Q), L.P., a Delaware limited partnership ("Fund").
RECITALS
A. Fund's organizational documents require that Fund have and maintain
the status of a "venture capital operating company" as defined in the Department
of Labor Regulations, Section 25101.3-101(d) (the "Regulations").
B. The Regulations require that a venture capital operating company
must have direct contractual rights to participate substantially in or
substantially influence the conduct of the management of its portfolio
companies.
C. In order to induce Fund to invest in the Company, the Company has
agreed to provide such rights to Fund.
NOW THEREFORE, the parties hereto agree that upon Fund's purchase of shares
of Series C Preferred Stock of the Company, Fund will be entitled to the
following contractual management rights, in addition to rights to non-public
financial information, inspection rights, and other rights specifically provided
to all investors in connection with the current financing:
(1) Fund shall be entitled to consult with and advise management of the
Company on significant business issues, including management's proposed annual
and quarterly operating plans, and management will meet with Fund within thirty
days after the end of each fiscal quarter at the Company's facilities at
mutually agreeable times for such consultation and advice and to review progress
in achieving said plans;
(2) Fund may examine the books and records of the Company and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided except to the extent provided to all of the
Company's investors under the terms of the current financing;
(3) If Fund is not represented on the Company's Board of Directors by
an affiliate of the Fund, the Company shall invite a representative of Fund to
attend all meetings of its Board of Directors in a nonvoting observer capacity
(provided that such representative may be excluded from such portion of the
meetings of the Board of Directors as (i) is an executive session of the Board
of Directors limited solely to Board members, (ii) necessary to protect the
attorney-client privilege or (iii) would result in a conflict of interest with
Fund) and, in this respect, shall give such representative timely copies of all
notices, minutes, consents, and other material that it provides to its
directors. Such representative may participate in discussions of matters brought
to the Board.
Fund agrees, and will cause any representative of Fund to agree, to hold in
confidence and trust and not use or disclose any confidential information
provided to or learned by it in connection with its rights under this Agreement.
The rights described herein shall terminate and be of no further force or
effect upon the consummation of the sale of the Company's securities pursuant to
a registration statement filed by the Company under the Securities Act of 1933,
as amended, in connection with the firm commitment underwritten offering of its
securities to the public. The confidentiality provisions hereof will survive any
such termination.
IN WITNESS WHEREOF the parties hereto have hereby executed this Agreement
as of the date first above written.
Inventa Corporation
a California Corporation
By: ________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management
Its: General Partner
By: ________________________________
Name : ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
MANAGEMENT RIGHTS AGREEMENT
This MANAGEMENT RIGHTS AGREEMENT ("Agreement") is entered into as of
May 11, 1998 by and between Inventa Corporation, a California corporation (the
"Company") and TCV II (Q), L.P., a Delaware limited partnership ("Fund").
RECITALS
A. Fund's organizational documents require that Fund have and maintain
the status of a "venture capital operating company" as defined in the Department
of Labor Regulations, Section 25101.3-101(d) (the "Regulations").
B. The Regulations require that a venture capital operating company
must have direct contractual rights to participate substantially in or
substantially influence the conduct of the management of its portfolio
companies.
C. In order to induce Fund to invest in the Company, the Company has
agreed to provide such rights to Fund.
NOW THEREFORE, the parties hereto agree that upon Fund's purchase of
shares of Series C Preferred Stock of the Company, Fund will be entitled to the
following contractual management rights, in addition to rights to non-public
financial information, inspection rights, and other rights specifically provided
to all investors in connection with the current financing:
(1) Fund shall be entitled to consult with and advise management of
the Company on significant business issues, including management's proposed
annual and quarterly operating plans, and management will meet with Fund within
thirty days after the end of each fiscal quarter at the Company's facilities at
mutually agreeable times for such consultation and advice and to review progress
in achieving said plans;
(2) Fund may examine the books and records of the Company and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided except to the extent provided to all of the
Company's investors under the terms of the current financing;
(3) If Fund is not represented on the Company's Board of Directors by
an affiliate of the Fund, the Company shall invite a representative of Fund to
attend all meetings of its Board of Directors in a nonvoting observer capacity
(provided that such representative may be excluded from such portion of the
meetings of the Board of Directors as (i) is an executive session of the Board
of Directors limited solely to Board members, (ii) necessary to protect the
attorney-client privilege or (iii) would result in a conflict of interest with
Fund) and, in this respect, shall give such representative timely copies of all
notices, minutes, consents, and other material that it provides to its
directors. Such representative may participate in discussions of matters brought
to the Board.
Fund agrees, and will cause any representative of Fund to agree, to
hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with its rights under
this Agreement.
The rights described herein shall terminate and be of no further force
or effect upon the consummation of the sale of the Company's securities pursuant
to a registration statement filed by the Company under the Securities Act of
1933, as amended, in connection with the firm commitment underwritten offering
of its securities to the public. The confidentiality provisions hereof will
survive any such termination.
IN WITNESS WHEREOF the parties hereto have hereby executed this
Agreement as of the date first above written.
Inventa Corporation
a California Corporation
By: ________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management
II, L.L.C.,
Its: General Partner
By: ________________________________
Name : ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
MANAGEMENT RIGHTS AGREEMENT
This MANAGEMENT RIGHTS AGREEMENT ("Agreement") is entered into as of
May 11, 1998 by and between Inventa Corporation, a California corporation (the
"Company") and Technology Crossover Ventures II, L.P., a Delaware limited
partnership ("Fund").
RECITALS
A. Fund's organizational documents require that Fund have and maintain
the status of a "venture capital operating company" as defined in the Department
of Labor Regulations, Section 25101.3-101(d) (the "Regulations").
B. The Regulations require that a venture capital operating company
must have direct contractual rights to participate substantially in or
substantially influence the conduct of the management of its portfolio
companies.
C. In order to induce Fund to invest in the Company, the Company has
agreed to provide such rights to Fund.
NOW THEREFORE, the parties hereto agree that upon Fund's purchase of
shares of Series C Preferred Stock of the Company, Fund will be entitled to the
following contractual management rights, in addition to rights to non-public
financial information, inspection rights, and other rights specifically provided
to all investors in connection with the current financing:
(1) Fund shall be entitled to consult with and advise management of the
Company on significant business issues, including management's proposed annual
and quarterly operating plans, and management will meet with Fund within thirty
days after the end of each fiscal quarter at the Company's facilities at
mutually agreeable times for such consultation and advice and to review progress
in achieving said plans;
(2) Fund may examine the books and records of the Company and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided except to the extent provided to all of the
Company's investors under the terms of the current financing;
(3) If Fund is not represented on the Company's Board of Directors by
an affiliate of the Fund, the Company shall invite a representative of Fund to
attend all meetings of its Board of Directors in a nonvoting observer capacity
(provided that such representative may be excluded from such portion of the
meetings of the Board of Directors as (i) is an executive session of the Board
of Directors limited solely to Board members, (ii) necessary to protect the
attorney-client privilege or (iii) would result in a conflict of interest with
Fund) and, in this respect, shall give such representative timely copies of all
notices, minutes, consents, and other material that it provides to its
directors. Such representative may participate in discussions of matters brought
to the Board.
Fund agrees, and will cause any representative of Fund to agree, to
hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with its rights under
this Agreement.
The rights described herein shall terminate and be of no further force
or effect upon the consummation of the sale of the Company's securities pursuant
to a registration statement filed by the Company under the Securities Act of
1933, as amended, in connection with the firm commitment underwritten offering
of its securities to the public. The confidentiality provisions hereof will
survive any such termination.
IN WITNESS WHEREOF the parties hereto have hereby executed this
Agreement as of the date first above written.
Inventa Corporation
a California Corporation
By:_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By: __________________________________
Name : ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer