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EXHIBIT 10.1
GEOTEL COMMUNICATIONS CORPORATION
1,712,329 Shares of
Series C Convertible Participating Preferred Stock
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STOCK PURCHASE AGREEMENT
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August 9, 1995
Geotel Communications Corporation
Stock Purchase Agreement
August , 1995
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INDEX
Page
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SECTION 1 TERMS OF PURCHASE............................. 1
1.1 Description of Securities..................... 1
1.2 Reserved Shares............................... 2
1.3 Sale and Purchase............................. 2
1.4 Closing....................................... 2
1.5 Prior Purchase Agreement...................... 2
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY....................................... 3
2.1 Organization and Corporate Power.............. 3
2.2 Authorization................................. 3
2.3 Capitalization................................ 4
2.4 Subsidiaries; Investments..................... 4
2.5 Financial Statements.......................... 4
2.6 Absence of Undisclosed Liabilities............ 5
2.7 Absence of Certain Developments............... 5
2.8 Title to Properties........................... 5
2.9 Tax Matters................................... 5
2.10 Contracts and Commitments..................... 6
2.11 Proprietary Rights; Employee Restrictions..... 6
2.12 Effect of Transactions........................ 8
2.13 Litigation.................................... 8
2.14 Offerees...................................... 8
2.15 Business; Compliance with Laws................ 8
2.16 Information Supplied to Investors............. 9
2.17 Investment Banking; Brokerage................. 9
2.18 Distribution on Capital Stock................. 9
2.19 Environmental Matters......................... 9
2.20 Employees..................................... 10
2.21 Insurance..................................... 11
2.22 Retirement Obligations, etc................... 11
2.23 Transactions with Affiliates.................. 11
SECTION 3 CONDITIONS OF PURCHASE........................ 11
(i)
3
3.1 Satisfaction of Conditions......................... 11
3.2 Opinion of Company Counsel.................... 11
3.3 Authorization................................. 11
3.4 Effectiveness of Preferred Stock Terms........ 12
3.5 Stock Restriction Agreements.................. 12
3.6 Non-Competition, Nondisclosure and
Developments Agreements..................... 12
3.7 Shareholders Agreement; Election
of Directors................................ 12
3.8 Founders Registration Rights Agreement........ 12
3.9 All Proceedings Satisfactory.................. 12
3.10 Delivery of Documents......................... 12
SECTION 4 COVENANTS OF THE COMPANY...................... 13
4.1 Financial Statements; Minutes................. 13
4.2 Budget and Operating Forecast................. 14
4.3 Conduct of Business........................... 14
4.4 Payment of Taxes, Compliance with Laws, etc... 15
4.5 Adverse Changes............................... 15
4.6 Insurance..................................... 15
4.7 Life Insurance................................ 15
4.8 Maintenance of Properties..................... 15
4.9 Affiliated Transactions....................... 16
4.10 Management Compensation....................... 16
4.11 Use of Proceeds............................... 16
4.12 Inspection.................................... 16
4.13 Board of Directors Meetings................... 16
4.14 Right to Participate in Sales of
Additional Securities....................... 17
4.15 Stock Restriction Agreement, Nondisclosure
and Developments Agreements and
Non-Competition Agreements.................. 18
4.16 Distributions on, and Redemptions of,
Capital Stock............................... 18
4.17 Merger, Consolidation, Sale of Assets,
Acquisitions and Other Actions.............. 18
4.18 No Amendments to Certificate of
Incorporation............................... 19
4.19 Capital Expenditures.......................... 19
4.20 Indebtedness.................................. 19
4.21 Restrictions on Other Agreements.............. 20
(ii)
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4.22 Compliance with Stock Restriction Agreement... 20
SECTION 5 REPRESENTATIONS OF INVESTORS.................... 20
SECTION 6 REGISTRATION RIGHTS............................. 21
6.1 Optional Registrations........................ 21
6.2 Required Registrations........................ 22
6.3 Form S-3...................................... 23
6.4 Registrable Securities........................ 24
6.5 Market Stand Off Agreement.................... 24
6.6 Further Obligations of the Company............ 25
6.7 Indemnification; Contribution................. 26
6.8 Rules 144 and 144A Reporting.................. 27
6.9 Transfer of Registration Rights............... 28
SECTION 7 GENERAL....................................... 28
7.1 Amendments, Waivers and Consents.............. 28
7.2 Survival of Covenants; Assignability of
Rights...................................... 29
7.3 Governing Law................................. 29
7.4 Section Headings.............................. 29
7.5 Counterparts.................................. 29
7.6 Notices and Demands........................... 29
7.7 Severability.................................. 30
7.8 Expenses...................................... 30
7.9 Integration................................... 30
7.10 Confidentiality............................... 30
7.11 Shares Owned by Affiliates.................... 30
EXHIBITS
Exhibit A - List of Investors
Exhibit B - Terms of Capital Stock
Exhibit C - Form of Company Counsel Opinion
Exhibit D - Form of Amendment No. 2 to Stock Restriction Agreement
Exhibit E-1 - Form of Key Employee Non-Competition,
Nondisclosure and Developments Agreement
Exhibit E-2 - Form of Nondisclosure and Developments Agreement
Exhibit F - Form of Amended and Restated Stockholders Agreement
Exhibit G - Form of Amended and Restated Founders Registration Rights
Agreement
(iii)
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SCHEDULES
Schedule 2.3 - Capitalization
Schedule 2.5 - Financial Statements
Schedule 2.6 - Liabilities
Schedule 2.7 - Developments
Schedule 2.8 - Title Matters
Schedule 2.9 - Tax Matters
Schedule 2.10 - Contracts and Commitments
Schedule 2.11 - Proprietary Rights
Schedule 2.13 - Litigation
Schedule 2.15 - Compliance with Laws
Schedule 2.19 - Environmental Matters
Schedule 2.20 - Employee Matters
Schedule 2.21 - Insurance
Schedule 2.22 - Retirement Obligations
Schedule 2.23 - Transactions with Affiliates
(iv)
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STOCK PURCHASE AGREEMENT
AGREEMENT made as of this 9th day of August, 1995 by and among (i)
Geotel Communications Corporation, a corporation incorporated under the laws of
the State of Delaware (the "Company"); (ii) Fidelity Ventures Limited
("Fidelity"), New Enterprise Associates VI, Limited Partnership, a Delaware
limited partnership ("NEA"), MATRIX Partners III, L.P., a Delaware limited
partnership ("Matrix"), Sigma Partners II, L.P. ("Sigma"); Sigma Associates II,
L.P. ("Sigma Associates"); Atlas Venture Fund II, L.P., a Delaware limited
partnership ("Atlas"); ▇▇▇▇▇▇ ▇▇▇▇ of Framingham, Massachusetts ("▇▇▇▇");
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. of West Newton, Massachusetts ("▇▇▇▇▇▇▇▇"); and
Alexander d'Arbeloff of Brookline, Massachusetts ("d'Arbeloff"); Fidelity, NEA,
Matrix, Sigma, Sigma Associates, Atlas, ▇▇▇▇, ▇▇▇▇▇▇▇▇ and d'Arbeloff being
hereinafter sometimes referred to collectively as the "Investors" and each
individually as an "Investor"); and (iii) those several investors (being
hereinafter referred to collectively as the "Prior Investors" and each
individually as a "Prior Investor") named in Exhibit A to the Company's Series A
Convertible Participating Preferred Stock Purchase Agreement dated as of
September 30, 1993 (the "Series A Purchase Agreement") and Exhibit A to the
Company's Series B Convertible Participating Preferred Stock Stock Purchase
Agreement dated as of July 29, 1994 (the "Series B Purchase Agreement" and,
together with the Series A Purchase Agreement, the "Prior Purchase Agreements").
WHEREAS, the Investors wish to purchase from the Company, and the
Company wishes to sell to the Investors, [1,712,329] shares of the Company's
Series C Convertible Participating Preferred Stock; and
WHEREAS, the Prior Investors and the Company desire to cancel and
terminate the provisions of Sections 4, 6 and 7 of the Series B Purchase
Agreement in their entirety and to replace said provisions of the Series B
Purchase Agreement with the corresponding provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereby agree as follows:
SECTION 1. TERMS OF PURCHASE
1.1 Description of Securities. The Company has authorized the issuance
and sale to the Investors of 1,712,329 shares (the "Preferred Shares") of its
authorized but unissued Series C Convertible Participating Preferred Stock, par
value $.01 per share (the "Series C Preferred Stock"), for a purchase price of
$2.336 per Preferred Share.
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1.2 Reserved Shares. The Company has authorized and has reserved and
covenants to continue to reserve, a sufficient number of shares of its Common
Stock, par value $.01 per share (the "Common Stock"), to satisfy the rights of
conversion of the holders of the Series C Preferred Stock. Any shares of Common
Stock or any successor class of capital stock of the Company hereafter issued or
issuable upon conversion of the Preferred Shares are herein referred to as
"Conversion Shares."
1.3 Sale and Purchase. Subject to the terms and conditions herein set
forth, the Company shall issue and sell to each of the Investors, and each
Investor shall purchase from the Company, the number of Preferred Shares set
forth opposite the name of such Investor in Column 2 of Exhibit A hereto for the
aggregate purchase price set forth in the corresponding row of Column 3 of said
Exhibit A.
1.4 Closing. A closing (the "Closing") of the sale and purchase of the
Preferred Shares shall take place at the offices of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
A Professional Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, at 10:00
A.M., on August , 1995, or such other date, time and place as shall be mutually
agreed upon by the Company and a majority in interest of the Investors (the
"Closing Date"). At the Closing, the Company will deliver the Preferred Shares
being acquired by each Investor in the form of a certificate issued in such
Investor's name or in the name of its nominee (of which the Investor shall
notify the Company not less than two business days prior to the Closing),
against payment of the full purchase price therefor by or on behalf of each
Investor to the Company by check or by wire transfer of immediately available
funds.
1.5 Prior Purchase Agreements.
(a) By their respective execution of this Agreement, the
Company and the Prior Investors (including those Prior Investors who are signing
as Investors hereunder), constituting the requisite parties in interest, agree
as follows:
(i) the provisions of Sections 4, 6 and 7 of the Series B
Purchase Agreement are hereby terminated and of no further
force and effect and shall be superseded and replaced in
their entirety by the corresponding provisions of this
Agreement; and
(ii) each Prior Investor hereby waives any and all of its rights
of first refusal under Section 4.14 of the Series B
Purchase Agreement with respect to the issuance by the
Company of the Preferred Shares and the Conversion Shares
as contemplated by this Agreement, with such waiver to
include the waiver of any rights of such Prior Investor
arising from the Company's noncompliance with the notice
provisions of said Section 4.14.
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(b) By their respective execution of this Agreement, the parties
hereto agree that solely for purposes of Sections 4, 6, 7.1, 7.2, 7.6 and 7.10
of this Agreement and to the extent necessary to give full force and effect to
the intent of this Section 1.5, (i) the term "Investor" and "Investors" shall
include each Prior Investor individually and the Prior Investors in the
aggregate as if each such Prior Investor has purchased shares of Series A
Convertible Participating Preferred Stock, par value $.01 per share (the "Series
A Preferred Stock") or Series B Convertible Participating Preferred Stock, par
value $.01 per share (the "Series B Preferred Stock"), as the case may be, as of
the date hereof pursuant to this Agreement, (ii) the shares of Series A
Preferred Stock issued by the Company under the Series A Purchase Agreement and
the shares of Series B Preferred Stock issued by the Company under the Series B
Purchase Agreement shall be deemed to be "Preferred Shares" hereunder, (iii) the
shares of Common Stock issuable upon conversion of the Series A Preferred Stock
issued under the Series A Purchase Agreement and the Series B Preferred Stock
issued under the Series B Purchase Agreement shall be deemed to be "Conversion
Shares" hereunder, and (iv) the term "Preferred Stock" shall mean the shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
collectively.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Investors to enter into this Agreement, the
Company represents and warrants to the Investors, that as of the date hereof:
2.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is qualified to do business as a foreign corporation in each
jurisdiction in which such qualification is required. The Company has all
required corporate power and authority to own its property, to carry on its
business as presently conducted or contemplated, to enter into and perform this
Agreement and the agreements contemplated hereby, and generally to carry out the
transactions contemplated hereby and thereby. The copies of the Certificate of
Incorporation and By-laws of the Company, as amended to date, which have been
furnished to counsel for the Investors by the Company, are correct and complete
at the date hereof. The Company is not in violation, in any material respect, of
any term of its Certificate of Incorporation or By-laws, or in violation, in any
material respect, of any term of any agreement, instrument, judgment, decree,
order, statute, rule or government regulation applicable to the Company.
2.2 Authorization. This Agreement and all documents and instruments
executed pursuant hereto are valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms. The execution,
delivery and performance of this Agreement and all documents and instruments
contemplated hereby and the issuance of the Preferred Shares and, upon
conversion thereof, the Conversion Shares have been duly authorized by all
necessary corporate or other action of the Company. Based in part on the
representations and warranties of the Investors set forth in Article 5 hereof,
no consent, approval or authorization of, or designation, declaration or filing
with any governmental authority is required of the Company in connection with
the execution, delivery and performance of this Agreement, or the
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issuance and delivery of the Preferred Shares in accordance with the terms of
this Agreement, and the Conversion Shares upon conversion of the Preferred
Shares in accordance with the terms of the Certificate of Incorporation of the
Company setting forth the rights and preferences of the Preferred Stock, or the
performance or consummation of any other transaction contemplated hereby.
2.3 Capitalization. The authorized and issued capital stock of the
Company is as set forth in Schedule 2.3 attached hereto. Except as disclosed in
Schedule 2.3, the Company has not issued any other shares of its capital stock
and there are no outstanding warrants, options or other rights to purchase or
acquire any of such shares, nor any outstanding securities convertible into such
shares or outstanding warrants, options or other rights to acquire any such
convertible securities. As of the Closing, all of the outstanding shares of
capital stock of the Company will have been duly and validly authorized and
issued and will be fully paid and nonassessable and will have been offered,
issued, sold and delivered in compliance with applicable federal and state
securities laws. The Preferred Shares have been duly and validly authorized and,
when delivered and paid for pursuant to this Agreement, will be validly issued,
fully paid and nonassessable. The relative rights, preferences, restrictions and
other provisions relating to the Preferred Shares are as set forth in Exhibit B
attached hereto. The Company has authorized and reserved for issuance upon
conversion of the Preferred Shares not less than 1,712,329 shares of its Common
Stock and the Conversion Shares issuable upon such conversion will be, when
issued in accordance with the Certificate of Incorporation of the Company, duly
and validly authorized and issued, fully paid and nonassessable. Except as set
forth on Schedule 2.3, there are no preemptive rights or rights of first refusal
with respect to the issuance or sale of the Company's capital stock, other than
rights to which holders of the Preferred Shares are entitled as set forth in
paragraph 4.14 hereof. Except as disclosed in Schedule 2.3, there are no
restrictions on the transfer of the Company's capital stock other than those
arising from federal and state securities laws or under this Agreement, the
Stock Restriction Agreement referred to in paragraph 3.5 hereof or Article 10A
of the Company's By-Laws. The outstanding shares of the Common Stock are held of
record and beneficially by the persons identified in Schedule 2.3 in the amounts
indicated therein.
2.4 Subsidiaries; Investments. The Company has no subsidiaries. The
Company does not own or have any direct or indirect interest in or control over
any corporation, partnership, joint venture or other entity of any kind.
2.5 Financial Statements. Included in Schedule 2.5 are the following
financial statements of the Company, all of which fairly present the financial
position of the Company on the dates of such statements and the results of its
operations for the periods covered thereby: (i) the audited balance sheet of the
Company as of December 31, 1994 and the related audited statements of income and
cash flow for the year then ended (the "Audited Financial Statements"), and (ii)
balance sheet of the Company as of June 30, 1995 and the related statements of
income and cash flow for the six month period ended June 30, 1995. The Audited
Financial Statements have been prepared in accordance with generally accepted
accounting principles and present fairly,
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in all material respects, the financial condition and results of operations of
the Company as of December 31, 1994 and for the year ended December 31, 1994.
2.6 Absence of Undisclosed Liabilities. Except as and to the extent
disclosed in Schedule 2.6 and to the extent reflected or reserved against in the
balance sheet of the Company as of June 30, 1995 included in Schedule 2.5
(including the footnotes and schedules thereto) (the "Base Balance Sheet"), the
Company does not have any material accrued or contingent liability or
liabilities arising out of any transaction or state of facts existing prior to
the date hereof and arising other than in the ordinary course of business
(whether such liability is accrued, to become due, contingent, or otherwise),
except for liabilities or obligations incurred pursuant to this Agreement and
the transactions contemplated hereby.
2.7 Absence of Certain Developments. Except as disclosed in Schedule
2.7, since June 30, 1995 there has been (i) no material adverse change in the
condition, financial or otherwise, of the Company or in the assets, liabilities,
properties or business of the Company, (ii) no declaration, setting aside or
payment of any dividend or other distribution with respect to, or any direct or
indirect redemption or acquisition of, any of the capital stock of the Company,
(iii) no waiver of any valuable right of the Company or cancellation of any debt
or claim held by the Company, (iv) no loan by the Company to any officer,
director, employee or stockholder of the Company, or any agreement or commitment
therefor, except for loans made to employees pursuant to the Company's
Restricted Stock Purchase Plan, (v) no increase, direct or indirect, in the
compensation paid or payable to any officer or director of the Company, (vi) no
material loss, destruction or damage to any property of the Company, whether or
not insured, (vii) no labor trouble involving the Company and no material change
in the personnel of the Company or the terms and conditions of their employment,
and (viii) no acquisition or disposition of any assets (or any contract or
arrangement therefor) nor any other transaction by the Company otherwise than
for fair value in the ordinary course of business.
2.8 Title to Properties. The Company has good and marketable title to
all of its properties and assets, free and clear of all liens, restrictions or
encumbrances except as disclosed in Schedule 2.8. All machinery and equipment
included in such properties which is necessary to the business of the Company is
in good condition and repair and all leases of real or personal property to
which the Company is a party are fully effective and afford the Company peaceful
and undisturbed possession of the subject matter of the lease. The Company is
not in violation of any material zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its owned or leased properties, nor has it received any notice of violation
with which it has not complied.
2.9 Tax Matters. Except as set forth in Schedule 2.9, all foreign,
federal, state and local taxes owed by the Company have been paid. Except as set
forth on said Schedule 2.9, the provision for taxes on the Base Balance Sheet in
Schedule 2.5 are sufficient for the payment of all accrued and unpaid foreign,
federal, state, county and local taxes of any nature of the Company, whether or
not assessed or disputed as of the date of said balance sheet. Except as set
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forth on Schedule 2.9, there exist no unpaid assessments or basis for the
assessment of additional taxes on the Company for any fiscal period. All taxes
and other assessments and levies which the Company is required to withhold or
collect have been withheld and collected and have been paid over to the proper
governmental authorities. With regard to the federal income tax returns of the
Company, the Company has never received notice of any audit or of any proposed
deficiencies from the Internal Revenue Service. There are in effect no waivers
of applicable statutes of limitations with respect to any taxes owed by the
Company for any year. Neither the Internal Revenue Service nor any other taxing
authority is now asserting or, to the knowledge of the Company, threatening to
assert against the Company any deficiency or claim for additional taxes or
interest thereon or penalties in connection therewith.
2.10 Contracts and Commitments. Except as set forth in Schedule 2.10,
the Company is not a party to any contract, obligation or commitment which
involves a potential commitment in excess of $20,000.00 or which is otherwise
material and not entered into in the ordinary course of business, and does not
have any employment contracts; stock redemption or purchase agreements;
financing agreements; licenses; distributor, sales representative or OEM
agreements; agreements with officers, directors, employees or stockholders of
the Company or persons or organizations related to or affiliated with any such
persons; leases; agreements relating to the licensing, distribution,
development, purchase or sale of software; material agreements with customers of
the Company; or pension, profit-sharing, retirement or stock option plans,
except in each case as are described in Schedule 2.10 and copies of which have
been delivered to counsel for the Investors. The Company does not know of any
basis for the termination, expiration or modification of any such agreements
within one year from the date hereof, which termination, expiration or
modification may have a material adverse effect on the Company. The Company is
not in default under any contract, obligation or commitment, and to the best
knowledge of the Company, there is no state of facts which upon notice or lapse
of time or both would constitute such a default. The Company is not a party to
any contract or arrangement which under circumstances now foreseeable is likely
to have a material adverse effect on the business, properties or prospects of
the Company. The Company does not have any liability for renegotiation of
government contracts or subcontracts.
2.11 Proprietary Rights; Employee Restrictions. Set forth in Schedule
2.11 is a list and brief description of all patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service ▇▇▇▇
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each case a brief description of the nature of
such right. The Company owns or possesses adequate licenses to use, free and
clear of claims or rights of any other person, all patents, patent applications,
trademarks, trademark applications, service marks, service ▇▇▇▇ applications,
trade names, copyrights, manufacturing processes, programming processes and
software, algorithms, formulae, trade secrets and know how (collectively
"Intellectual Property") necessary to the conduct of its business as presently
conducted and as proposed to be conducted. All Intellectual Property that is
used or incorporated into the
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Company's products or contemplated products and which is unique or proprietary
to the Company was developed by or for the Company by the employees or
consultants of the Company and is owned exclusively by the Company free and
clear of claims or rights of any other person. The Company is not aware of any
infringement by any other person of any rights of the Company under any
Intellectual Property. No claim is pending or threatened against the Company,
nor has the Company received any notice from any third parties, to the effect
that any Intellectual Property owned or licensed by the Company, or which the
Company otherwise has the right to use, or the operation or products or services
of the Company infringe upon or conflict with the asserted rights of any other
person under any Intellectual Property, and, to the best knowledge of the
Company, there is no basis for any such claim (whether or not pending or
threatened). No claim is pending or threatened against the Company, nor has the
Company received any notice from any third parties to the effect that any
Intellectual Property owned or licensd by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company, and,
to the best knowledge of the Company, there is no basis for any such claim
(whether or not pending or threatened).
All technical information developed by or belonging to the Company and
which is material to the business of the Company which has not been patented has
been kept confidential. The Company is not making unlawful use of any
Intellectual Property of any other person, including without limitation any
former employer of any past or present employees of the Company. Except as
disclosed in Schedule 2.11, neither the Company nor, to the knowledge of the
Company, any of the Company's employees or consultants has any agreements or
arrangements with former employers of such employees or consultants relating to
any Intellectual Property of such employers, which interfere or conflict with
the performance of such employee's or consultant's duties for the Company or
results in any former employers of such employees and consultants having any
rights in, or claims on, the Company's Intellectual Property. To the knowledge
of the Company, the activities of the Company's employees and consultants on
behalf of the Company do not violate any agreements or arrangements which any
such employees have with former employers. The Company has taken all commercial
reasonable steps required to establish and preserve its ownership of all of the
Intellectual Property; each current and former employee of the Company, and each
of the Company's consultants and independent contractors involved in development
of any of the Intellectual Property, has executed an agreement regarding
confidentiality, proprietary information and assignment of inventions to the
Company substantially in the form of either Exhibit E-1 or Exhibit E-2 hereto,
and, to the knowledge of the Company, all such employees, consultants and
independent contractors are not in violation of such agreements.
Without limitation of any of the foregoing and except as otherwise
expressly disclosed in Schedule 2.11 hereto: (a) no part of any software
belonging to any third parties was included in the Company's products, whether
pursuant to any license arrangement or otherwise, and no use was made of any
trade secrets or proprietary information of any third party in developing such
products; (b) the Company has not at any time licensed or otherwise authorized
any person to manufacture, have manufactured, assemble, reproduce, sell or
otherwise distribute or modify the
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Company's products or any part or modified version thereof; (c) the Company has
not at any time provided to any person the specific parameters, system
architecture and information which defines.the scope, objectives and processes
of operations for the Company's products or any part thereof; (d) the Company
has affixed appropriate copyright notices and notices prohibiting unlicensed use
to all copies of the Company's products and related documentation which the
Company has distributed to any person; (e) the Company has taken reasonable
security measures to guard against unauthorized disclosure or use any of its
Intellectual Property; and (f) the Company has no reason to believe that any
person (including without limitation any former employee of the Company) has
unauthorized possession of any of its Intellectual Property, or any part
thereof, or that any person has obtained unauthorized access to any of its
Intellectual Property.
2.12 Effect of Transactions. The execution, delivery and performance by
the Company of this Agreement and the agreements and transactions contemplated
hereby will not conflict with or result in any default under any material
contract, obligation or commitment of the Company, or any charter provision,
by-law or corporate restriction of the Company, or result in the creation of any
lien, charge or encumbrance of any nature upon any of the properties or assets
of the Company except pursuant to this Agreement. The Company's execution and
delivery of this Agreement and its performance of the transactions contemplated
thereby will not violate any instrument, agreement, judgment, decree, order,
statute, rule or regulation of any federal, state or local government or agency
applicable to the Company or to which the Company is a party.
2.13 Litigation. Except as disclosed in Schedule 2.13, there is no
litigation or governmental proceeding or investigation pending or, to the best
knowledge of the Company, threatened against the Company affecting any of its
properties or assets, or against any officer or key employee of the Company in
his capacity as such, or which may call into question the validity or hinder the
enforceability or performance of this Agreement or the agreements and
transactions contemplated hereby; nor, to the best knowledge of the Company, has
there occurred any event nor does there exist any condition on the basis of
which any litigation, proceeding or investigation might properly be instituted.
2.14 Offerees. Neither the Company nor anyone acting on its behalf has
in the past sold, offered for sale or solicited offers to buy any securities of
the Company so as to bring the offer, issuance or sale of the Preferred Shares
as contemplated by this Agreement, within the provisions of Section 5 of the
Securities Act of 1933 and the rules and regulations promulgated thereunder, as
amended (the "Securities Act"), unless such offer, issuance or sale was or will
be within the exemptions of Section 4 thereof. The Company has and will comply
with all applicable state "blue-sky" or securities laws in connection with the
issuance and sale of its Common Stock, Preferred Shares and other securities
heretofore issued and to be issued upon the closing of the Agreement.
2.15 Business; Compliance with Laws. Except as disclosed in Schedule
2.15, the Company has all necessary franchises, permits, licenses and other
rights and privileges necessary
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to permit it to own its property and to conduct its business as it is presently
or contemplated to be conducted. The Company is not in violation, in any
material respect, of any law, regulation, authorization or order of any public
authority relevant to the ownership of its properties or the carrying on of its
business as it is presently conducted. The Company is in compliance, in all
material respects, with all federal, state and local laws and regulations
(including all applicable environmental laws and regulations) relating to its
business as presently conducted, except as disclosed in Schedule 2.15.
2.16 Information Supplied to Investors. Neither this Agreement, nor the
Schedules attached hereto or any document referenced therein, nor any
certificate, projection or statement prepared by the Company and furnished in
writing to the Investors by or on behalf of the Company, contains any untrue
statement of a material fact, and none of this Agreement, the Schedules attached
hereto or such other documents, certificates, projections or statements
referenced therein omits to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no material fact directly relating to the
business, operations or condition of the Company (other than facts which relate
to general economic trends or conditions) that materially adversely affects or
in the future may in the reasonable business judgment of the Company (so far as
the officers of the Company may now foresee based upon material facts of which
they are now aware) materially adversely affect the same that has not been set
forth in this Agreement or in the Schedules attached hereto. Notwithstanding the
foregoing, no representation or warranty is made that the Company can achieve
any of the projections or goals described in the information furnished to the
Investors.
2.17 Investment Banking; Brokerage. No broker, finder, agent or similar
intermediary has acted on behalf of the Company in connection with this
Agreement or the transactions contemplated hereby and there are no brokerage
commissions, finders fees or similar fees or commissions payable in connection
therewith.
2.18 Distribution on Capital Stock. Except as set forth on Schedule
2.7 hereto, the Company has not declared, set aside or paid any dividends or
made any distributions with respect to any shares of its Common Stock or any
other class of its stock.
2.19 Environmental Matters. Except as disclosed in Schedule 2.19, (i)
the Company has never generated transported, used, stored, treated, disposed of,
or managed any Hazardous Waste (as hereinafter defined) and the operations of
the Company or, to the knowledge of the Company, any other party located at the
Company's facilities have not resulted in the release of any Hazardous Material
(as hereinafter defined) in violation of any Environmental Law (as hereinafter
defined), (ii) no lien has ever been imposed by any governmental agency on any
property, facility, machinery, or equipment owned, operated, leased, or used by
the Company in connection with the presence of any Hazardous Material. Except as
disclosed in said Schedule 2.19; (i) the Company has no material liability under
nor has it ever violated any Environmental Law in any material fashion; (ii) the
Company, all property owned, operated, leased, or used by the
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15
Company, and all facilities and operations thereon are presently in material
compliance with all applicable Environmental Laws; (iii) the Company has never
entered into or been subject to any judgment, consent decree, compliance order,
or administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) the Company has no reason to believe that any of the
items enumerated in clause (iii) of this sentence will be forthcoming. To the
best knowledge of the Company, except as disclosed in said Schedule 2.19, no
site owned, operated, leased, or used by the Company contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation or, to the knowledge
of the Company, any underground storage tanks. The Company has provided to the
Investors copies of all documents, records, and information available to the
Company concerning any environmental or health and safety matter relevant to the
Company, whether generated by the Company or others, including, without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency. For purposes of this paragraph, the
following definitions shall apply: "Hazardous Material" shall mean and include
any hazardous waste, hazardous material, hazardous substance, petroleum product,
oil, toxic substance, pollutant, contaminant, or other substance which may pose
a threat to the environment or to human health or safety, as defined or
regulated under any Environmental Law. "Hazardous Waste" shall mean and include
any hazardous waste as defined or regulated under any Environmental Law.
"Environmental Law" shall mean any environmental or health and safety-related
law, regulation, rule, ordinance, or by-law at the foreign, federal, state, or
local level, whether existing as of the date hereof, previously enforced, or
subsequently enacted. "Company" shall mean and include the company, any
subsidiaries, affiliates, and all other entities for whose conduct the Company
is or may be held responsible under any Environmental Law.
2.20 Employees. Except as set forth on Schedule 2.13, there are no
controversies or labor troubles pending, or to the knowledge of the Company,
threatened between it and its employees. Except as set forth in Schedule 2.20,
to the Company's knowledge: (a) no officer or key employee has any present
intention of terminating his employment with the Company; and (b) the Company
has complied in all material respects with all applicable state and federal laws
and regulations respecting employment and employment practices, terms and
conditions of employment, wages and hours and other laws related to employment,
and there are no arrears in the payments of wages, withholding or social
security taxes, unemployment insurance premiums or other similar obligations.
Except as set forth in Schedule 2.20, the Company is not a party to any written
agreement or oral agreement which obligates the Company to retain the services
of any employee for more than 120 days, with any of its officers or employees
with respect to such person's employment with the Company.
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16
2.21 Insurance. The Company maintains in full force such types and
amounts of insurance issued by insurers of recognized responsibility insuring
the Company with respect to its respective business and properties, in such
amounts and against such losses and risks as are listed in Schedule 2.21.
2.22 Retirement Obligations, etc. Except as disclosed in Schedule 2.22,
the Company does not have any pension, retirement or similar plan or obligation,
whether of a legally binding nature or in the nature of informal understandings.
The Company is not a party to any collective bargaining agreement and, to the
Company's knowledge, no organizational efforts are presently being made with
respect to any of its employees. Schedule 2.22 lists the employee benefit plans
of the Company.
2.23 Transactions with Affiliates. Except as disclosed in Schedule 2.23
or as provided in the agreements contemplated by this Agreement and the Exhibits
hereto, no stockholder, officer or director of the Company nor any "affiliate"
or "associate" of such persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act) (herein, a "Related Party") is
a party to any transaction with the Company, including, without limitation, any
contract, agreement or other arrangement providing for the rental of real or
personal property from, or otherwise requiring payments to, any Related Party
other than the making of employee loans under the Company's Restricted Stock
Purchase Plan to fund the purchase price of shares issued thereunder.
SECTION 3. CONDITIONS OF PURCHASE
The Investors' obligation to purchase and pay for the Preferred Shares
shall be subject to compliance by the Company with its agreements herein
contained and to the fulfillment to the Investors' satisfaction on or before and
at the Closing Date of the following conditions:
3.1 Satisfaction of Conditions. The representations and warranties of
the Company contained in this Agreement including but not limited to the
representation and warranties made in Section 2 hereof, shall be true and
correct on and as of the Closing Date; each of the conditions specified in this
Section 3 shall have been satisfied or waived in writing; and on the Closing
Date, certificates to such effect executed by the President of the Company shall
be delivered to the Investors.
3.2 Opinion of Company Counsel. The Investors shall have received from
counsel for the Company, a favorable opinion, dated the Closing Date,
substantially in the form attached hereto as Exhibit C.
3.3 Authorization. The Board of Directors and the stockholders of the
Company shall have duly adopted resolutions in form reasonably satisfactory to
the Investors authorizing the Company to consummate the transactions
contemplated hereby in accordance with the terms
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17
hereof, and the Investors shall have received a duly executed certificate of the
Secretary of the Company setting forth a copy of such resolutions and the
Certificate of Incorporation and By-laws of the Company and such other matters
as may be requested by the Investors.
3.4 Effectiveness of Preferred Stock Terms. The Board of Directors of
the Company shall have adopted a resolution establishing the terms of the
Preferred Stock as set forth in Exhibit B hereto, and such action shall have
been made effective by approval thereof by the stockholders and the filing of a
Certificate of Amendment with the Secretary of State of Delaware.
3.5 Stock Restriction Agreements. The Company, the Investors, the
Prior Investors and ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (the
"Founders") shall have executed and delivered an Amendment No. 2 to Stock
Restriction Agreement in the form of Exhibit D hereto.
3.6 Non-Competition, Nondisclosure and Developments Agreements. Each of
the Company's "key employees" (including without limitation each of Messrs.
Andrews, Thibault, Webber, Allen, ▇▇▇▇▇▇ and ▇▇▇▇▇) shall have delivered to the
Investors an executed copy of a Key Employee Non-Competition, Nondisclosure and
Developments Agreements with the Company, substantially in the forms attached as
Exhibit E-1 hereto.
3.7 Stockholders Agreement; Election of Directors. The Company, the
Investors, the Prior Investors and the Founders shall have executed and
delivered an Amended and Restated Stockholders Agreement (the "Stockholders
Agreement") in the form of Exhibit F hereto.
3.8 Founders Registration Rights Agreement. The Company and each of
the Founders shall have executed and delivered an Amended and Restated Founders
Registration Rights Agreement in the form of Exhibit G hereto.
3.9 All Proceedings Satisfactory. All corporate and other proceedings
taken prior to or at the Closing in connection with the transactions
contemplated by this Agreement, and all documents and evidences incident
thereto, shall be reasonably satisfactory in form and substance to each of the
Investors, and each of the Investors shall receive such copies thereof and other
materials (certified, if requested) as they may reasonably request in connection
therewith. The issuance and sale of the Preferred Shares to the Investors shall
be made in conformity with all applicable state and federal securities laws.
3.10 Delivery of Documents. The Company shall have executed and
delivered to the Investors (or shall have caused to be executed and delivered to
the Investors by the appropriate persons) the following:
(a) Certificates for the Preferred Shares;
(b) Certified copies of resolutions of the Board of Directors
(and, if necessary, the stockholders) of the Company authorizing the execution
and delivery of this Agreement, the
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Stock Restriction Agreement, the Stockholders Agreement, the Certificate of
Amendment creating the Preferred Shares and the issuance of the Preferred
Shares;
(c) A copy of the Company's corporate charter, as amended by the
Certificate of Amendment, certified as of a recent date by the appropriate
Secretary of State and the Secretary of the Company;
(d) A copy of the by-laws of the Company certified by the
Secretary of the Company;
(e) A certificate issued by the appropriate Secretary of State of
the state of incorporation of the Company certifying that the Company is in good
standing in such state;
(f) A true and correct copy of each agreement referred to in
Sections 3.5, 3.6, 3.7 and 3.8 hereof;
(g) A true and correct copy of the amendment to Section 10A of
the Company's By-laws; and
(h) Such other supporting documents and certificates as the
Investors may reasonably request.
SECTION 4. COVENANTS OF THE COMPANY
The Company (which term shall be deemed to include, for purposes of
this Section 4, any subsidiary or subsidiaries of the Company formed after the
date of this Agreement) shall comply with the following covenants until the
consummation of the first Qualified Public Offering (as defined in Section 5 of
the Preferred Stock terms attached as Exhibit B hereto) except as shall
otherwise be expressly agreed pursuant to a written consent or consents executed
by holders of a majority in interest (or, in the case of Section 4.17,
two-thirds in interest and, in the case of Section 4.18, two-thirds in interest
of each series) of the Preferred Shares; provided that Sections 4.1, 4.2 and
4.12 may not be amended in a manner adverse to an Investor without the consent
of such Investor; provided, further, that Section 4.14 may only be so amended
provided that in connection with such amendment all Investors are treated
equally. Notwithstanding anything to the contrary contained in this Section 4,
no Investor shall be entitled to the information referred to in Sections 4.1 and
4.2 or to the inspection or visitation rights referred to in Section 4.12 if the
Board of Directors determines that a competitive conflict would exist by
providing such information or inspection or visitation rights to the Investor.
In the event of such a competitive conflict, the information, inspection and
visitation rights of the Investor shall be limited so as to avoid the
competitive conflict.
4.1 Financial Statements; Minutes. The Company will maintain a
comparative system of accounts in accordance with generally accepted accounting
principles, keep full and complete
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19
financial records and furnish to the Investors, so long as such Investor
continues to hold (or have the right to hold) at least 200,000 Conversion
Shares, the following reports: (a) within 90 days after the end of each fiscal
year, a copy of the consolidated balance sheet of the Company as at the end of
such year, together with a consolidated statement of income and retained
earnings of the Company for such year, audited and certified by independent
public accountants of recognized national standing reasonably satisfactory to
the Investors, prepared in accordance with generally accepted accounting
principles and practices consistently applied; (b) within 45 days after the end
of each quarter, a consolidated unaudited balance sheet of the Company as at the
end of such quarter and a consolidated unaudited statement of income and
retained earnings for the Company for such quarter and for the year to date; (c)
within 30 days after the end of each month, a consolidated unaudited balance
sheet of the Company as at the end of such month and an unaudited statement of
income and retained earnings for the Company for such month and for the year to
date, each of the foregoing balance sheets and statements of earnings and
retained earnings to set forth in comparative form the corresponding figures for
the prior fiscal period and, with respect to financial information delivered to
the Investors, to include a brief written discussion and analysis by management
of such annual and quarterly financial statements; (d) within 30 days after the
end of each month, a historical statement of cash flows for the preceding month
and a projected statement of cash flows for the 90 day period following the end
of such month; and (e) such other financial information as a majority in
interest of the Investors may reasonably request, including without limitation
certificates of the principal financial officer of the Company concerning
compliance with the covenants of the Company under this Section 4; provided,
however, that the above-referenced obligation to furnish various financial
statements shall terminate once the Company becomes subject to, and commences
reporting under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and provided, further, however, that prior to December 31, 1996 Aspect
Telecommunications, Inc. ("Aspect") and its transferees shall only be entitled
to receive the information required to be delivered to the Investors under
clauses (a) and (b) of this Section 4.1.
4.2 Budget and Operating Forecast. The Company will prepare and submit
to the Board of Directors of the Company a budget for the Company for each
fiscal year of the Company at least 30 days prior to the beginning of such
fiscal year, together with management's written discussion and analysis of such
budget. The budget shall be accepted as the budget for such fiscal year when it
has been approved by a majority of the full Board of Directors of the Company
and, thereupon, a copy of such budget promptly shall be sent to each Investor
who holds (or has the right to hold) in excess of 200,000 of the Conversion
Shares. The Company shall review the budget periodically and shall advise the
Board of Directors and the Investors of all changes therein and all material
deviations therefrom. The Company shall not be required to deliver any budget to
Aspect or its transferees or advise Aspect or its transferees of any changes
therein or deviations therefrom prior to December 31, 1996.
4.3 Conduct of Business. The Company will continue to engage
principally in the business now conducted by the Company or a business or
businesses similar thereto or reasonably compatible therewith, including such
research and development activities as the Board of Directors
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20
may from time to time approve. The Company will keep in full force and effect
its corporate existence and all intellectual property rights useful in its
business (except such rights as the Board of Directors has reasonably determined
are not material to the Company's continuing operations) and shall use its best
efforts to cause each employee who has access to confidential and proprietary
information to execute a Nondisclosure and Developments Agreements substantially
in the form of Exhibit E-2 attached hereto with such reasonable changes as may
be deemed appropriate by the Board of Directors.
4.4 Payment of Taxes, Compliance with Laws, etc. The Company will pay
and discharge all lawful taxes, assessments and governmental charges or levies
imposed upon it or upon its income or property before the same shall become in
default, as well as all lawful claims for labor, materials and supplies which,
if not paid when due, might become a lien or charge upon its property or any
part thereof; provided, however, that the Company shall not be required to pay
and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof is being contested by the Company in good faith by appropriate
proceedings and an adequate reserve therefor has been established on its books.
The Company will comply with all applicable laws and regulations in the conduct
of its business, including, without limitation, all applicable federal and state
securities laws in connection with the issuance of any shares of its capital
stock.
4.5 Adverse Changes. The Company will promptly advise the Investors of
any event which represents a material adverse change in the condition or
business, financial or otherwise, of the Company, and of each suit or proceeding
commenced or threatened against the Company which, if adversely determined,
would result in such a material adverse change. The Company will also promptly
notify the Investors of any facts which, if such facts had existed at the
Closing, would have constituted a material breach of the representations and
warranties contained herein.
4.6 Insurance. The Company will keep its insurable properties insured,
upon reasonable business terms, by financially sound and reputable insurers
against liability, and the perils of casualty, fire and extended coverage in
amounts of coverage at least equal to those customarily maintained by companies
in the same or similar business as the Company. The Company will also maintain
with such insurers insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies
engaged in the same or similar business.
4.7 Life Insurance. The Company will obtain and maintain, and continue
to pay the premiums on, "key-man" term life insurance from financially sound and
reputable insurers on the life of the Founders as a group in the face amount of
$3,000,000.00, and the Company shall be named as the sole and exclusive
beneficiary. The Company hereby agrees that such policy shall not be assigned,
borrowed against or pledged.
4.8 Maintenance of Properties. The Company will maintain all
properties used or useful in the conduct of its business in good repair, working
order and condition, ordinary wear
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21
and tear excepted, as necessary to permit such business to be properly and
advantageously conducted.
4.9 Affiliated Transactions. All transactions by and between the
Company and any officer, key employee or stockholder of the Company or persons
controlling, controlled by, under common control with or otherwise affiliated
with such officer, key employee or stockholder, shall be conducted on an
arm's-length basis, shall be on terms and conditions no less favorable to the
Company than could be obtained from nonrelated persons and shall be approved in
advance by a majority of the Investor Representatives after full disclosure of
the terms thereof, for which purpose the interested party, if an Investor
Representative, and any affiliate of the interested party who is an Investor
Representative, shall not be entitled to vote, except that such approval shall
not be required in connection with the making of employee loans under the
Company's Restricted Stock Purchase Plan to fund the purchase price of shares
issued thereunder.
4.10 Management Compensation. Compensation paid by the Company to its
management will be comparable to compensation paid to management in companies in
the same or similar businesses of similar size and maturity and with comparable
financial performance. In furtherance of the foregoing, the Company hereby
agrees that, except as set forth in Schedule 2.10 hereto, no compensation or
other remuneration shall be paid to, nor shall any capital stock of the Company
be issued to, or options to purchase any of its capital stock granted to, any
director, officer or key employee of, or any consultant to, the Company or any
of its subsidiaries, without the approval of a majority of members of the
Compensation Committee of the Company's Board of Directors.
4.11 Use of Proceeds. The Company will use the proceeds from the sale
of the Preferred Shares to fund the Company's working capital. Pending use for
the above described purpose, said proceeds shall be temporarily invested in
short-term, interest bearing securities, including U.S. Government securities,
certificates of deposit and similar instruments, and money market mutual funds.
4.12 Inspection. The Company will, upon reasonable prior notice to the
Company, permit authorized representatives of the Investors, so long as the
Investors continue to hold (or have the right to hold) at least 200,000
Conversion Shares, to visit and inspect any of the properties of the Company,
including its books of account (and to make copies thereof and take extracts
therefrom), and to discuss its affairs, finances and accounts with its officers,
administrative employees and independent accountants, all at such reasonable
times and as often as may be reasonably requested, provided that Aspect shall
not be entitled to any such visitation or inspection rights prior to December
31, 1996. In addition, upon reasonable prior notice, the management of the
Company will be available at least quarterly to meet with an authorized
representative of NEA to review the Company's business environment and market
opportunities.
4.13 Board of Directors Meetings. The Company will ensure that
meetings of its Board of Directors are held at least four times each year and at
intervals of not more than three months
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22
and will reimburse Directors for their reasonable travel expenses incurred in
connection with attending meetings of the Board of Directors or performing such
other business on behalf of the Company as may be approved by the Company in
advance. The Company will allow an authorized representative of each of Atlas,
NEA and Fidelity to have certain observer rights in connection with such Board
of Directors meetings, as set forth in the Stockholders Agreement or the letter
agreement dated as of July 29, 1994 between the Company and NEA (the "Management
Rights Letter"). The Certificate of Incorporation or By-laws of the Company will
at all times during which any nominee of the Investors serves as director of the
Company provide for indemnification of the directors and limitations on the
liability of the directors to the fullest extent permitted under applicable
state law. Upon the reasonable request of the Investor Representatives (as
defined in Section 4.14(b)), the Company will use its best efforts to obtain and
maintain on reasonable business terms directors and officers liability insurance
coverage of at least $1,000,000.00 per occurrence, so long as such insurance may
be obtained and maintained on commercially reasonable terms.
4.14 Right to Participate in Sales of Additional Securities.
(a) The Company covenants and agrees that it will not sell or
issue any shares of capital stock of the Company, or bonds, certificates of
indebtedness, debentures or other securities convertible into or exchangeable
for capital stock of the Company, or options, warrants or rights carrying any
rights to purchase capital stock or convertible or exchangeable securities of
the Company, other than in connection with a Qualified Public Offering (as
defined in Section 5 of the Preferred Stock terms attached as Exhibit B hereto)
or as otherwise provided in Section 4.14(b) hereof, unless (i) the Company shall
have received a bona fide arm's-length offer to purchase such stock, bonds,
certificates of indebtedness, debentures, securities, options, warrants or
rights from a third party, and (ii) the Company first submits a written offer to
the Investors identifying the third party to whom such stock, bonds,
certificates of indebtedness, debentures, securities, options, warrants or
rights are proposed to be sold and the terms of the proposed sale, and offering
to the Investors the opportunity to purchase their proportionate share of such
securities on terms and conditions, including price, not less favorable than
those on which the Company proposes to sell such securities to the third party.
Each Investor shall have the right to purchase its proportionate share (relative
to the other Investors) of the total number of securities proposed to be
purchased by such third party based on the ratio of the Preferred Shares issued
to such Investor to the Preferred Shares issued to all of the Investors. The
Investors shall have a right of over-allotment pursuant to this Section 4.14
such that to the extent an Investor does not exercise its right of first refusal
hereunder, such additional securities which such Investor did not elect to
purchase may be purchased by the other Investors in proportion to the total
number of Preferred Shares which each such other Investor holds compared to the
total number of Preferred Shares held by all Investors who elect to participate
in the right of over-allotment hereunder. Any Investor may transfer its right to
be offered any such opportunity to any transferee of in excess of 200,000 shares
of its Preferred Shares (other than a competitor of the Company). The Company's
offer to the Investors shall remain open and irrevocable for a period of at
least 45 days. Any securities so offered to the Investors which are not
purchased pursuant to such offer
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23
(after giving effect to the over-allotment option) may be sold by the Company to
the third party originally named in the offer to the Investors on terms and
conditions, including price, not more favorable to the third party than those
set forth in such offer at any time within 75 days following the date of such
offer, but may not be sold to any other person or on terms and conditions,
including price, that are more favorable to the purchaser than those set forth
in such offer or after such 75-day period without renewed compliance with this
paragraph 4.14.
(b) Notwithstanding the foregoing, the Company may (i) issue up to
an aggregate of 2,768,341 shares of its Common Stock (including, and not in
addition to, 2,318,689 shares which are issued and outstanding on the date of
this Agreement), or grant options exercisable therefor, to officers, directors,
employees, consultants or agents of the Company pursuant to the terms of the
Company's Stock Option Plan or Restricted Stock Purchase Plan, provided that
such shares or options shall vest over a five year period (unless a shorter
vesting schedule is approved by the designees of Matrix and Sigma to the
Company's Board of Directors (herein referred to, together with any successors
or replacements, collectively, as the "Investor Representatives"), (ii) declare,
make or issue a dividend or other distribution payable in shares of the Common
Stock in respect of outstanding shares of the Common Stock or the Preferred
Stock in accordance with the Company's Certificate of Incorporation, as amended,
(iii) issue shares of its Common Stock or other securities in connection with
the acquisition of any other corporation or business concern, whether by
acquisition of assets, or capital stock merger, consolidation or other
reorganization as long as the beneficial owners of the Company's outstanding
capital stock immediately prior to such transaction hold no less than fifty-one
percent (51%) of the voting power of the outstanding capital stock of the
Company immediately after such transaction, (iv) with the prior consent of a
majority of the Investor Representatives, issue, or issue options, warrants or
rights to subscribe for, shares of its Common Stock in connection with any debt,
capital lease or other similar financing transaction, or (v) issue shares of
Common Stock pursuant to a Qualified Public Offering (as defined in Exhibit B)
without offering the Investors the opportunity to purchase their proportionate
share of such shares or options under this paragraph 4.14.
4.15 Stock Restriction Agreement, Nondisclosure and Developments
Agreements and Non-Competition Agreements. The Company will diligently enforce
all of its rights under the Stock Restriction Agreement described in paragraph
3.5 hereof and the Nondisclosure and Developments Agreements and Non-Competition
Agreements described in paragraph 3.6 hereof. The Company will not waive or
release any rights under, or consent to the amendment of, any such agreement
without the written consent of the Investor Representatives.
4.16 Distributions on, and Redemptions of, Capital Stock. Except as
otherwise expressly provided in this Agreement or in Exhibit B hereto, the
Company will not declare or pay any dividends or make any distributions of cash,
property or securities of the Company with respect to any shares of its Common
Stock or any other class of its capital stock, or directly or indirectly redeem,
purchase, or otherwise acquire for consideration any shares of its Common Stock
or any other class of its capital stock; provided, however, that this
restriction shall not apply
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24
to the redemption of Preferred Shares or the repurchase of shares of the Common
Stock pursuant to stock repurchase agreements under which the Company has the
option to repurchase such shares upon the occurrence of certain events,
including the termination of employment and involuntary transfers by operation
of law, provided that (unless the purchase is approved by a vote of the
disinterested members of the Board of Directors) the repurchase price paid by
the Company does not exceed the purchase price paid to the Company for such
shares. Any redemption, repurchase or other acquisition by the Company of any
shares of its capital stock shall be made in compliance with all laws, including
but not limited to federal and state securities laws.
4.17 Merger, Consolidation, Sale of Assets, Acquisition and Other
Actions. The Company will not without the prior written consent of holders of
two-thirds in interest of the Preferred Shares: (a) sell, lease or otherwise
dispose of (whether in one transaction or a series of related transaction) all
or substantially all of its assets, (b) merge with or into or consolidate with
another entity, (except into or with a wholly-owned subsidiary of the Company
with the requisite shareholder approval), (c) acquire any other corporation or
business concern, whether by acquisition of assets, capital stock or otherwise,
and whether in consideration of the payment of cash, the issuance of capital
stock or otherwise, (d) voluntarily liquidate or wind up its operations or (e)
issue any shares of its capital stock which are senior to or on a parity with
the Preferred Shares with respect to dividends liquidation or redemptions or
with any special voting rights.
4.18 No Amendments to Certificate of Incorporation. The Company will
not make any amendment to its Certificate of Incorporation or make any amendment
to its By-laws that directly or indirectly adversely affects the terms of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
without the prior written consent of two-thirds in interest of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting
together as a separate class. If any amendment to the Certificate of
Incorporation would adversely affect one or more series of Preferred Stock but
would not so affect one or more series of Preferred Stock as a class, then the
prior written consent of two-thirds in interest of such series shall be required
to effect any such amendment.
4.19 Capital Expenditures. The Company will not, without the prior
approval of a majority of the Investor Representatives, make any expenditures
for fixed or capital assets, or any commitments for such expenditures, exceeding
an amount of $250,000 for any one such expenditure or series of related
expenditures.
4.20 Indebtedness. The Company will not become indebted for or create,
incur, assume or be liable in any manner in respect of, or suffer to exist,
without the prior approval of a majority of the Investor Representatives, any
new or additional long-term indebtedness, bonding or other similar commitment,
standby letter of credit or similar loan which, for any one such borrowing or
series of related borrowings, is in excess of $250,000
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4.21 Restrictions on Other Agreements. The Company will not enter into
any agreement with any party which by its terms (i) restricts the payments due
the holders of Preferred Shares pursuant to Exhibit B hereto or (ii) other than
as set forth in the Amended and Restated Founders Registration Rights Agreement
by and among the Company and the Founders (the "Founders Registration Rights
Agreement"), which grants any right relating to the registration of its Common
Stock superior to or on a parity with the rights granted to the Investors
pursuant to Section 6 hereof. For purposes of this paragraph 4.21, loan
agreements approved by the Board of Directors of the Company which provide that
no redemption may be made and/or no dividends may be paid while there is a
continuing default shall be deemed not to restrict such payments.
4.22 Compliance with Stock Restriction Agreement. The Company will not
effect any transfer of any of the outstanding capital stock of the Company on
the stock record books of the Company unless such transfer does not violate the
terms of the Stock Restriction Agreement referred to in paragraph 3.5 hereof.
SECTION 5. REPRESENTATIONS OF INVESTORS
It is the understanding of the Company, and each Investor hereby
severally represents with respect to such Investor's purchase of Preferred
Shares hereunder, that:
(a) The execution of this Agreement has been duly authorized by
all necessary action on the part of the Investor, has been duly executed and
delivered, and constitutes a valid, binding and enforceable agreement of the
Investor.
(b) The Investor is acquiring the Preferred Shares for its own
account, for investment, and not with a view to any distribution thereof within
the meaning of the Securities Act. The Investor was not formed or organized for
the purpose of acquiring the Preferred Shares.
(c) The Investor understands that because the Preferred Shares
have not been registered under the Securities Act, it cannot dispose of any or
all of the Preferred Shares unless the Preferred Shares are subsequently
registered under the Act or exemptions from such registration are available. The
Investor understands that each certificate representing the Preferred Shares
will bear the following legend or one substantially similar thereto:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act"). These
securities have been acquired for investment and not with a
view to distribution or resale, and may not be sold,
mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such
securities under the Act or the availability of an exemption
from such registration requirements.
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26
(d) The Investor is sufficiently knowledgeable and experienced in
the making of venture capital investments so as to be able to evaluate the risks
and merits of its investment in the Company, and is able to bear the economic
risk of loss of its investment in the Company. The Investor is an accredited
investor as such term is defined in Rule 501 promulgated under the Securities
Act.
(e) The Investor has been advised that the Preferred Shares have
not been and are not being registered under the Securities Act or under the blue
sky laws of any jurisdiction and that the Company in issuing the Preferred
Shares is relying upon, among other things, the representations and warranties
of the Investors contained in this Section 5.
(f) No broker, finder, agent or similar intermediary has acted on
behalf of the Investor in connection with this Agreement or the transactions
contemplated hereby and there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection therewith.
SECTION 6. REGISTRATION RIGHTS
6.1 Optional Registrations. If at any time or times after the date
hereof, the Company shall determine to register any shares of its Common Stock
or securities convertible into or exchangeable or exercisable for shares of the
Common Stock under the Securities Act (whether in connection with a public
offering of securities by the Company (a "primary offering"), a public offering
of securities by stockholders (a "secondary offering"), or both, but not in
connection with a registration effected solely to implement an employee benefit
plan or a transaction to which Rule 145 or any other similar rule of the
Securities and Exchange Commission (the "Commission" ) under the Securities Act
is applicable), the Company will promptly give written notice thereof to the
holders of Registrable Securities (as hereinafter defined in paragraph 6.4
below) then outstanding (the "Holders"). In connection with any such
registration, if within 30 days after their receipt of such notice any Holder of
the Registrable Securities requests the inclusion of some or all of the
Registrable Securities owned by it in such registration, the Company will notify
all of the Holders of its receipt of such request, and will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which such Holders may request in a writing delivered to the Company
within 30 days after the notice given by the Company with respect to its receipt
of such request; provided, however, that in the case of the registration of
shares of the Common Stock by the Company in connection with an underwritten
public offering, if the underwriter determines that a limitation on the number
of shares to be underwritten is required, and (i) 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 to the notice
described herein, and (ii) 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
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included in the registration and underwriting to not less than fifty percent
(50%) of the securities included therein (based on aggregate market values). The
Company shall advise all Holders of Registrable Securities promptly after such
determination by the underwriter, and the number of shares of securities that
are entitled to be included in the registration and underwriting (other than
those to be sold for the account of the Company) shall be allocated in the
following manner: The securities of the Company other than Registrable
Securities shall be excluded from such registration and underwriting to the
extent required by such limitation (except to the extent that the Founders are
entitled to certain registration rights pursuant to the Founders' Registration
Rights Agreement), and if a limitation of the number of shares is still
required, the number of shares that may be included in the registration and
underwriting shall be allocated among all Holders of Registrable Securities and
the Founders (to the extent that the Founders are entitled to include shares
under the Founders Registration Rights Agreement) in proportion, as nearly as
practicable, to their respective holdings of Registrable Securities and shares
of Common Stock. All expenses of the registration and offering (including
transfer taxes on shares being sold by the Holders) and the reasonable fees and
expenses of one independent counsel for the Holders shall be borne by the
Company, except that the Holders shall bear underwriting discounts and selling
commissions attributable to their Registrable Securities being registered.
Without in any way limiting the types of registrations to which this paragraph
6.1 shall apply, in the event that the Company shall effect a shelf registration
under Rule 415 promulgated under the Securities Act, or any other similar rule
or regulation (Rule 415), the Company shall take all necessary action,
including, without limitation, the filing of post-effective amendments, to
permit the Holders to include their shares in such registration in accordance
with the terms of this paragraph 6.1.
6.2 Required Registrations. If on any one (1) occasion on or after the
earlier of (i) September 30, 1996 or (ii) six months after an initial public
offering, one or more of the Holders of a majority of the Registrable Securities
then outstanding shall notify the Company in writing that he or they intend to
offer or cause to be offered for public sale all or any portion of his or their
Registrable Securities having an aggregate proposed offering price of not less
than $5,000,000, the Company will notify all of the Holders of Registrable
Securities who would be entitled to notice of a proposed registration under
paragraph 6.1 above of its receipt of such notification from such Holder or
Holders. Upon the written request of any such Holder delivered to the Company
within 15 days after receipt from the Company of such notification, the Company
will use its best efforts to cause such of the Registrable Securities as may be
requested by any Holders (including the Holder or Holders giving the initial
notice of intent to register hereunder) to be registered under the Securities
Act in accordance with the terms of this paragraph 6.2; provided, however that
unless such registration becomes effective, the Holders of the Registrable
Securities shall be entitled to require an additional registration pursuant to
this paragraph 6.2. All expenses of such registration and offering and the
reasonable fees and expenses of one independent counsel for the Holders shall be
borne by the Company. The Company may postpone the filing of any registration
statement required hereunder for a reasonable time not to exceed 90 days during
any twelve month period, if the Company has been advised by legal counsel, which
counsel shall be acceptable to the Holders of Registrable Securities, that such
filing would require the disclosure of a material transaction or other matter
and the Company determines reasonably and
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in good faith that such disclosure would have a material adverse effect on
the Company. The Company shall not be required to cause a registration statement
requested pursuant to this paragraph 6.2 to become effective prior to 90 days
following the effective date of a registration statement initiated by the
Company, if the request for registration has been received by the Company
subsequent to the giving of written notice by the Company, made in good faith,
to the Holders of Registrable Securities to the effect that the Company is
commencing to prepare a Company-initiated registration statement (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 or any other similar rule of the Commission under
the Securities Act is applicable); provided, however, that the Company shall use
its best efforts to achieve such effectiveness promptly following such 90-day
period if the request pursuant to this paragraph 6.2 has been made prior to the
expiration of such 90-day period. If so requested by any Holder in connection
with a registration under this paragraph, the Company shall take such steps as
are required to register such Holder's Registrable Securities for sale on a
delayed or continuous basis under Rule 415, and also take such steps as are
required to keep any registration effective until all of such Holder's
Registrable Securities registered thereunder are sold. The obligation of the
Company hereunder shall be deemed satisfied only when a registration statement
covering all shares of Registrable Securities specified in notices received as
aforesaid shall have become effective and, if the method of disposition is a
firm commitment underwritten public offering, all such shares have been sold
pursuant thereto.
If the method of disposition is an underwritten public offering, the
holders of a majority of the Registrable Securities to be sold in such offering
may designate the managing underwriter of such offering, subject to approval of
the Company, which approval shall not be unreasonably withheld or delayed.
6.3 Form S-3. If the Company becomes eligible to use Form S-3 under the
Securities Act or a comparable successor form, the Company shall use its best
efforts to continue to qualify at all times for registration of its capital
stock on Form S-3 or such successor form. One or more of the Holders of
Registrable Securities shall have the right from time to time to request and
have effected registrations of shares of Registrable Securities on Form S-3 or
such successor form for a public offering of shares of Registrable Securities
having an aggregate proposed offering price of not less than $1,000,000.00 (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 such Holder or Holders). The Company shall give notice to all of the
Holders of Registrable Securities of the receipt of a request for registration
pursuant to this paragraph 6.3 and shall provide a reasonable opportunity for
such Holders to participate in such a 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 or such successor form to the
extent requested by the Holder or Holders thereof. If so requested by any Holder
in connection with a registration under this paragraph 6.3, the Company shall
take such steps as are required to register such Holder's Registrable Securities
or sale on a delayed or continuous basis under Rule 415, and to keep such
registration effective until all of such Holder's Registrable Securities
registered thereunder are sold. All expenses incurred in connection with a
registration requested pursuant
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to this paragraph 6.3 and the reasonable fees and expenses of independent
counsel for the Holders shall be borne by the Company. The Company may postpone
the filing of any registration statement required hereunder for a reasonable
period of time, not to exceed 90 days, if the Company has been advised by legal
counsel, which counsel shall be acceptable to the Holders of Registrable
Securities, that such filing would require the disclosure of a material
transaction or other factor and the Company determines reasonably and in good
faith that such disclosure would have a material adverse effect on the Company.
The Company shall not be required to cause a registration statement requested
pursuant to this paragraph 6.3 to become effective prior to 90 days following
the effective date of a registration statement initiated by the Company, if the
request for registration has been received by the Company subsequent to the
giving of written notice by the Company, made in good faith, to the Holders of
Registrable Securities to the effect that the Company is commencing to prepare a
Company-initiated registration statement (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
or any other similar rule of the Commission under the Securities Act is
applicable); provided, however, that the Company shall use its best efforts to
achieve such effectiveness promptly following such 90-day period if the request
pursuant to this paragraph 6.3 has been made prior to the expiration of such
90-day period. If so requested by any Holder in connection with a registration
under this paragraph, the Company shall take such steps as are required to
register such Holder's Registrable Securities for sale on a delayed or
continuous basis under Rule 415, and also take such steps as are required to
keep any registration effective until all of such Holder's Registrable
Securities registered thereunder are sold.
6.4 Registrable Securities. For the purposes of this Section 6, the
term Registrable Securities shall mean any Conversion Shares and any Common
Stock issued or issuable with respect to the Conversion Shares by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
6.5 Market Stand-Off Agreement. Each Holder agrees, if requested by
the Company and an underwriter of Common Stock of the Company, not to sell or
otherwise transfer or dispose of stock held by it during the 90-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, except for the sale of stock registered pursuant to
such registration statement, provided that:
(a) Such agreement only applies to the first such registration
statement of the Company including securities to be sold on its behalf to the
public in an underwritten offering; and
(b) All other principal shareholders, officers and directors of
the Company enter into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Holder, 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 the 90-day period.
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6.6 Further Obligations of the Company. Whenever under the preceding
paragraphs of this Section 6 the Company is required hereunder to register any
Registrable Securities, it agrees that it shall also do the following:
(a) Use its best efforts to diligently prepare and file with the
Commission a registration statement and such amendments and supplements to said
registration statement and the prospectus used in connection therewith as may be
necessary to keep said registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale of securities covered
by said registration statement for the period necessary to complete the proposed
public offering;
(b) Furnish to each selling Holder such copies of each preliminary
and final prospectus and such other documents as such Holder may reasonably
request to facilitate the public offering of his Registrable Securities;
(c) Enter into any reasonable underwriting agreement required by
the proposed underwriter for the selling Holders, if any;
(d) Use its best efforts to register or qualify the securities
covered by said registration statement under the securities or blue-sky laws of
such jurisdictions as any selling Holder may reasonably request, provided that
the Company shall not be required to register or qualify the securities in any
jurisdictions which require it to qualify to do business or subject itself to
general service of process therein;
(e) Immediately notify each selling Holder, at any time when a
prospectus relating to his Registrable Securities is required to be delivered
under the Securities Act, of the happening of any event as a result of which
such prospectus contains an untrue statement of a material fact or omits any
material fact necessary to make the statements therein not misleading, and, at
the request of any such selling Holder, prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(f) Cause all such Registrable Securities to be listed on or
included in each securities exchange or quotation system on which similar
securities issued by the Company are then listed.
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders, in each case as soon as practicable, but not later than 30
days after the close of the period covered thereby an earnings statement of the
Company which will satisfy the provisions of Section 11(a) of the Securities
Act; and
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(h) Obtain and furnish to each selling Holder, immediately prior
to the effectiveness of the registration statement (and, in the case of an
underwritten offering, at the time of delivery of any Registrable Securities
sold pursuant thereto), a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request.
6.7 Indemnification; Contribution.
(a) Incident to any registration statement referred to in this
Section 6, and subject to applicable law, the Company will indemnify and hold
harmless each underwriter, each Holder of Registrable Securities (including its
respective partners, directors, officers, employees and agents) so registered,
and each person who controls any of them within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act of 1934 and the rules and
regulations promulgated thereunder (the "Exchange Act"), from and against any
and all losses, claims, damages, expenses and liabilities, joint or several
(including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses claims damages or
liabilities arise out of or are based on (i) any untrue statement or alleged
true statement of a material fact contained in such registration statement
(including any related preliminary or definitive prospectus, or any amendment or
supplement to such registration statement or prospectus), (ii) any omission or
alleged omission to state in such document a material fact required to be stated
in it or necessary to make the statements in it not misleading, or (iii) any
violation by the Company of the Securities Act, any state securities or blue sky
laws or any rule or regulation thereunder in connection with such registration,
provided that the Company will not be liable to the extent that such loss,
claim, damage, expense or liability arises from and is based on an untrue
statement or omission or alleged untrue statement or omission made in reliance
on and in conformity with information furnished in writing to the Company by
such underwriter, Holder or controlling person expressly for use in such
registration statement. With respect to such untrue statement or omission or
alleged untrue statement or omission in the information furnished in writing to
the Company by such Holder expressly for use in such registration statement,
such Holder will indemnify and hold harmless each underwriter, the Company
(including its directors, officers, employees and agents), each other Holder of
Registrable Securities (including its respective partners directors, officers,
employees and agents) so registered, and each person who controls any of them
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, expenses and
liabilities, joint or several, to which they, or any of them, may become subject
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise to the same extent provided in the
immediately preceding sentence. In no event, however, shall the liability of a
Holder for indemnification under this subparagraph 6.7(a) exceed the proceeds
received by such Holder from its sale of Registrable Securities under such
registration statement.
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(b) If the indemnification provided for in subparagraph 6.7(a)
above for any reason is held by a court of competent jurisdiction to be
unavailable to an indemnified party in respect of any losses, claims, damages,
expenses or liabilities referred to therein, then each indemnifying party under
this paragraph 6.7, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, expenses or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the other selling Holders and the underwriters from the offering of the
Registrable Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company, the other selling Holders and the underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
selling Holders and the underwriters shall be deemed to be in the same
respective proportions as the net proceeds from the offering (before deducting
expenses) received by the Company and the selling Holders and the underwriting
discount received by the underwriters, in each case as set forth in the table on
the cover page of the applicable prospectus, bear to the aggregate public
offering price of the Registrable Securities. The relative fault of the Company,
the selling Holders and the underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the selling Holders or the underwriters and
the parties relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Holders, and the
underwriters agree that it would not be just and equitable if contribution
pursuant to this subparagraph 6.7(b) were determined by pro rata or per capita
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
In no event, however, shall a Holder be required to contribute any amount under
this subparagraph 6.7(b) in excess of the proceeds received by such Holder from
its sale of Registrable Securities under such registration statement. No person
found guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(c) The amount paid or payable by an indemnified party as a result
of the losses, claims, damages and liabilities referred to in this paragraph 6.7
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. The
indemnification and contribution provided for in this paragraph 6.7 will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified parties or any officer, director, employee, agent or controlling
person of the indemnified parties.
6.8 Rules 144 and 144A Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Registrable Securities to the public without registration the
Company agrees to: (i) register its Common Stock
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under the Exchange Act concurrently with, or immediately following the effective
date of the first registration statement under the Securities Act filed by the
Company for an offering of its securities to the public and at all times from
and after the 90th day thereafter, make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities Act (and
any successor rule to Rule 144); (ii) 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; (iii) so long as a holder owns at least 200,000
shares of Registrable Securities, furnish to the holder as promptly as possible
upon its request a written statement by the Company confirming its compliance
with the reporting requirements of Rule 144 (at any time from and after 90 days
following the effective date of the first registration statement filed by the
Company for an offering of its securities to the 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 any other reports and documents so filed as a holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a holder to sell any such securities without registration;
and (iv) comply, in connection with any resales by the Investors, pursuant to
Rule 144A, with the informational requirements of Rule 144A(d)(4) (and any
successor rule to Rule 144A(d)(4)).
6.9 Transfer of Registration Rights. The registration rights of the
Holders under this Section 6 may be transferred to any transferee of 30,000
shares (adjusted appropriately for stock splits, stock dividends and the like)
of Registrable Securities or to any partner or shareholder of any Investor
regardless of the number of shares held by such transferee; provided, however,
that the registration rights may not be transferred to any transferee reasonably
deemed by a majority of the Board of Directors to be a competitor of the
Company. Each such transferee shall be deemed to be a Holder for purposes of
this Section 6.
SECTION 7. GENERAL
7.1 Amendments, Waivers and Consents. For the purposes of this
Agreement and all agreements, documents and instruments executed pursuant
hereto, except as otherwise specifically set forth herein or therein, no course
of dealing between the Company and any Investor and no delay on the part of any
party exercising any rights hereunder or thereunder shall operate as a waiver of
the rights hereof and thereof. No covenant or other provision hereof or thereof
may be waived otherwise than by a written instrument signed by the party so
waiving such covenant or other provision; provided, however, that except as
otherwise provided herein or therein, changes in or additions to, and any
consents required by, this Agreement may be made, and compliance with any term,
covenant, condition or provision set forth herein may be omitted or waived
(either generally or in a particular instance and either retroactively or
prospectively) by a consent or consents in writing signed by the holders of a
majority of the Preferred Shares and (in the case of any such change or
addition) the Company. Any waivers or changes or additions to Sections 2 and 3
shall only require the consent of the Investors holding a majority of the shares
of Series C Preferred Stock and the Company. Any amendment or waiver effected in
accordance
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with this paragraph 7.1 shall be binding upon each holder of Preferred Shares
purchased under this Agreement at the time outstanding, each future holder of
all such securities and the Company.
7.2 Survival of Covenants; Assignability of Rights. All covenants,
agreements, representations and warranties of the Company made herein and to be
performed prior to or at the Closing and in the certificates, lists, exhibits,
schedules or other written information delivered or furnished by or on behalf of
the Company to any Investor in connection herewith shall be deemed material and
to have been relied upon by such Investor, and, except as otherwise provided in
this Agreement, shall survive the delivery of the Preferred Shares and shall
bind the Company's successors and assigns, whether so expressed or not, and,
except as otherwise provided in this Agreement, all such covenants, agreements,
representations and warranties shall inure to the benefit of the Investors'
successors and assigns and to transferees of the Preferred Shares, whether so
expressed or not; provided, however, that the rights which inure to the benefit
of Aspect under this Agreement may not be assigned to any transferee reasonably
deemed by a majority of the Board of Directors to be a competitor of the
Company. The representations and warranties made by the Investors in Section 5
of this Agreement shall survive the delivery of the Preferred Shares and shall
bind the Investors' successors and assigns and shall inure to the benefit of the
Company's successors and assigns.
7.3 Governing Law. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the Commonwealth
of Massachusetts.
7.4 Section Headings. The descriptive headings in this Agreement have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provision thereof or hereof.
7.5 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute but one
and the same document.
7.6 Notices and Demands. Any notice or demand which, by any provision
of this Agreement or any agreement, document or instrument executed pursuant
hereto or thereto, except as otherwise provided therein, is required or provided
to be given shall be deemed to have been sufficiently given or served and
received for all purposes when delivered or 5 days after being sent by certified
or registered mail, postage and charges prepaid, return receipt requested, or by
express delivery providing receipt of delivery as of the date of receipt, to the
following addresses: if to the Company, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: President, or at any other address designated by the Company
to each of the Investors in writing; if to an Investor, at its mailing address
as shown on Exhibit A hereto, or at any other address designated by such
Investor to the Company and the other Investors in writing; and if to an
assignee of an Investor, at its address as designated to the Company and the
other Investors in writing.
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7.7 Severability. Whenever possible each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law but if any provision of this Agreement shall be deemed prohibited
or invalid under such applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity and such prohibition or invalidity
shall not invalidate the remainder of such provision or the other provisions of
this Agreement.
7.8 Expenses. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation execution, delivery and performance of
this Agreement and the agreements, documents and instruments contemplated hereby
or executed pursuant hereto, and the Investors shall pay all costs and expenses
that they incur with respect to the negotiation execution, delivery and
performance of this Agreement and the agreements, documents and instruments
contemplated hereby or executed pursuant hereto, except that on the Closing
pursuant to this Agreement, the Company shall reimburse the Investors for up to
$10,000.00 in legal fees and expenses for the professional services of Ropes &
▇▇▇▇, special counsel for the Investors, incurred in connection with the
negotiation, execution, delivery and performance of this Agreement and the
agreements, documents and instruments contemplated hereby or executed pursuant
hereto.
7.9 Integration. This Agreement including the exhibits documents and
instruments referred to herein or therein constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
7.10 Confidentiality. Each of the Investors agrees to keep confidential
(and to use reasonable efforts to cause its directors, officers, partners,
employees and agents to keep confidential) all information furnished to it by
the Company under this Agreement which the Company identifies as confidential or
proprietary, except for information which (a) is in the public domain, or enters
the public domain other than by such Investor's breach of this Agreement, (b)
was known to such Investor prior to its disclosure by the Company, (c) is
required to be disclosed by applicable laws or regulations or by order of any
governmental agency or authority having competent jurisdiction or (d) in the
case of the Investors, constitutes summary financial or descriptive business
information disclosed by an Investor which is an investment fund as part of its
regular reports to its partners, partner committees or other Investors.
7.11 Shares Owned by Affiliates. For the purpose of applying all
provisions of this Agreement which condition the receipt of information or
access to information upon ownership of a specified number of Conversion Shares,
the Conversion Shares owned by any affiliate of an Investor shall be deemed to
be owned by such Investor.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
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36
GEOTEL COMMUNICATIONS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name:
Title:
PURCHASERS SIGNING IN THEIR CAPACITY
AS BOTH PRIOR INVESTORS AND INVESTORS:
MATRIX PARTNERS III, L.P.
By: /s/ W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Name:
Title: General Partner
SIGMA PARTNERS II, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name:
Title: General Partner
SIGMA ASSOCIATES II, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name:
Title: General Partner
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name:
Title: General Partner
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37
NEW ENTERPRISE ASSOCIATES VI,
LIMITED PARTNERSHIP
By: NEA Partners VI, Limited
Partnership
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name:
Title: General Partner
/s/ ALEXANDER D'ARBELOFF
---------------------------
Alexander d'Arbeloff
/s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
PERSONS SIGNING IN THEIR
CAPACITY AS INVESTORS ONLY:
FIDELITY VENTURES LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
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38
PERSONS SIGNING IN THEIR
CAPACITY AS PRIOR INVESTORS ONLY:
ASPECT TELECOMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
---------------------------
/s/ G. ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
G. ▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
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