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EXHIBIT 10.16
AVISTAR SYSTEMS CORPORATION
REGISTRATION AND INFORMATION RIGHTS AGREEMENT
December 9, 1999
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TABLE OF CONTENTS
PAGE
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SECTION 1 Restrictions on Transferability; Registration Rights...................................1
1.1 Certain Definitions...............................................................1
1.2 Restrictions......................................................................3
1.3 Restrictive Legend................................................................3
1.4 Notice of Proposed Transfers......................................................3
1.5 Requested Registration............................................................4
1.6 Company Registration..............................................................6
1.7 Registration on Form S-3..........................................................7
1.8 Limitations on Subsequent Registration Rights.....................................8
1.9 Expenses of Registration..........................................................8
1.10 Registration Procedures...........................................................8
1.11 Indemnification...................................................................9
1.12 Information by Holder............................................................11
1.13 Rule 144 Reporting...............................................................11
1.14 Transfer of Registration Rights..................................................12
1.15 Standoff Agreement...............................................................12
1.16 Termination of Rights............................................................12
SECTION 2 Right of Participation................................................................13
2.1 Purchaser's Right of Participation...............................................13
2.2 Termination of Participation Right...............................................14
SECTION 3.......................................................................................15
3.1 Financial Information............................................................15
3.2 Additional Information...........................................................15
3.3 Inspection Rights................................................................15
3.4 Transfer of Information Rights...................................................16
3.5 Termination of Covenants.........................................................16
SECTION 4 Miscellaneous.........................................................................16
4.1 Assignment.......................................................................16
4.2 Third Parties....................................................................16
4.3 Governing Law....................................................................17
4.4 Counterparts.....................................................................17
4.5 Notices..........................................................................17
4.6 Severability.....................................................................17
4.7 Amendment and Waiver.............................................................17
4.8 Effect of Amendment or Waiver....................................................17
4.9 Rights of Holders................................................................17
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TABLE OF CONTENTS
(CONTINUED)
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4.10 Delays or Omissions..............................................................17
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REGISTRATION AND INFORMATION RIGHTS AGREEMENT
THIS REGISTRATION AND INFORMATION RIGHTS AGREEMENT (the "Agreement") is
entered into as of the ____ day of December, 1999 by and among Avistar Systems
Corporation, a Nevada corporation (the "Company"), and the persons listed on
Schedule A attached hereto (collectively, the "Purchasers").
RECITALS
WHEREAS, the Company and the Purchasers are entering into that certain
Series B Preferred Stock Purchase Agreement of even date herewith (the "Purchase
Agreement"), pursuant to which the Company shall sell, and the Purchasers shall
acquire, shares of the Company's Series B Preferred Stock (the "Preferred
Shares").
WHEREAS, in order to induce the Company to enter into the Purchase
Agreement and to induce the Purchasers to invest funds in the Company, the
parties desire that the Purchasers be granted registration rights, rights of
participation and information rights with respect to the Preferred Shares.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
SECTION 1
Restrictions on Transferability; Registration Rights
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock of the Company.
"Conversion Shares" means the Common Stock issued or issuable
upon conversion of the Preferred Shares as defined herein.
"Holder" shall mean any of the Purchasers listed on Schedule A
hereto, in each case while such person or entity is holding Registrable
Securities and any person holding Registrable Securities to whom the rights
under this Agreement have been transferred in accordance with Section 1.14
hereof.
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"Initiating Holders" shall mean Holders in the aggregate of not
less than thirty percent (30%) of the Registrable Securities.
"Preferred Shares" shall mean the Series B Preferred Stock of the
Company.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, the expense of any special audits incident
to or required by any such registration and the fees and expenses of one special
counsel to the Holders of up to $15,000 (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
"Registrable Securities" means (i) the Preferred Shares, (ii) the
Conversion Shares, and (iii) any Common Stock of the Company issued or issuable
in respect of the Preferred Shares or Conversion Shares or other securities
issued or issuable with respect to the Preferred Shares or Conversion Shares
upon any stock split, stock dividend, recapitalization, or similar event, or any
Common Stock otherwise issued or issuable with respect to the Conversion Shares
or Preferred Shares; provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(l) thereof so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 of this Agreement.
"Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
"Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders.
1.2 Restrictions. The Preferred Shares and the Conversion Shares
shall not be sold, assigned, transferred or pledged by a Holder except upon the
conditions specified in this Agreement, which conditions are intended to ensure
compliance with the provisions of the Securities Act. The Purchaser will cause
any proposed purchaser, assignee, transferee or pledgee of the Preferred Shares,
or the Conversion Shares to agree to take and hold such securities subject to
the provisions and upon the conditions specified in this Agreement.
1.3 Restrictive Legend. Each certificate representing (i) the
Preferred Shares, (ii) the Conversion Shares, and (iii) any other securities
issued in respect of the securities referenced in clauses (i) and (ii) upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 1.4 below)
be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED
OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR
THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE
OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT."
Each Purchaser and Holder consents to the Company making a
notation on its records and giving instructions to any transfer agent of the
Restricted Securities in order to implement the restrictions on transfer
established in this Section 1.
1.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company, addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
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Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. The Company will not require such a legal opinion or "no action" letter
in any transaction (a) in compliance with Rule 144(k) not earlier than 180 days
after the Company's initial public offering, (b) in which a Holder distributes
Restricted Securities after six (6) months after the purchase thereof solely to
its majority-owned subsidiaries or affiliates, or (c) in which a Holder
distributes Restricted Securities six (6) months after the purchase thereof
solely to partners thereof for no consideration, provided that each transferee
agrees in writing to be subject to the terms of this Section 1.4, (d) in which
the Holder transfers all or a portion of the Registrable Securities to an
affiliate that is licensed as a Small Business Investment Company pursuant to
the Small Business Investment Act of 1958, as amended and the regulations
promulgated thereunder or (e) in which one Holder transfers Restricted
Securities to another Holder. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144(k) not earlier than 180 days after the Company's
initial public offering, the appropriate restrictive legend set forth in Section
1.3 above, except that such certificate shall not bear such restrictive legend
if, in the opinion of counsel for such holder and the Company, such legend is
not required in order to establish compliance with any provisions of the
Securities Act.
1.5 Requested Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
qualification, compliance or registration with respect to all or a part of the
Registrable Securities (which, in connection with the Company's initial public
offering, must be for at least 30% of their Registrable Securities or such
lesser percentage which would reasonably be expected to result in an aggregate
offering price to the public, net of underwriting discounts and commissions,
exceeding $15,000,000); the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to take
any action to effect any such registration, qualification or compliance pursuant
to this Section 1.5:
(1) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration,
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qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act;
(2) Prior to the earlier of (i) six (6) months following
the effective date of the Company's initial public offering or (ii) December 9,
2002;
(3) During the period ending on the date three (3) months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan);
(4) After the Company has effected two (2) such
registrations pursuant to this subparagraph 1.5(a), such registrations have been
declared or ordered effective and the securities offered pursuant to such
registrations have been sold; or
(5) If the Company shall furnish to such Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1. 5 shall be deferred once per year for a
period not to exceed ninety (90) days from the date of receipt of written
request from the Initiating Holders.
Subject to the foregoing clauses (1) through (5), the Company
shall file and cause to become effective a registration statement covering the
Registrable Securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities held by such Holder.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by a majority in interest of the Initiating Holders (which
managing underwriter shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 1.5, if the managing
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing
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limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms
of the underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of such registration.
1.6 Company Registration.
(a) Notice of Registration. If at any time or from time to
time, the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved in such registration, all the Registrable Securities specified in a
written request or requests made within twenty (20) days after receipt of such
written notice from the Company by any Holder, but only to the extent that such
inclusion will not diminish the number of securities included by the Company or
by holders of the Company's securities who have demanded such registration.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities to
be included in such registration to a minimum of 30% of the total shares to be
included in such underwriting or exclude them entirely in the case of the
Company's initial public offering. The Company shall so advise all Holders and
the other holders distributing their securities through such underwriting
pursuant to piggyback registration rights similar to this Section 1.6, and the
number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be first allocated among all
Holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities
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held by such Holders at the time of filing the registration statement, and after
satisfaction of the requirements of the Holders, the remaining shares that may
be included in the registration and underwriting shall be allocated among the
officers, directors and other shareholders of the Company in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such officers and directors and shareholders of the Company at the time of
filing of the registration statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder or other holder to the nearest 100
shares.
(c) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7 Registration on Form S-3.
(a) After its initial public offering, in addition to the
foregoing rights contained in this Section 1, if any Holder requests that the
Company file a registration statement on Form S-3 (or any successor form to Form
S-3) for a public offering of shares of the Registrable Securities, the
reasonably anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $2,000,000, and the Company
is a registrant entitled to use Form S-3 to register the Registrable Securities
for such an offering, then the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form.
Thereafter, the Company will (i) promptly give written notice of the proposed
registration to all other Holders, and (ii) as soon as practicable, use its best
efforts to effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of such written notice from
the Company. The substantive provisions of Section 1.5(b) shall be applicable to
each registration initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 1.7: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act, (ii) during the period
ending on a date three (3) months following the effective date of, a
registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities), or (iii) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors, it would be seriously detrimental to the
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Company or its shareholders for registration statements to be filed in the near
future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred once per year for a period not to
exceed ninety (90) days from the receipt of the request to file such
registration by such Holder or Holders.
1.8 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not enter into any agreement granting
any holder or prospective holder of any securities of the Company registration
rights with respect to such securities unless such holder derives its rights as
an additional Holder hereunder. The Holders of Registrable Securities hereby
agree to amend this Agreement to include shares or securities issued from and
after the date of this Agreement by the Company in financing transactions if
such shares or securities are issued with rights, preferences and privileges
pari passu with the Series B Preferred. Subsequent purchasers of securities of
the Company may not be granted registration rights superior to those held by the
Series B Preferred Stock without the consent of the holders of at least a
majority of the shares of the Series B Preferred Stock.
1.9 Expenses of Registration. All Registration Expenses incurred in
connection with up to two registrations pursuant to Section 1.5, up to four
registrations pursuant to Section 1.7 or any registration pursuant to Section
1.6 and the reasonable cost of one special legal counsel (not to exceed $15,000)
to represent all of the Holders together in any such registration shall be borne
by the Company, provided that the Company shall not be required to pay the
Registration Expenses of any registration proceeding begun pursuant to Section
1.5, the request of which has been subsequently withdrawn by the Initiating
Holders. In such case, the Holders of Registrable Securities to have been
registered shall bear all such Registration Expenses pro rata on the basis of
the number of shares to have been registered unless the Holders of a majority of
the Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.5. Notwithstanding the foregoing, however, if
at the time of the withdrawal, the Holders have learned of a material adverse
change in the condition, business or prospects of the Company from that known to
the Holders at the time of their request, of which the Company had knowledge at
the time of the request, then the Holders shall not be required to pay any of
said Registration Expenses or to forfeit the right to one demand registration.
1.10 Registration Procedures. Whenever required pursuant to this
Section 1 to effect the registration of any Registrable Securities, the Company
shall perform the following obligations as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, to
keep such registration statement effective for up to 60 days, or until the
Holder or Holders have completed the distribution described in such registration
statement, whichever first occurs.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may
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be necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of the
prospectus, including a prospectus subject to completion, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into an perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.11 Indemnification.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 1, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, as such
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expenses are incurred, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder, controlling person or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein; provided, however, that the liability
of a Holder for indemnification under this Section 1.11(b) shall not exceed the
gross proceeds from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section
1.11 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.11 unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
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(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
Holder exercising rights under this Agreement, or any controlling person of any
such Holder, makes a claim for indemnification pursuant to this Section 1.11 but
it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 1.11 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
1.11; then, in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under such
registration statement, and the Company and other selling Holders are
responsible for the remaining portion; provided, however, that in any such case
(A) no such Holder will be required to contribute any amount in excess of the
proceeds from the offering received by such Holder pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company and Holders under this Section
1.11 shall survive the completion of any offering of Registrable Securities in a
registration statement. No indemnifying party, in the defense of any such claim
or litigation, shall, except with the consent of each indemnified party, consent
to entry to any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
1.12 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.13 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
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(b) 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); and
(c) So long as a Purchaser owns any Restricted Securities, to
furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as a Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Purchaser
to sell any such securities without registration.
1.14 Transfer of Registration Rights. The rights to cause the Company to
register Registrable Securities granted under this Section 1 may be assigned by
a Holder to any other Holder or to a transferee or assignee who acquires at
least 1,000,000 shares (appropriately adjusted for stock dividends, stock
splits, stock combinations and the like) of the Registrable Securities held by
such Holder, provided that, the Company is, within a reasonable time prior to
such transfer, furnished with written notice of the name and address of such
proposed transferee or assignee and the securities with respect to which such
registration rights are being assigned; provided further that such assignment
shall be effective only if the transferee enters into a written agreement
providing that such transferee shall be bound by the provisions of Section 1 of
this Agreement. Notwithstanding the foregoing or any other provision contained
herein to the contrary, the right to cause the Company to register Registerable
Securities may be assigned by a Holder to any constituent partner or affiliate
of a partnership Holder and any subsidiary, parent or affiliate of a corporate
Holder provided that such transferee agrees in writing to be bound by the terms
and conditions of this Agreement.
1.15 Standoff Agreement. Each Holder agrees in connection with the
initial registration of the Company's securities that, upon request of the
underwriters managing any underwritten initial public offering of the Company's
securities, not to sell or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not to exceed one hundred eighty (180) days from the effective date of
such registration) as may be requested by the managing underwriters; provided,
however, that the holders of Series A Preferred Stock, holders of more than 1%
of the outstanding capital stock of the Company and the officers and directors
of the Company who own stock of the Company also agree to such restrictions.
1.16 Termination of Rights. No Holder shall be entitled to exercise any
right provided for in this Section 1:
(a) after five (5) years following the consummation of the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the initial
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firm commitment underwritten offering of its securities to the general public
with proceeds of not less than $1.50 per share (as adjusted for stock dividends,
stock splits, stock combinations and the like) and an aggregate offering price
to the public of not less than $20,000,000, or
(b) on or after the closing of a public offering of the Common
Stock of the Company, when fewer than 1% and all shares of the Holder's
Registrable Securities may be sold under Rule 144 during any 90-day period.
SECTION 2
Right of Participation
2.1 Purchaser's Right of Participation.
(a) Right of Participation. Subject to the terms and
conditions contained in this Section 2.1, the Company hereby grants to each
Holder the right of participation to purchase its Pro Rata Portion of any New
Securities (as defined in subsection 2.1(b)) which the Company may, from time to
time, propose to sell and issue. A Holder's "Pro Rata Portion" for purposes of
this Section 2.1 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then held by such Holder and the number of shares of the
Company's Common Stock issuable upon conversion of the Series B Preferred Stock
then held by such Holder, bears to (y) the sum of the total number of shares of
the Company's Common Stock then outstanding, and the number of shares of the
Company's Common Stock issuable upon conversion of the then outstanding Series A
Preferred Stock and Series B Preferred Stock.
(b) Definition of New Securities. Except as set forth below,
"New Securities" shall mean any shares of capital stock of the Company,
including Common Stock and Preferred Stock, whether authorized or not, and
rights, options or warrants to purchase said shares of Common Stock or Preferred
Stock, and securities of any type whatsoever that are, or may become,
convertible into said shares of Common Stock or Preferred Stock. Notwithstanding
the foregoing, "New Securities" does not include (i) the Preferred Shares or the
Conversion Shares, (ii) securities offered to the public generally pursuant to a
registration statement under the Securities Act, (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or shares or other reorganization
whereby the Company or its shareholders own not less than a majority of the
voting power of the surviving or successor corporation, (iv) shares of the
Company's Common Stock or related options or warrants convertible into or
exercisable for such Common Stock issued to employees, officers and directors
of, and consultants to, the Company, pursuant to any arrangement approved by the
Board of Directors of the Company, (v) stock issued pursuant to any rights or
agreements, including, without limitation, convertible securities, options and
warrants, provided that the Company shall have compiled with the rights of
participation established by this Section 2.1 with respect to the initial sale
or grant by the Company of such rights or agreements, (vi) options, warrants or
the shares issues upon conversion thereof to unaffiliated third parties in
connection with an equipment lease, a bank line or
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other vendor agreement or (vii) stock issued in connection with any stock split,
stock dividend or recapitalization by the Company.
(c) Notice of Right. In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Purchaser written
notice of its intention, describing the type of New Securities and the price and
terms upon which the Company proposes to issue the same. Each Purchaser shall
have fifteen (15) days from the date of receipt of any such notice to agree to
purchase shares of such New Securities (up to the amount referred to in
subsection 2.1 (a)), for the price and upon the terms specified in the notice,
by giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(d) Exercise of Right. If any Purchaser exercises its right of
participation under this Agreement, the closing of the purchase of the New
Securities with respect to which such right has been exercised shall take place
within thirty (30) days after the Purchaser gives notice of such exercise, which
period of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of participation, the Company and the
Purchaser shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(e) Lapse and Reinstatement of Right. In the event a Purchaser
fails to exercise the right of participation provided in this Section 2.1 within
said fifteen (15) day period, the Company shall have sixty (60) days thereafter
to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within thirty (30) days from the
date of said agreement) to sell the New Securities not elected to be purchased
by such Purchaser at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the New Securities or entered into an agreement
to sell the New Securities within said sixty (60) day period (or sold and issued
New Securities in accordance with the foregoing within thirty (30) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities without first offering such securities to the Purchaser in the manner
provided above.
(f) Assignment. The right of the Purchaser to purchase any
part of the New Securities may be assigned in whole or in part by a Holder to a
transferee or assignee who acquires at least 1,000,000 shares (appropriately
adjusted for stock dividends, stock splits, stock combinations and the like) of
the Registrable Securities held by such Holder, provided that, the Company is,
within a reasonable time prior to such transfer, furnished with written notice
of the name and address of such proposed transferee or assignee and the
securities with respect to which such registration rights are being assigned;
provided further that such assignment shall be effective only if the transferee
enters into a written agreement providing that such transferee shall be bound by
the provisions of Section 1 of this Agreement.
2.2 Termination of Participation Right. The rights of participation
granted under Section 2.1 of this Agreement shall terminate on and be of no
further force or effect upon the consummation of the Company's sale of its
Common Stock in an underwritten public offering pursuant to an effective
registration statement filed under the Securities Act of its securities to the
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general public with proceeds of not less than $1.50 per share (as adjusted for
stock dividends, stock splits, stock combinations and the like) and an aggregate
offering price to the public of not less than $20,000,000.
SECTION 3
3.1 Financial Information. The Company will mail the following
reports to the Purchaser for so long as the Purchaser is a holder of 1,000,000
Shares purchased pursuant to this Agreement (or Common Stock issued upon
conversion of the Shares):
(a) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in any
event within 30 days thereafter, a consolidated balance sheet of the Company and
its subsidiaries, if any, as of the end of each such quarterly period, and
consolidated statements of income and consolidated statement of cash flows of
the Company and its subsidiaries for such period, prepared in accordance with
generally accepted accounting principles in the United States, all in reasonable
detail and signed, subject to charges resulting from year-end audit adjustments,
by the principal financial or accounting officer of the Company.
(b) As soon as practicable after the end of each fiscal year, and
in any event within one hundred twenty (120) days thereafter, consolidated
balance sheets of the Company and its subsidiaries, if any, as of the end of
such fiscal year, and consolidated statements of income and consolidated
statements of cash flows of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles in
the United States and setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail and audited by the
Company's independent public accountants who shall be a nationally recognized
firm.
(c) Contemporaneously with delivery to holders of Common Stock, a
copy of each report of the Company delivered to holders of the Company's Common
Stock.
3.2 Additional Information. For so long as Purchaser holds not less
than 1,000,000 Shares (or an equivalent number of shares consisting of the
Shares or Common Stock issued upon conversion of the Shares), as adjusted for
recapitalizations, stock splits, stock dividends and the like, the Company will
mail to such Purchaser as soon as practicable, but in any event within 30 days
prior to the end of each fiscal year, a budget for the next fiscal year,
including balance sheets and sources and applications of funds statements and,
as soon as prepared, any other budgets or revised budgets prepared by the
Company.
3.3 Inspection Rights. For so long as a Purchaser is eligible to
receive reports under Section 3.2 above, the Company shall permit such
Purchaser, at such Purchaser's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
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Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by such Purchaser; provided, however, that
the Company shall not be obligated pursuant to this Section 3.3 to provide
access to any information which it reasonably deems in good faith to be a trade
secret or similar confidential information.
3.4 Transfer of Information Rights. The information rights set forth in
Sections 3.1, 3.2 and 3.3 may be transferred in any nonpublic transfer of Shares
(or Shares of Common Stock issued upon conversion of the Shares), provided that
the Company is given written notice of such transfer, and provided further that
the rights to receive the information set forth in Sections 3.2 and 3.3 may only
be transferred to a holder of, or affiliated holders who in the aggregate hold,
at least 1,000,000 Shares (or an equivalent number of shares consisting of the
Shares or Common Stock issued upon conversion of the Shares, as appropriately
adjusted for stock splits and the like) other than a competitor of the Company.
In the event that the Company reasonably determines that provision of
information to a transferee pursuant to this Section 3.4 would materially
adversely affect its proprietary position, such information may be edited in the
manner necessary to avoid such effect.
3.5 Termination of Covenants. The covenants set forth in Sections
3.1, 3.2 and 3.3 shall terminate on and be of no further force or effect upon
the consummation of the Company's sale of its Common Stock in an underwritten
public offering pursuant to an effective registration statement filed under the
Securities Act of its securities to the general public with proceeds of not less
than $1.50 per share (as adjusted for stock dividends, stock splits, stock
combinations and the like) and an aggregate offering price to the public of not
less than $20,000,000 immediately subsequent to which the Company shall be
obligated to file annual and quarterly reports with the Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of ββββ (βββ "ββββββββ βββ").
SECTION 4
Miscellaneous
4.1 Assignment. Except as otherwise provided in this Agreement, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties to this
Agreement.
4.2 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
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4.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California in the United States of America
without giving effect to the conflicts of laws principles thereof.
4.4 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
4.5 Notices. Any notice required or permitted by this Agreement shall
be in writing and shall be sent by prepaid registered or certified mail return
receipt requested, or otherwise delivered by hand or by messenger addressed to
the other party at the address shown below or at such other address for which
such party gives notice under this Agreement. Such notice shall be deemed to
have been given when delivered if delivered personally, or, if sent by mail, at
the earlier of its receipt or three (3) days after deposit in the mail.
4.6 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
4.7 Amendment and Waiver. Any provision of this Agreement may be
amended or waived with the written consent of the Company and the Holders of at
least a majority of the outstanding shares of the Registrable Securities, so
long as the effect is to treat all Holders equally. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each Holder of
Registrable Securities and the Company. In addition, the Company may waive
performance of any obligation owing to it, as to some or all of the Holders of
Registrable Securities, or agree to accept alternatives to such performance,
without obtaining the consent of any Holder of Registrable Securities. In the
event that an underwriting agreement is entered into between the Company and any
Holder, and such underwriting agreement contains terms differing from this
Agreement, as to any such Holder the terms of such underwriting agreement shall
govern.
4.8 Effect of Amendment or Waiver. The Purchaser and its successors
and assigns acknowledge that by the operation of Section 4.7 of this Agreement
the holders of a majority of the outstanding Registrable Securities, acting in
conjunction with the Company, will have the right and power to diminish or
eliminate any or all rights or increase any or all obligations pursuant to this
Agreement.
4.9 Rights of Holders. Each Holder of Registrable Securities shall
have the absolute right to exercise or refrain from exercising any right or
rights that such Holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such Holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
4.10 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair
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any such right, power or remedy of such non-breaching party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be made in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement, or by law or otherwise afforded to
any holder, shall be cumulative and not alternative.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY:
AVISTAR SYSTEMS CORPORATION
a Nevada corporation
By:
-------------------------------------
ββββββ β. βββββββ
President
AVISTAR SYSTEMS CORPORATION
REGISTRATION RIGHTS SIGNATURE PAGE
23
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PURCHASER:
UBS (USA) Inc.
By:
-------------------------------
ββββββ βββββ
Managing Director
By:
-------------------------------
Name:
Title:
AVISTAR SYSTEMS CORPORATION
REGISTRATION RIGHTS SIGNATURE PAGE
24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PURCHASER:
WS INVESTMENTS 99B
By:
-----------------------------------
ββββββ β. βββββ
Partner
AVISTAR SYSTEMS CORPORATION
REGISTRATION RIGHTS SIGNATURE PAGE
25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PURCHASER:
By:
--------------------------------
ββββββ β. βββββ
AVISTAR SYSTEMS CORPORATION
REGISTRATION RIGHTS SIGNATURE PAGE