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EXHIBIT 10.14
PIVOTAL SOFTWARE INC.
SHAREHOLDERS AGREEMENT
January 15, 1999
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TABLE OF CONTENTS
1. RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST OFFER.....................1
1.1 Grant...................................................1
1.2 Restrictions on Transfer................................2
1.3 Pro Rata Determination..................................4
1.4 Further Restriction.....................................4
1.5 Not to Encumber.........................................4
1.6 Affiliate...............................................4
2. CO-SALE RIGHTS IN SALES BY A SHAREHOLDER..............................5
2.1 Grant of Co-Sale Rights.................................5
2.2 Payment of Proceeds.....................................6
2.3 Non-Exercise............................................6
3. CO-SALE RIGHTS ON CHANGE OF CONTROL...................................6
3.1 Grant of Change of Control Co-Sale Rights...............6
3.2 Exercise of Co-Sale Rights..............................7
3.3 Control Price...........................................7
3.4 Non-Exercise............................................7
4. EXEMPT TRANSFERS......................................................8
4.1 Permitted Transactions..................................8
4.2 Transfers to Affiliates.................................9
4.3 Number of Transferees...................................9
4.4 Company Repurchase or Public Offering..................10
5. PROHIBITED TRANSFERS.................................................10
5.1 Grant...................................................10
5.2 Put Option..............................................10
6. LEGEND REQUIREMENTS..................................................11
6.1 Legend..................................................11
6.2 Removal.................................................11
7. CONDUCT OF COMPANY AFFAIRS...........................................11
7.1 Conduct by Shareholders.................................11
7.2 Constitution of Board...................................11
7.3 Removal.................................................12
7.4 Articles................................................12
7.5 Audit and Compensation Committees.......................12
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8. MISCELLANEOUS PROVISIONS............................................12
8.1 Allocation of Rights.................................12
8.2 Termination..........................................12
8.3 Notice...............................................13
8.4 Severability.........................................13
8.5 Waiver or Modification...............................13
8.6 Governing Law........................................13
8.7 Legal Fees...........................................13
8.8 Further Assurances...................................13
8.9 Successors and Assigns...............................14
8.10 Aggregation of Shares................................14
8.11 Termination of Prior Agreement.......................14
8.12 Counterparts.........................................14
8.13 Remedies Cumulative..................................14
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SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made as of the 15th day of January, 1999, by and among Pivotal
Software, Inc., a British Columbia company (the "Company"), and certain
shareholders of the Company (individually a "Shareholder" and collectively the
"Shareholders");
WHEREAS, the Company and certain of the Shareholders are parties to the Class F
Preferred Share Subscription and Purchase Agreement of even date herewith (the
"Class F Agreement"), pursuant to which those Shareholders are purchasing the
Company's Class F Preferred Shares.
WHEREAS, each of the Shareholders is a beneficial owner of the number of Class A
Common Shares, Class B Common Shares, Class A Preferred Shares, Class B
Preferred Shares, Class D Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares of the Company set forth opposite such Shareholder's name on
Schedule A hereto (collectively the "Shares," which term shall also include any
additional Common Shares and/or Preferred Shares of the Company, or securities
convertible into or exchangeable for such shares, now owned or hereafter
acquired by the Shareholders).
WHEREAS, the Shareholders that are not parties to the Class F Agreement wish to
provide a further inducement to the other Shareholders to purchase the Company's
Class F Preferred Shares pursuant to the terms of the Class F Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST OFFER
1.1 GRANT. The Company and the Shareholders are hereby each granted a right of
first offer with respect to any proposed disposition of Shares by a Shareholder
(or by any permitted transferee of the Shares under Part 4 hereof, hereafter
collectively included in all references to "Shareholder"), in the following
order of priority. The Company shall have the first right to purchase any Shares
proposed to be transferred to a third party by a Shareholder. In the event the
Company elects not to exercise its first right to purchase with respect to all
or any portion of such proposed transfer, the Company agrees to waive such
rights with respect to such portion in favour of the Shareholders' first offer
and co-sale rights under this Agreement. The parties agree that the restrictions
on transfer and the procedure for exercising the right of offer and purchase
shall be governed by the provisions of this Part 1.
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1.2 RESTRICTIONS ON TRANSFER. Except as otherwise permitted in this Agreement:
(a) no Shareholder shall sell, transfer or otherwise dispose of, or offer
to sell, transfer or otherwise dispose of, any of its Shares unless
that Shareholder (the "Offeror") first offers to the Company and to
the other Shareholders (the "Others") by notice in writing (the
"Offer") delivered to the secretary of the Company (the "Secretary")
the prior right to purchase, receive or otherwise acquire the same;
(b) the Offer shall state that the Offeror has determined to avail itself
of the provisions of this Part I and shall set forth:
(i) the number and kind of Shares offered for sale (the "Target
Shares");
(ii) the price per share in cash at which the Offeror is prepared to
sell the Target Shares;
(iii) the terms and conditions of the sale;
(iv) that the Offer is open for acceptance by the Company and the
Others for a period of 60 days after receipt of such Offer by the
Secretary; and
(v) the identity of the proposed purchaser, if any (the "Proposed
Purchaser");
(c) upon receipt of the Offer, the Secretary shall forthwith:
(i) transmit the Offer to each director of the Company;
(ii) transmit the Offer to each of the Others; and
(iii) call a meeting of the directors of the Company to consider the
Offer;
(d) the Company shall have the first right to accept the Offer and
purchase all or a portion of the Target Shares and to the extent that
it is accepted, the Others agree to refuse any pro rata offer by the
Company to purchase shares which is required to be made by the Company
under the Company Act, (British Columbia) the Articles of the Company
or this Agreement;
(e) if the Offer is not wholly accepted by the Company within 30 days
after receipt thereof by the Secretary:
(i) the Secretary shall forthwith advise the Others of the extent to
which the Offer is still open forthwith upon the expiration of
the aforesaid 30 day period;
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(ii) that portion of the Offer not accepted by the Company shall be
open for acceptance within the next 20 days by the Others pro
rata in accordance with their respective shareholdings in the
Company, it being understood and agreed that each of the
Shareholders pro rata portions shall be determined on the basis
set out in Paragraph 1.3;
(iii) acceptance by the Others shall be by notice to the Secretary and
by such acceptance a Shareholder may specify any additional
portion of the Target Shares offered for sale that such
Shareholder is prepared to purchase in the event that any of the
Others fails to accept such Offer, and if any of the Others fails
to accept such Offer, such Shareholder (pro rata if more than
one) shall be entitled to purchase such additional portion of the
Target Shares as shall be so available;
(iv) the Secretary shall advise the Company of the extent to which the
Offer is still open forthwith upon the expiration of the
aforesaid 20 day period;
(f) if, and to the extent the Offer is not accepted by the Others within
the 20 days that it is open to them, the Company shall be entitled
prior to the expiration of the Offer to accept the Offer with respect
to that portion of the Target Shares as shall then be available, in
which event the Others agree to refuse any pro rata offer by the
Company to purchase shares which is required to be made by the Company
under the Company Act (British Columbia), the Articles or this
Agreement;
(g) prior to the expiration of the 60 day period, the Secretary shall
advise the Offeror whether the Offer has been accepted in its entirety
or in part, and by whom;
(h) if the Offer is not wholly accepted or is accepted only in part within
the 60 days that it is open, the Offeror may, within 120 days
thereafter sell, transfer or otherwise dispose of the whole of the
Target Shares, or that portion of the Target Shares that has not been
accepted by the Company and/or the Others, as the case may be, being
offered under this Part to any other person, firm or corporation (a
"Third Party") for not less than the price, payable in cash or by
certified cheque or by bank draft and on no better terms and
conditions than as set out in the Offer;
(i) upon the expiry of the said 120 day period without the completion of a
sale to a Third Party, the provisions of this Paragraph 1.2 will again
become applicable to the sale, transfer or other disposition of the
Target Shares or any part thereof and so on from time to time; and
(j) upon the acceptance of the Offer, the Company, the Others and the
Third Party, as the case may be, shall purchase, at the stated
purchase price the Target Shares (or that part thereof) being sold and
the closing of the purchase thereof shall occur on the
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30th day following the date of the last acceptance in respect of the
Offer or, if that day is a non juridical day, then on the next ensuing
juridical day (or such other date as the parties thereto may agree),
at which time the appropriate parties shall execute and deliver such
cash, certified cheques, share certificates, instruments, conveyances,
assignments, and releases as may be reasonably required to effect and
complete the sale.
1.3 PRO RATA DETERMINATION. It is understood and agreed that each of the
Shareholder's pro rata portions shall be determined on the basis that:
(a) if an Offer is for Common Shares, the Shareholders shall have
converted their Preferred Shares to Common Shares, whether or not
converted; and,
(b) if an Offer is for Preferred Shares of a particular class, the Offeror
of those Preferred Shares and all Others shall have converted their
Preferred Shares to Common Shares, whether or not converted,
and pro rata distributions among the holders of Class A Preferred Shares, Class
B Preferred Shares, Class D Preferred Shares, Class E Preferred Shares, Class F
Preferred Shares, Class A Common Shares and Class B Common Shares shall be based
on the number of Common Shares held by each on a converted basis.
1.4 FURTHER RESTRICTION. No Common Shares or Preferred Shares shall be sold,
assigned, transferred, conveyed or issued, whether pursuant to Paragraph 1.2 or
other-wise, by a Shareholder to any person other than the parties hereto, unless
and until the proposed transferee enters into an agreement on the same terms in
all material respects as this Agreement with the Company, or to any person or
Affiliate of any person that has a financial interest in any company or business
that is competitive with the Company (other than an interest not exceeding five
percent (5%) in the shares of a publicly traded company) or to any person or
Affiliate of any person that the directors believe, on reasonable basis, will
have an adverse affect on the activities or business prospects of the Company.
1.5 NOT TO ENCUMBER. No Shareholder shall mortgage, pledge, charge, hypothecate
or otherwise encumber its Shares or any part thereof without the prior written
unanimous consent thereto of the directors of the Company, which consent may be
arbitrarily withheld without giving any reason therefore, unless the holder of
the mortgage, pledge, charge, hypothecation or encumbrance agrees to be bound by
the provisions of this Agreement.
1.6 AFFILIATE. For the purposes of this Agreement "Affiliate" of a person means
any corporation, partnership or limited liability partner which is controlled by
or which controls that person or any other corporation controlled by or which
controls that corporation, partnership or limited liability partner and any
partnership or limited liability partner that is controlled by the same general
partner or members, whether such control be direct or indirect, and "control"
means:
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(a) the right to exercise a majority of the votes which may be cast at a
general meeting of a corporation; and
(b) the right to elect or appoint, directly or indirectly, a majority of
the directors of a corporation or other persons who have the right to
manage or supervise the management of the affairs and business of the
corporation.
2. CO-SALE RIGHTS IN SALES BY A SHAREHOLDER
2.1 GRANT OF CO-SALE RIGHTS. After completing the procedures set out in Part 1,
if an Offeror proposes to enter into a transaction regarding the sale of Common
Shares to a Third Party, which, if consummated, would result in aggregate sales
of Common Shares by the Offeror in excess of 50,000 shares in any calendar year
to Third Parties, the Offeror shall give written notice of the intended
disposition (the "Disposition Notice") and the basic terms and conditions
thereof, including the identity of the Proposed Purchaser, if determined, to the
Others and the Others shall have the right, exercisable upon written notice to
the Offeror within thirty (30) days after receipt of the Disposition Notice, to
participate in such sale of the Target Shares on the same terms and conditions
as those set forth in the Disposition Notice. To the extent the Others exercise
such right of participation, the number of Target Shares that the Offeror may
sell in the transaction shall be correspondingly reduced. The right of
participation of the Others shall be subject to the terms and conditions set
forth in this Part 2.
(a) The Others shall be deemed to own the number of Common Shares that the
Others actually hold plus the number of Common Shares that are
issuable upon conversion of any Class A Preferred Shares, Class B
Preferred Shares, Class D Preferred Shares, Class E Preferred Shares
and Class F Preferred Shares then held by the Others. The Offeror
shall be deemed to own the number of Common Shares that the Offeror
actually holds plus the number of Common Shares that are issuable upon
conversion of any Class A Preferred Shares, Class B Preferred Shares,
Class D Preferred Shares, Class E Preferred Shares and Class F
Preferred Shares then held by the Offeror.
(b) The Others may sell all or any part of a number of Common Shares of
the Company equal to the product obtained by multiplying (i) the
aggregate number of Common Shares covered by the purchase offer by
(ii) a fraction, the numerator of which is the number of Common Shares
of the Company at the time owned by the Others and the denominator of
which is the combined number of Common Shares of the Company at the
time owned by the Offeror and the Others.
(c) The Others may effect their participation in the sale by delivering to
the Offeror for transfer to the Proposed Purchaser one or more
certificates, properly endorsed for transfer, which represent:
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(i) the number of Common Shares that the Others elect to sell pursuant to
this Paragraph 2.1; or
(ii) that number of Class A, Class B, Class D, Class E or Class F Preferred
Shares that is at such time convertible into the number of Common
Shares that the Others have elected to sell pursuant to this Paragraph
2.1; provided, however, that if the Proposed Purchaser objects to the
delivery of Class A, Class B, Class D, Class E or Class F Preferred
Shares in lieu of Common Shares, the Others may convert and deliver
Common Shares as provided in subparagraph (i) above.
2.2 PAYMENT OF PROCEEDS. The share certificates that the Others deliver to the
Offeror pursuant to Paragraph 2.1 shall be transferred by the Offeror to the
Proposed Purchaser in consummation of the sale of the Common Shares pursuant to
the terms and conditions specified in the Disposition Notice, and the Offeror
shall promptly thereafter remit to the Others that portion of the sale proceeds
to which the Others are entitled by reason of their participation in such sale.
Otherwise, the closing of the purchase shall be as set out in Subparagraph
1.2(j).
2.3 NON-EXERCISE. The exercise or non-exercise of the rights of the Others
hereunder to participate in one or more sales of Common Shares made by the
Offeror shall not adversely affect their rights to participate in subsequent
Common Shares sales by the Offeror.
3. CO-SALE RIGHTS ON CHANGE OF CONTROL
3.1 GRANT OF CHANGE OF CONTROL CO-SALE RIGHTS. Without limiting the terms of
Part 2, where the Offeror desires to sell any of its Shares to any person who,
together with any of its Associates and Affiliates, is already entitled or would
thereafter be entitled to exercise in excess of 50% of the votes at a general
meeting of the Company (determined on a fully converted basis in respect of the
Preferred Shares), the Offeror shall deliver a written notice of the intended
sale (the "Control Notice") to the Others at least 30 days prior to the date of
such intended sale, which Control Notice shall specify the terms of the intended
sale, including, without limitation:
(a) the name and address of the Proposed Purchaser;
(b) the number and class of Shares owned by the Proposed Purchaser and its
Associates and Affiliates;
(c) the purchase price and other terms and conditions for the sale of the
Shares included in the Control Notice;
(d) the date on or about which such sale is intended to be made;
(e) the number and class of Shares to be sold (herein called the "Control
Shares"); and,
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(f) similar details of any previous transactions by which the Offeror has
sold any Shares since the date of this Agreement.
3.2 EXERCISE OF CO-SALE RIGHTS. Each of the Others shall have 30 days from the
date of receipt of the Control Notice to elect to sell to the buyer named in the
Control Notice (the "Buyer") all of their Shares (of whatever class) at a price
per Share equal to the Control Price (as herein defined) and otherwise on the
same terms and conditions as set forth in the Control Notice. If any of the
Others so elects to sell its Shares to the Buyer, it shall so inform both the
Buyer and the Offeror in writing not more than 30 days after receipt of the
Control Notice. Such sale shall take place coincidentally with the sale of the
Control Shares, and the Offeror shall not complete its sale unless all such
transactions between the Buyer and any Others who elect to sell, are similarly
completed. If the Buyer will not purchase such Shares on the sale date, the
proposed sale by the Offeror as described in the Control Notice shall not be
made.
3.3 CONTROL PRICE. The term "Control Price" shall mean the price per Share,
computed separately according to its class, of the Company which is the greater
of:
(a} the amount payable per Share of that class for the Shares of that
class proposed to be sold by the Offeror as specified in the Control
Notice; and
(b) the average price per Share of that class paid at any previous time by
the Buyer together with any of its Affiliates or Associates to the
Offeror,
provided that where Common Shares are proposed to be sold or have been sold, the
average amount applicable to a Preferred Share shall be computed as if such
Preferred Share were converted to a Common Share in accordance with the
provisions of the Articles, and where Preferred Shares are proposed to be sold
or have been sold, the average amount applicable to a Common Share shall be
computed on the basis of a reverse conversion.
3.4 NON-EXERCISE. To the extent that the Others do not elect to sell as provided
in Paragraph 3.2 then subject to compliance with Parts I and 2 (if applicable),
the Offeror may sell the Shares offered for sale to the Buyer at the price and
terms specified in the Control Notice. If the Offeror has not sold the Shares
offered for sale within 120 days after the mailing of the Control Notice to the
Others, the Offeror shall not sell such Shares offered for sale without again
complying with the terms of this Part 3.
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4. EXEMPT TRANSFERS
4.1 PERMITTED TRANSACTIONS. Notwithstanding the foregoing, the first offer
rights of the Company and the Shareholders and the co-sale rights of the Others
shall not apply to any transfer, sale or other disposition:
(a) in the case of Shareholders that are individuals, to the ancestors,
descendants, siblings or spouse of the Shareholder or to trusts for
the benefit of such persons;
(b) to a partner or retired partner of a Shareholder that is a partnership
or to the estate of any such partner or retired partner or the
transfer by gift, will or intestate succession of any partner to his
or her spouse, ancestors, descendants, or siblings or to trusts for
the benefit of such persons;
(c) between any one or more of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the spouse of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ , ▇▇▇▇▇ Wales, ▇▇▇▇▇▇▇▇ Wales, the ▇▇▇▇▇▇▇ Family Trust,
Boardwalk Ventures Inc., Daybreak Software Inc. and Fireweed
Investments Inc., ancestors, descendants or siblings of any of them
and to trusts for the benefit of any of them;
(d) in the case of VW B.C. Technology Investment Fund Limited Partnership
("Ventures West") to:
(i) any limited partnership of which the general partner is under
common control with those persons who controlled Ventures West
Management B.C. Ltd. as at the date of the disposition;
(ii) any corporation or form of entity whose senior officers are, or
which is managed by, a corporate manager whose senior officers
are common officers of Ventures West Management B.C. Ltd. as at
the date of the disposition; and
(iii) persons who are bona fide investors (including the general
partner or fund manager, as the case may be, and any of its
Associates or Affiliates), in Ventures West who are entitled to
participate in a distribution of the assets of Ventures West
upon winding up, liquidation or dissolution where the Shares are
distributed to them on such occurrence;
(e) in the case of Bank of Montreal Capital Corporation ("BMO-CC"):
(i) to Ventures West Management TIP Inc., the manager of BMO-CC;
(ii) in connection with a reorganization of the Bank of Montreal
group of companies with respect to the activities of BMO-CC; and
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(iii) if BMO-CC is required to divest itself of its Shares in order to
remain a "specialized financing corporation" (as defined in the
Bank Act, as amended from time to time);
and
(f) in the event the BMO-CC Shares are transferred to Ventures West
Management TIP Inc., notwithstanding Paragraph 1.2, Ventures West
Management TIP Inc. may sell, transfer or otherwise dispose of the
whole or any part of its Shares to:
(i) any limited partnership of which the general partner is under
common control with those persons who controlled Ventures West
management TIP Inc. as at the date of the transfer; and
(ii) any corporation or other form of entity whose senior officers
are, or which is managed by, a corporate manager whose senior
officers are common officers of Ventures West Management TIP Inc.
at the date of the transfer;
provided that the transferee shall furnish the Shareholders and the Company with
a written agreement to be bound by and comply with all provisions of this
Agreement. Such transferred Shares shall remain "Shares" hereunder, and such
transferee shall be treated as a "Shareholder" for the purposes of this
Agreement. For purposes of this Agreement, "Associate" shall have the meaning as
defined in the Company Act (British Columbia).
4.2 TRANSFERS TO AFFILIATES. Notwithstanding Paragraph 1.2, any Shareholder may
sell, transfer or otherwise dispose of the whole or any part of its Shares to
any of its Affiliates provided that the Shareholder and the Affiliate enter into
an agreement with the other Shareholders that:
(a) the Affiliate will remain an Affiliate so long as the Affiliate
holds the Shares or any part thereof;
(b) prior to the Affiliate ceasing to be such, the Affiliate will
transfer its Shares back to the Shareholder or to another
Affiliate of the Shareholder provided that such other Affiliate
enters into an agreement on the same terms in all material
respects as this Agreement with the other Shareholders and the
Company; and
(c) the Affiliate will otherwise be bound by and have the benefit of
the provisions of this Agreement.
4.3 NUMBER OF TRANSFEREES. The rights of the Shareholders under Paragraphs 4.1
and 4.2 to sell, transfer or otherwise dispose of the whole or any part of its
Shares without going through the first offer provisions of paragraph 1.2 is
subject to the condition that no such transfer shall cause the
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Shares of the Company to be held by 50 or more persons, counting any two or more
joint registered owners of Shares as one beneficial owner, exclusive of persons:
(a) that are employed by the Company or any Affiliate of the Company;
or
(b) that beneficially owned, directly or indirectly, Shares of the
Company while employed by the Company or by an Affiliate of the
Company and, at all times since ceasing to be so employed, have
continued to beneficially own, directly or indirectly, at lease
one Share of the Company.
4.4 COMPANY REPURCHASE OR PUBLIC OFFERING. The provisions of this Agreement
shall not apply to the sale of any Shares (a) to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the U.S. Securities Act of 1933, as amended (the
"Securities Act") or (b) to the Company, except the co-sale rights on change of
control as more particularly set out in Part 3.
5. PROHIBITED TRANSFERS
5.1 GRANT. In addition to any other rights or remedies available to the other
Shareholders at law or in equity, in the event a Shareholder should sell any
Shares (a "Breaching Shareholder") of the Company in contravention of the
participation rights of the other Shareholders under this Agreement (a
"Prohibited Transfer"), the other Shareholders shall have the put option
provided in Paragraph 5.2.
5.2 PUT OPTION. In the event of a Prohibited Transfer, the other Shareholders
and each of them shall have the option to sell to the Breaching Shareholder a
number of Common Shares of the Company (either directly or through delivery of
Preferred Shares) equal to the number of shares that such other Shareholders
would have been entitled to sell had such Prohibited Transfer been effected in
accordance with Parts 2 and 3 hereof, on the following terms and conditions:
(a) The price per share at which the shares are to be sold to the
Breaching Shareholder shall be equal to the price per share paid to
the Breaching Shareholder by the third party purchaser or purchasers
of the Breaching Shareholder's Shares.
(b) The other Shareholders shall deliver to the Breaching Shareholder
within 30 days after they have received notice from the Breaching
Shareholder or otherwise become aware of the Prohibited Transfer, the
certificate or certificates representing shares to be sold, each
certificate to be properly endorsed for transfer.
(c) The Breaching Shareholder shall, upon receipt of the certificates for
the shares, pay the aggregate Paragraph 5.2 purchase price therefor,
by certified cheque or bank draft made payable to the order of the
other Shareholders that have delivered the
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certificates for the shares and shall reimburse such other
Shareholders for any additional expenses, including legal fees and
expenses, incurred in effecting such purchase and sale and the parties
shall otherwise do such acts and execute such documents (including
replacement share certificates) as may be reasonably required to
effect and complete the sale.
6. LEGEND REQUIREMENTS
6.1 LEGEND. Each certificate representing the Shares owned by the Shareholders
shall be endorsed with the following legend:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN SHAREHOLDERS AGREEMENT
DATED JANUARY 15,1999 BY AND AMONG THE REGISTERED HOLDER (OR ITS PREDECESSOR
IN INTEREST), THE COMPANY AND CERTAIN SHAREHOLDERS OF THE COMPANY. A COPY OF
SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
6.2 REMOVAL. The Paragraph 6.1 legend shall be removed upon termination of this
Agreement in accordance with the provisions of Paragraph 8.2.
7. CONDUCT OF COMPANY AFFAIRS
7.1 CONDUCT BY SHAREHOLDERS. Each of the Shareholders covenants and agrees at
all times to vote its shares and use its best efforts and take all steps as may
be reasonably required so as to cause the Company to act in the manner
contemplated by the provisions of this Agreement and to implement fully the
provisions of this Agreement and, to the extent permitted by law, cause the
board of directors of the Company (the "Board") to so act.
7.2 CONSTITUTION OF BOARD. Each of the Shareholders shall vote its shares so
that the number of directors on the Board shall be six and the Board shall
consist of the following:
(a) two directors shall be nominated and elected annually by the holders
of Common Shares and none of the holders of any of the other classes
of Shares shall have the right to vote with respect to such directors;
(b) so long as there are any Class B Preferred Shares issued and
outstanding, the holders of the Class B Preferred Shares shall have
the right to nominate and elect annually one director, and none of the
holders of any of the other classes of Shares shall have the right to
vote with respect to such one director, provided however, that if
there are no Class B Preferred Shares issued and outstanding, then
such director shall be
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nominated and elected by the members of the Company holding shares
entitled to vote;
(c) so long as there are any Class D Preferred Shares issued and
outstanding, the holders of the Class D Preferred Shares shall have
the right to nominate and elect annually one director, and none of the
holders of any of the other classes of Shares shall have the right to
vote with respect to such one director, provided however, that if
there are no Class D Preferred Shares issued and outstanding, then
such director shall be nominated and elected by the members of the
Company holding shares entitled to vote; and
(d) two directors shall be appointed by the Shareholders upon the
recommendation or approval of the majority of the directors that have
been nominated and elected pursuant to Paragraphs 7.2(a), (b) and (c)
above.
In the event that a position on the Board shall be vacated or be otherwise open
for any reason, the Shareholder or Shareholders whose nominee shall have
formerly occupied such position shall be entitled to nominate and elect a new
director to fill such vacancy.
7.3 REMOVAL. In the event that a director shall fail to vote and act as a
director to carry out the provisions of this Agreement then the Shareholders
agree to exercise their rights as shareholders of the Company and in accordance
with the Articles of the Company to remove such director from the Board.
7.4 ARTICLES. Unless otherwise provided herein the conduct of the business of
the Company shall be governed in accordance with the Articles of the Company.
7.5 AUDIT AND COMPENSATION COMMITTEES. The Board shall appoint an audit
committee and a compensation committee, each of which will be comprised of three
individuals, and the majority of which individuals on each committee will not be
involved in the management of the Company.
8. MISCELLANEOUS PROVISIONS
8.1 ALLOCATION OF RIGHTS. All rights granted under this Agreement to the
Shareholders shall be exercisable by and among the Shareholders on a pro rata
basis based on the number of Shares then held by the Shareholder, or on such
other basis as the Shareholder so agree.
8.2 TERMINATION. The rights of the Company and the Shareholders under this
Agreement and the correlative obligations of each Shareholder with respect to
the Company and each other Shareholder, except in the case of a Breaching
Shareholder, shall terminate at such time as the Shareholders to which the
rights or obligations relate shall no longer be the owner of any capital
12
16
shares of the Company. Unless sooner terminated in accordance with the preceding
sentence, this Agreement shall terminate upon the occurrence of any one of the
following events:
(a) the liquidation, dissolution or indefinite cessation of the business
operations of the Company;
(b) the execution by the Company of a general assignment for the benefit
of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company;
(c) immediately prior to the closing of a bona fide firm commitment
underwritten public offering of the Company's Common Shares registered
under the Securities Act.
8.3 NOTICE. Unless otherwise provided, any notice required or permitted to be
given to a party pursuant to the provisions of this Agreement shall be in
writing and shall be effectively given by personal delivery to the party to be
notified, by facsimile transmission or by mail from a United States or Canadian
Post Office, by registered or certified mail, postage prepaid and properly
addressed to the party to be notified as set forth below such party's signature
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties hereto, and any such notice will be
considered to have been received, if delivered, upon the date of delivery, if
sent by facsimile, then on the business day next following the date of
transmission, and if mailed, then five business days after the date of mailing.
If normal mail service is interrupted by strike, slowdown, force majeure or
other cause, a notice sent by mail will not be considered to be received until
actually received, and the party sending the notice will deliver or transmit by
facsimile such notice in order to ensure prompt receipt thereof.
8.4 SEVERABILITY. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed and
interpreted in such manner as to be effective and valid under applicable law.
8.5 WAIVER OR MODIFICATION. Any amendment or modification of this Agreement
shall be effective only if evidenced by a written instrument executed by the
Shareholders and the Company.
8.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of British Columbia and the laws of Canada applicable
therein.
8.7 LEGAL FEES. In the event of any dispute involving the terms hereof, the
prevailing parties shall be entitled to collect legal fees and expenses from the
other party to the dispute.
8.8 FURTHER ASSURANCES. Each party agrees to act in accordance herewith and not
to take any action that is designed to avoid the intention hereof.
13
17
8.9 SUCCESSORS AND ASSIGNS. This Agreement and the rights and obligations of the
parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives.
8.10 AGGREGATION OF SHARES. For the purposes of determining the availability of
any rights under this Agreement, the holdings of transferees and assignees of an
individual or a partnership who are spouses, ancestors, lineal descendants or
siblings of such individual or partners or retired partners of such partnership
(including spouses and ancestors, lineal descendants and siblings of such
partners or spouses who acquire Common Shares by gift, will or intestate
succession) shall be aggregated together with the individual or partnership, as
the case may be, for the purpose of exercising any rights or taking any action
under this Agreement.
8.11 TERMINATION OF PRIOR AGREEMENT. This Agreement supersedes and replaces the
Shareholders Agreement dated November 5, 1996 made among the Company, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ Wales, the ▇▇▇▇▇▇▇ Family Trust, ▇▇▇▇▇▇▇▇ Wales, Boardwalk
Ventures Inc., Daybreak Software Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VI,
Integral Capital Partners 1, LP, Integral Capital Partners II, LP, VW B.C.
Technology Investment Fund Limited Partnership and ▇▇▇▇▇ ▇▇▇▇▇▇, Bank of
Montreal Capital Corporation, Integral Capital Partners International II C.V.,
▇▇▇▇▇▇ ▇▇▇▇▇ and Oak Investment Partners VI, L.P. ( the "Prior Agreement"), and
upon execution and delivery of this Agreement, the Prior Agreement shall
terminate and have no further force or effect.
8.12 COUNTERPARTS. This Agreement may be executed in facsimile counterparts,
each of which when executed and delivered shall be deemed to be an original and
all of which together shall constitute the same document.
8.13 REMEDIES CUMULATIVE. All rights and remedies of the parties in this
Agreement are cumulative and are in addition to and shall not be deemed to
exclude any other rights or remedies allowed by law and all rights and remedies
may be exercised concurrently.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first indicated above.
PIVOTAL SOFTWARE INC.
per: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Address: ▇▇▇ - ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
14
18
THE ▇▇▇▇▇▇▇ FAMILY TRUST
per: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
BOARDWALK VENTURE INC.
per: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
DAYBREAK SOFTWARE INC.
per: /s/ ▇▇▇▇▇ WALES
-------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
FIREWEED INVESTMENTS INC.
per: /s/ ▇▇▇▇▇▇▇▇ WALES
-------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
15
19
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇ WALES
-------------------------
▇▇▇▇▇ WALES
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ WALES
-------------------------
▇▇▇▇▇▇▇▇ WALES
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
16
20
VW B.C. TECHNOLOGY INVESTMENT FUND
LIMITED PARTNERSHIP
By its general, partner Ventures West
Management B.C. Ltd.
per: /s/ SIGNED
------------------------------------
Address: ▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
BANK OF MONTREAL CAPITAL CORPORATION
By its manager, Ventures West Management
TIP Inc.
per: /s/ SIGNED
------------------------------------
Address: ▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VI
by: /s/ SIGNED
-------------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
17
21
INTEGRAL CAPITAL PARTNERS, L.P.
by: /s/ SIGNED
-----------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ or
▇▇▇▇ ▇▇▇▇▇▇
INTEGRAL CAPITAL PARTNERS II, L.P.
By Integral Capital Management II, L.P.,
its General Partner
by: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
A General Partner
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ or
▇▇▇▇ ▇▇▇▇▇▇
INTEGRAL CAPITAL PARTNERS INTERNATIONAL
II, C.V.
By Integral Capital Management II, L.P.,
its Investment General Partner
by: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
A General Partner
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ or
▇▇▇▇ ▇▇▇▇▇▇
18
22
OAK INVESTMENT PARTNERS VI, L.P.
by: /s/ SIGNED
-----------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇ ▇▇▇▇▇▇
OAK VI AFFILIATES FUND, L.P.
by: /s/ SIGNED
-----------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇ ▇▇▇▇▇▇
KPMG PEAT MARWICK LLP
by: /s/ SIGNED
-----------------------------------
Address: Suite ▇▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
19
23
Schedule A
PIVOTAL SOFTWARE INC.
SHARE CAPITAL
AFTER
PRIOR TO PFD CLASS F
PFD CLASS F FINANCING FINANCING
---------------------------------------------- -----------------
FULLY
DILUTED
CONVERTED AT US $6.21
SHARE TYPE ISSUED % BASIS % # %
FOUNDERS
▇▇▇▇ ▇▇▇▇▇▇▇ Common A 680,800 680,800 680,000
▇▇▇▇ ▇▇▇▇▇▇▇ Common B 45,000 45,000 45,000
▇▇▇▇ ▇▇▇▇▇▇▇ Preferred Class A 142,857 142,857 142,857
868,657 5.97% 868,657 5.37% 868,657 4.98%
Boardwalk Ventures Preferred Class A 857,143 5.90% 857,143 5.30% 857,143 4.91%
▇▇▇▇▇▇▇ Family Trust Common A 575,800 3.96% 575,800 3.56% 575,800 3.30%
▇▇▇▇▇▇▇ Family Trust Common B 125,000 0.86% 125,000 0.77% 125,000 0.72%
▇▇▇▇▇ Wales Common A 669,550 669,550 669,550
▇▇▇▇▇ Wales Common B 56,250 56,250 56,250
▇▇▇▇▇ Wales Preferred Class A 71,428 71,428 71,428
(stock split, Aug 10, 1998) 797,228 5.48% 797,228 4.93% 797,228 4.57%
Daybreak Software Preferred Class A 428,572 2.95% 428,572 2.65% 428,572 2.46%
▇▇▇▇▇▇▇▇ Wales Common A 644,550 4.43% 644,550 3.99% 644,550 3.69%
▇▇▇▇▇▇▇▇ Wales Common B 56,250 0.39% 56,250 0.35% 56,250 0.32%
▇▇▇▇▇▇▇▇ Wales Preferred Class A 71,429 0.49% 71,429 0.44% 71,429 0.41%
Fireweed Investments Inc. Preferred Class A 428,571 2.95% 428,571 2.65% 428,571 2.46%
(stock split, Aug 10, 1998)
----- ----- -----
TOTAL FOUNDERS 4,853,200 33.38% 4,853,200 30.02% 4,853,200 27.80%
----- ----- -----
NON-FOUNDERS Common A 832,599 5.73% 832,599 5.15% 832,599 4.77%
Common B 194,286 1.34% 194,286 1.20% 194,286 1.11%
----- ----- -----
7.06% 6.35% 5.88%
----- ----- -----
VENTURES WEST
BCTIF Preferred Class D 1,645,570 11.32% 1.645,570 10.18% 1,645,570 9.43%
BCTIF Preferred Class E 370,370 2.55% 370,370 2.29% 370,370 2.12%
Bk of Montreal
Capital Corp. Preferred Class D 40,259 0.28% 40,259 0.25% 40,259 0.23%
Bk of Montreal
Capital Corp. Preferred Class E 370,370 2.55% 370,370 2.29% 370,370 2.12%
CLASS F 204,848 1.17% $1,272,104
----- ----- ----- ----------
2,426,569 16.69% 2,426,569 15.01% 2,426,569 15.08% $1,272,104
----- ----- ----- ----------
---------- ----- ---------- ----- ---------- -----
SUBTOTAL 8,306,654 57.14% 8,306,654 51.38% 8,511,502 48.76%
---------- ----- ---------- ----- ---------- -----
Integral Capital Partners Preferred Class B 200,000 210,526 210,526
Integral Capital
Partners II Preferred Class B 126,582 126,582 126,582
Integral Capital
Partners II Preferred Class B 548,148 548,148 548,148
Integral Capital
Partners Int'l. Preferred Class E 192,593 192,593 192,593
CLASS F 483,092 $3,000,000
----- ----- -----
1,067,323 7.34% 1,077,849 6.67% 1,560,941 8.94%
----- ----- -----
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ VI Preferred Class B 1,614,600 1,699,579 1,699,579
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ VI Preferred Class E 951,852 951,852 951,852
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ VI Preferred Class D 658,481 658,481 658,481
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ VI Preferred Class D 60,824 60,824 60,824
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ VI Preferred Class B 185,400 195,158 195,158
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ VI Preferred Class D 101,013 101,013 101,013
CLASS F 309,557 $1,922,346
----- ----- -----
3,572,170 24.57% 3,666,907 22.68% 3,976,464 22.78%
----- ----- -----
Oak VI Affiliates Fund L.P. Preferred Class D 581 0.00% 581 0.00% 581 0.00%
Oak Investment Partners Preferred Class D 24,918 0.17% 24,918 0.15% 24,918 0.14%
Oak Investment Partners Preferred Class E 1,511,111 10.39% 1,511,111 9.35% 1,511,111 8.66%
CLASS F 129,718 0.74% $805,550
----- ----- -----
10.57% 9.50% 9.55%
----- ----- -----
----- ----- -----
▇▇▇▇▇▇ ▇▇▇▇▇ Preferred Class E 55,556 0.38% 55,556 0.34% 55,556 0.32%
----- ----- -----
-----
KPMG CLASS F 161,031 0.92% $1,000,000
-----
---------- ----- ---------- ----- ---------- -----
6,231,659 42.86% 6,336,922 39.20% 7,420,319 42.51%
---------- ----- ---------- ----- ---------- -----
---------- ----- ---------- ----- ---------- -----
SUBTOTAL 14,538,313 100.00% 14,643,576 90.58% 15,931,821 91.27%
---------- ----- ---------- ----- ---------- -----
BEFORE UNEXERCISED AND UNGRANTED OPTIONS
EMPLOYEE OPTIONS
Granted, not exercised 1,202,861 7.44% 1,202,861 6.89%
Not granted 320,254 1.98% 320,254 1.83%
---------- ----- ---------- ---- ----------
TOTAL Fully Diluted with Options 16,166,691 100% 17,454,936 100% $8,888,888
========== ===== ========== ==== ==========