S2 TECHNOLOGIES, INC.
SERIES ▇-▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇, ▇▇▇▇
▇▇ TECHNOLOGIES, INC.
SERIES B-1 PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B-1 PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made and entered into as of May 6, 2003, by and among S2 TECHNOLOGIES, INC., a
California corporation (the "Company"), and each of those persons and entities,
severally and not jointly, whose names are set forth on the Schedule of
Purchasers attached hereto as Exhibit A (which persons and entities are
hereinafter collectively referred to as "Purchasers" and each individually as a
"Purchaser"). Together, the Company and the Purchasers are referred to as
"parties" and each as a "party."
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of two million nine hundred thousand (2,900,000) shares of its Series
B-1 Preferred Stock (the "Shares");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchasers
on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties, and covenants hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 Authorization of Shares. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized (a) the sale and issuance to
Purchasers of the Shares and (b) the issuance of such shares of Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares"). The Shares
and the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Second Amended and Restated Articles of
Incorporation of the Company, in the form attached hereto as Exhibit B (also
referred to as the "Restated Charter").
1.2 Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined) the Company shall issue and sell to each
Purchaser, severally and not jointly, and each Purchaser shall purchase from the
Company, severally and not jointly, the number of Shares set forth opposite such
Purchaser's name as set forth on the Schedule of Purchasers attached hereto as
Exhibit A (the "Schedule of Purchasers") under the heading "First Closing," at a
purchase price of thirty-five cents ($0.35) per share. The per share price
1.
will be adjusted based upon the Company meeting certain milestones as further
described in Section (4)(j) of the Second Amended and Restated Articles of
Incorporation.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 Closing. The closing of the sale and purchase of a minimum of
1,714,286 Shares set forth under the heading "First Closing" on Exhibit A (the
"Closing") shall take place at 12:00 p.m. on the date hereof, at the offices of
▇▇▇▇▇▇ Godward LLP located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or at such
other time or place as the Company and Purchasers may mutually agree (such date
is hereinafter referred to as the "Closing Date").
2.2 Delivery. At each Closing, subject to the terms and conditions
hereof, the Company will deliver to each Purchaser a certificate representing
the number of Shares purchased at the Closing by such Purchaser, against payment
of the purchase price therefor by check, wire transfer made payable to the order
of the Company, cancellation of indebtedness or any combination of the
foregoing.
2.3 Subsequent Sales of Shares. At any time on or before the 90th day
following the Closing or at such later time as the Company and the holders of a
majority of the Shares purchased at the Closing (pursuant to Section 2.1) may
mutually agree, the Company may sell up to the balance of the authorized shares
of Series B-1 Preferred Stock not sold at the Closing (the "Remaining Shares")
to such persons as may be approved by the Company (the "Additional Purchasers")
provided, however, that no such sales of Remaining Shares may be made hereunder
unless the Purchasers at the first Closing hereunder (the "Initial Purchasers")
are first offered a right to purchase their pro rata portion of the Remaining
Shares offered at any such Additional Closing (as defined below). Each Initial
Purchaser's "pro rata portion", for the purposes of this Section 2.3 only, shall
be equal to the number of shares that such Initial Purchaser actually purchased
at the first Closing divided by the total number of Shares sold by the Company
to all Initial Purchasers at the first Closing. If the Company proposes to sell
Remaining Shares, it shall give each Initial Purchaser written notice of its
intention. Each Initial Purchaser shall have ten (10) days from the giving of
such notice to agree to purchase up to its pro rata portion of the Remaining
Shares on the terms and conditions specified in this Agreement by giving written
notice to the Company and stating therein the quantity of Remaining Shares to be
purchased and delivering the requisite purchase price for such shares. If not
all of the Initial Purchasers elect to purchase their entire pro rata portion of
the Remaining Shares then being offered by the Company, the Company shall have
sixty (60) days thereafter to sell any such Remaining Shares to persons selected
in the Company's discretion, on the terms and conditions of this Agreement
during the ninety (90) day period referenced in the first sentence of this
Section 2.3. All such sales made at any additional closings (each an "Additional
Closing"), (i) shall be made on the terms and conditions set forth in this
Agreement, (ii) the representations and warranties of the Company set forth in
Section 3 hereof (and the Schedule of Exceptions) shall speak as of the Closing,
and (iii) the representations and warranties of the Additional Purchasers in
Section 4 hereof shall speak as of such Additional Closing. This Agreement,
including without limitation, the Schedule of Purchasers, may be amended by the
Company without the consent of Purchasers to include any Additional Purchasers.
Any shares of Series B-1 Preferred Stock sold pursuant to this Section 2.3 shall
be deemed to be "Shares" for
2.
all purposes under this Agreement and any Additional Purchasers thereof shall be
deemed to be "Purchasers" for all purposes under this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Schedule of Exceptions delivered by the
Company to the Purchasers at the Closing, the Company hereby represents and
warrants to each Purchaser as of the date of this Agreement as set forth below.
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Amended and Restated Investor Rights Agreement in the form
attached hereto as Exhibit C (the "Investor Rights Agreement"), the Amended and
Restated Co-Sale Agreement in the form attached hereto as Exhibit D (the
"Co-Sale Agreement"), and the Amended and Restated Voting Agreement in the form
attached hereto as Exhibit E (the "Voting Agreement") (collectively, the
"Related Agreements"), to issue and sell the Shares and the Conversion Shares,
and to carry out the provisions of this Agreement, the Related Agreements and
the Restated Charter and to carry on its business as presently conducted and as
presently proposed to be conducted.
3.2 Subsidiaries. The Company does not own or control any equity
security or other interest of any other corporation, limited partnership or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, immediately
prior to the Closing, consists of (i) thirty-eight million (38,000,000) shares
of Common Stock, five million eight hundred seventy-two thousand nine hundred
and sixteen (5,872,916) shares of which are issued and outstanding, and (ii)
fifteen million four hundred ninety-two thousand five hundred ninety-three
(15,492,593) shares of Preferred Stock, two million five hundred ninety-two
thousand five hundred ninety-three (2,592,593) shares of which are designated
Series A Preferred Stock, all of which are issued and outstanding, and ten
million (10,000,000) shares of which are designated Series B Preferred Stock,
nine million nine hundred sixty-four thousand two hundred and eighty-six
(9,964,286) of which are issued and outstanding. Of the Preferred Stock two
million nine hundred thousand (2,900,000) shares are designated Series B-1
Preferred Stock, none of which are issued and outstanding immediately prior to
the Closing.
(b) Under the Company's 2000 Equity Incentive Plan (the
"Plan"), (i) three hundred six thousand five hundred (306,500) shares have been
issued pursuant to restricted stock purchase agreements and/or the exercise of
outstanding options, (ii) options to purchase one million eight hundred
sixty-three thousand five hundred (1,863,500) shares of Common Stock have been
granted and are currently outstanding, and (iii) one million four hundred
thirty-seven thousand six hundred fifty-seven (1,437,657) shares of Common Stock
remain available for future issuance to officers, directors, employees and
consultants of the Company.
3.
(c) Other than (i) the shares reserved for issuance under the
Plan, (ii) warrants to purchase up to seven hundred thousand (700,000) shares of
Common Stock pursuant to that certain Business Consultant and Management
Agreement dated July 20, 2000, between the Company and Oryx Technologies, Inc.,
of which four hundred sixty-six thousand six hundred sixty-six (466,666) shares
have been exercised, and (iii) warrants to purchase up to thirty five thousand
seven hundred fourteen (35,714) shares of the Company's Series B Preferred Stock
issued to VMR High Octane Fund and except as may be granted pursuant to this
Agreement and the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or shareholder agreements, or agreements of any kind for the
purchase or acquisition from the Company of any of its securities.
(d) All issued and outstanding shares of the Company's Common
Stock (i) have been duly authorized and validly issued and are fully paid and
nonassessable, and (ii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
(e) The rights, preferences, privileges and restrictions of
the Shares are as stated in the Restated Charter. Each series of Preferred Stock
is convertible into Common Stock on a one-for-one basis as of the date hereof.
The Conversion Shares have been duly and validly reserved for issuance. When
issued in compliance with the provisions of this Agreement and the Restated
Charter, the Shares and the Conversion Shares will be validly issued, fully paid
and nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed
and will be subject to the terms of the Investor Rights Agreement, Co-Sale
Agreement and the Company's Bylaws.
(f) No stock plan, stock purchase, stock option or other
agreement or understanding between the Company and any holder of any equity
securities or rights to purchase equity securities provides for acceleration or
other changes in the vesting provisions or other terms of such agreement or
understanding as the result of any merger, consolidation, sale of stock or
assets, change in control or any other transaction(s) by the Company.
3.4 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto and the
Conversion Shares pursuant to the Restated Charter has been taken or will be
taken prior to the Closing. The Agreement and the Related Agreements, when
executed and delivered, will be valid and binding obligations of the Company
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions in Section 2.9
of the Investor Rights Agreement may be limited by applicable laws. The sale of
the Shares and the subsequent conversion of the Shares into Conversion Shares
are not and will not
4.
be subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with.
3.5 Liabilities. The Company has no material liabilities and knows of
no material contingent liabilities, except current liabilities incurred in the
ordinary course of business which have not been, either in any individual case
or in the aggregate, materially adverse.
3.6 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and
agreements between the Company and its individual employees with respect to the
sale of the Company's Common Stock, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i) obligations
(contingent or otherwise) of, or payments to, the Company in excess of $25,000
(other than obligations of, or payments to, the Company arising from purchase or
sale agreements entered into in the ordinary course of business), or (ii) the
transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses arising from the purchase of
"off the shelf" or other standard products), or (iii) indemnification by the
Company with respect to infringements of proprietary rights (other than
indemnification obligations arising from purchase or sale or license agreements
entered into by the Company for the benefit of its customers in the ordinary
course of business).
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business) individually in excess of $25,000 or, in the case of
indebtedness and/or liabilities individually less than $25,000, in excess of
$50,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
3.7 Obligations to Related Parties. There are no obligations of the
Company to officers, directors, shareholders, or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company, and/or (c) for other
standard employee benefits made generally available to all
5.
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company). None of the officers,
directors, key employees or shareholders of the Company, or any members of their
immediate families, is indebted to the Company. None of the officers, directors
or, to the best of the Company's knowledge, key employees or shareholders of the
Company or any members of their immediate families, has any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, other than passive investments in
publicly traded companies (representing less than 1% of such company) which may
compete with the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.8 Title to Properties and Assets; Liens, Etc. The Company has good
and marketable title to its properties and assets, including the properties and
assets reflected in the Company's most recent balance sheet dated December 31,
2003, a copy of which has been provided to the Purchasers, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not
yet become delinquent, (b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, and (c) those that have otherwise arisen in the
ordinary course of business. The Company is in compliance with all material
terms of each lease to which it is a party or is otherwise bound.
3.9 Intellectual Property.
(a) The Company owns or possesses sufficient legal rights to
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes necessary for
its business as now conducted and as presently proposed to be conducted, without
any known infringement of the rights of others. There are no outstanding
options, licenses or agreements of any kind relating to the foregoing
proprietary rights, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes of any other person or entity other than
such licenses or agreements arising from the purchase of "off the shelf" or
standard products.
(b) The Company has not received any communications alleging
that the Company has violated or, by conducting its business as presently
proposed in the Business Plan (as defined in Section 3.18 hereof), would violate
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity.
(c) The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with their duties to
the Company or that would conflict with the Company's business as presently
proposed to be conducted in the Business Plan. Each employee, officer and
6.
consultant of the Company has executed a Proprietary Information and Inventions
Agreement in the form of Exhibit F attached hereto. No employee, officer or
consultant of the Company has excluded works or inventions made prior to his or
her employment with the Company from his or her assignment of inventions
pursuant to such employee, officer or consultant's proprietary information and
inventions agreement. The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been assigned to the Company.
(d) Neither the execution nor delivery of this Agreement or
the Related Agreements, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business (as
presently proposed in the Business Plan (as defined in Section 3.18)) will, to
the Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated.
3.10 Compliance with Other Instruments. The Company is not in violation
or default of any term of its Restated Charter or Bylaws, or of any provision of
any mortgage, indenture, contract, agreement, instrument or contract to which it
is party or by which it is bound or of any judgment, decree, order, writ. The
execution, delivery, and performance of and compliance with this Agreement, and
the Related Agreements, and the issuance and sale of the Shares pursuant hereto
and of the Conversion Shares pursuant to the Restated Charter, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties. The Company has avoided every condition, and
has not performed any act, the occurrence of which would result in the Company's
loss of any right granted under any license, distribution agreement or other
agreement required to be disclosed on the Schedule of Exceptions.
3.11 Litigation. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, or the Related Agreements or the
right of the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for any of the foregoing. The foregoing includes,
without limitation, actions pending or, to the Company's knowledge, threatened
or any basis therefor known by the Company involving the prior employment of any
of the Company's employees, their use in connection with the Company's business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit,
7.
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.12 Tax Returns and Payments. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company's
knowledge all other taxes due and payable by the Company on or before the
Closing, have been paid or will be paid prior to the time they become
delinquent. The Company has no knowledge of any liability of any tax to be
imposed upon its properties or assets as of the date of this Agreement that is
not adequately provided for.
3.13 Employees. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. The
Company is not a party to or bound by any currently effective employment
contract, deferred compensation arrangement, bonus plan, incentive plan, profit
sharing plan, retirement agreement or other employee compensation plan or
agreement. To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or of any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and/or the performance of the Company's
contracts with its independent contractors, will not result in any such
violation. The Company has not received any notice alleging that any such
violation has occurred. No employee of the Company has been granted the right to
continued employment by the Company or to any compensation following termination
of employment with the Company. The Company has no knowledge that any officer,
key employee or group of employees intends to terminate his, her or their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee, group of employees, or
contractor.
3.14 Obligations of Management. Each officer and key employee of the
Company is currently devoting substantially all of his or her business time to
the conduct of the business of the Company. The Company is not aware that any
officer or key employee of the Company is planning to work less than full time
at the Company in the future. No officer or key employee is currently working
or, to the Company's knowledge, plans to work for a competitive enterprise,
whether or not such officer or key employee is or will be compensated by such
enterprise.
3.15 Registration Rights and Voting Rights. Except as required pursuant
to the Investor Rights Agreement, the Company is not under any obligation, and
has not granted any rights, to register (as defined in Section 1.1 of the
Investor Rights Agreement) any of the Company's presently outstanding securities
or any of its securities that may hereafter be issued. To the Company's
knowledge, except as contemplated in the Voting Agreement, no shareholder of the
Company has entered into any agreement with respect to the voting of equity
securities of the Company.
8.
3.16 Compliance with Laws; Permits. The Company is not in violation of
any applicable statute, rule, regulation, order or restriction of any domestic
or foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the issuance of the Shares or
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. The Company (a) has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects or financial condition of the Company
and (b) believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted in the
Business Plan.
3.17 Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.2 hereof, the offer, sale
and issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
3.18 Full Disclosure. The Company has provided the Purchasers with all
information requested by the Purchasers in connection with their decision to
purchase the Shares, including all information the Company believes is
reasonably necessary to make such investment decision. Neither this Agreement,
the exhibits hereto, the Related Agreements nor any other document delivered by
the Company to Purchasers or their attorneys or agents in connection herewith or
therewith or with the transactions contemplated hereby or thereby, contain any
untrue statement of a material fact nor, omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading.
Notwithstanding the foregoing, the 2003 Business Plan attached hereto as Exhibit
H (the "Business Plan") provided to each of the Purchasers was prepared by the
management of the Company in a good faith effort to describe the Company's
presently proposed business and products and the markets therefor. The
assumptions applied in preparing the Business Plan appeared reasonable to
management as of the date thereof and as of the date hereof; however, there is
no assurance that these assumptions will prove to be valid or that the
objectives set forth in the Business Plan will be achieved. To the Company's
knowledge, there are no facts which (individually or in the aggregate)
materially adversely affect the business, assets, liabilities, financial
condition, prospects or operations of the Company that have not been set forth
in the Agreement, the exhibits hereto, the Related Agreements or in other
documents delivered to Purchasers or their attorneys or agents in connection
herewith.
9.
3.19 Section 83(b) Elections. To the Company's knowledge, all elections
and notices permitted by Section 83(b) of the Code and any analogous provisions
of applicable state tax laws have been timely filed by all employees who have
purchased shares of the Company's common stock under agreements that provide for
the vesting of such shares.
3.20 Insurance. The Company has or will obtain promptly following the
Closing general commercial, product liability, fire and casualty insurance
policies with coverage customary for companies similarly situated to the
Company.
3.21 Qualified Small Business. The Company represents and warrants to
the Purchasers that, to the best of its knowledge, the Company is a "qualified
small business" within the meaning of Section 1202(d) of the Internal Revenue
Code of 1986, as amended (the "Code") as of the date hereof and that upon
issuance the Shares should qualify as "qualified small business stock" as
defined in Section 1202(c) of the Code as of the date hereof.
3.22 U.S. Real Property Holding Corporation. The Company is not now and
has never been a "United States real property holding corporation" as defined in
Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service, and the Company has filed with the
Internal Revenue Service all statements, if any, with its United States income
tax returns which are required under Section 1.897-2(h) of the such Regulations.
3.23 Compliance with Environmental Laws. The Company has not caused or
allowed, or contracted with any party for, the generation, use, transportation,
treatment, storage or disposal of any Hazardous Substances (as defined below) in
connection with the operation of its business or otherwise. To its knowledge,
the Company, the operation of its business, and any real property that the
Company owns, leases or otherwise occupies or uses (the "Premises") are in
compliance with all applicable Environmental Laws (as defined below) and orders
or directives of any governmental authorities having jurisdiction under such
Environmental Laws. The Company has not received any citation, directive, letter
or other communication, written or oral, or any notice of any proceeding, claim
or lawsuit, from any person arising out of the ownership or occupation of the
Premises, or the conduct of its operation, and the Company is not aware of any
basis therefor. For purposes of this Agreement, the term "Environmental Laws"
shall mean any Federal, state or local law or ordinance or regulation pertaining
to the protection of human health or the environment. For purposes of this
Agreement, the term "Hazardous Substances" shall include any materials
classified as hazardous or toxic under any Environmental Laws.
3.24 Minute Books. The minute books of the Company made available to
the Investors contain a complete summary of all meetings of directors and
shareholders of the Company since the time of incorporation of the Company.
10.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
action on Purchaser's part required for the lawful execution and delivery of
this Agreement and the Related Agreements have been or will be effectively taken
prior to the Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) as limited by
general principles of equity that restrict the availability of equitable
remedies, and (c) to the extent that the enforceability of the indemnification
provisions of Section 2.9 of the Investor Rights Agreement may be limited by
applicable laws.
4.2 Investment Representations. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that Purchaser is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present intention of
registering the Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares or the Conversion Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
11.
(d) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Purchaser has received and read the
Company's financial statements and Business Plan and has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the
Shares, and, if issued, the Conversion Shares, must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring following the required holding period under Rule
144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit A; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located at
the address or addresses of the Purchaser set forth on Exhibit A.
4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees that
the Shares and, if issued, the Conversion Shares, are subject to restrictions on
transfer as set forth in the Investor Rights Agreement and are subject to voting
requirements as set forth in the Voting Agreement.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchasers' Obligations at the Closing. Purchasers'
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
(b) Legal Investment. On the Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
12.
(c) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
(d) Filing of Restated Charter. The Restated Charter shall
have been filed with the Secretary of State of California and shall continue to
be in full force and effect as of the Closing Date.
(e) Corporate Documents. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company as
Purchasers shall reasonably request.
(f) Reservation of Conversion Shares. The Conversion Shares
issuable upon conversion of the Shares issuable at the Closing shall have been
duly authorized and reserved for issuance upon such conversion.
(g) Compliance Certificate. The Company shall have delivered
to Purchasers a Compliance Certificate, executed by the President of the
Company, dated the Closing Date, to the effect that the conditions specified in
subsections (a), (c), (d) and (f) of this Section 5.1 have been satisfied.
(h) Secretary's Certificate. The Purchasers shall have
received from the Company's Secretary, a certificate having attached thereto (i)
the Company's Articles of Incorporation as in effect at the time of the Closing,
(ii) the Company's Bylaws as in effect at the time of the Closing, (iii)
resolutions approved by the Board of Directors authorizing the transactions
contemplated hereby, (iv) resolutions approved by the Company's shareholders
authorizing the filing of the Restated Charter, and (v) good standing
certificates (including tax clearance) with respect to the Company from the
applicable authority(ies) in California and any other jurisdiction in which the
Company is qualified to do business, dated a recent date before the Closing.
(i) Investor Rights Agreement. The Investor Rights Agreement
shall have been executed and delivered by the parties thereto.
(j) Co-Sale Agreement. The Co-Sale Agreement shall have been
executed and delivered by the parties thereto. The stock certificates
representing the shares subject to the Co-Sale Agreement shall have been
delivered to the Secretary of the Company and shall have had appropriate legends
placed upon them to reflect the restrictions on transfer set forth on the
Co-Sale Agreement.
(k) Voting Agreement. The Voting Agreement shall have been
executed and delivered by the parties thereto.
(l) Board of Directors. Upon the Closing, the authorized size
of the Board of Directors of the Company shall be five (5) members and the Board
shall consist of ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and two (2) other
members, as further specified in the Voting Agreement.
13.
(m) Legal Opinion. The Purchasers shall have received from
legal counsel to the Company an opinion addressed to them, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit G.
(n) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(o) Proprietary Information and Inventions Agreement. The
Company and each of its officers, employees and consultants shall have entered
into the Company's standard form of Proprietary Information and Inventions
Agreement, in substantially the form attached hereto as Exhibit F or in other
form reasonably acceptable to the Purchasers.
(p) Executed Side Letter. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall have delivered
to the Investors an executed side letter regarding the impact of the Company's
ability to reach certain milestones as further defined in the letter.
5.2 Conditions to Purchasers' Obligations at an Additional Closing.
Purchasers' obligations to purchase the Shares at any Additional Closing are
subject to the satisfaction, at or prior to the date of the Additional Closing
of the following conditions:
(a) Legal Investment. The sale and issuance of the Shares and
the proposed issuance of the Conversion Shares shall be legally permitted by all
laws and regulations to which Purchasers and the Company are subject.
(b) Filing of Restated Charter. The Restated Charter shall
have been filed with the Secretary of State of the State of California and shall
continue to be in full force and effect.
(c) Reservation of Conversion Shares. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(d) Compliance Certificate. The Company shall have delivered
to the Additional Purchasers at such Additional Closing (i) a Compliance
Certificate, executed by the President of the Company, dated as of the date of
the Additional Closing, to the effect that the conditions specified in
subsections (b) and (c) of this Section 5.2 have been satisfied and (ii) a
Certificate of the Chief Executive Officer that there have been no material
changes to representations and warranties of the Company set forth in Section 3
herein or, if they have so changed, then said Certificate shall be accompanied
by a revised Schedule of Exceptions dated as of the date of the Closing.
(e) Secretary's Certificate. The Additional Purchasers at such
Additional Closing shall have received from the Company's Secretary, a
certificate having attached thereto (i) the Company's Articles of Incorporation
as in effect at the time of the
14.
respective Additional Closing, (ii) the Company's Bylaws as in effect at the
time of the respective Additional Closing, (iii) resolutions approved by the
Board of Directors authorizing the transactions contemplated hereby, (iv)
resolutions approved by the Company's shareholders authorizing the filing of the
Restated Charter, and (v) good standing certificates (including tax clearance)
with respect to the Company from the applicable authority(ies) in California and
any other jurisdiction in which the Company is qualified to do business, dated a
recent date before the given Additional Closing.
5.3 Conditions to Obligations of the Company. The Company's obligation
to issue and sell the Shares at the Closing and at each Additional Closing is
subject to the satisfaction, on or prior to the Closing or the Additional
Closing, as the case may be, of the following conditions by each Purchaser
participating in the Closing or the Additional Closing, as the case may be
(except that with respect to any Additional Closing, the references to "Closing"
shall instead be deemed to refer to the applicable "Additional Closing"):
(a) Representations and Warranties True. The representations
and warranties in Section 4 made by those Purchasers acquiring Shares shall be
true and correct in all material respects at the date of the Closing, with the
same force and effect as if they had been made on and as of said date.
(b) Performance of Obligations. Such Purchasers shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) Filing of Restated Charter. The Restated Charter shall
have been filed with the Secretary of State of the State of California.
(d) Investor Rights Agreement. The Investor Rights Agreement
shall have been executed and delivered by the parties thereto.
(e) Co-Sale Agreement. The Co-Sale Agreement shall have been
executed and delivered by the parties thereto.
(f) Voting Agreement. The Voting Agreement shall have been
executed and delivered by the parties thereto.
(g) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
6. MISCELLANEOUS.
6.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
15
6.2 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 Entire Agreement. This Agreement, the exhibits and schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof, and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 Amendment and Waiver.
(a) This Agreement shall be amended or modified only upon the
written consent of the Company and holders of at least a majority of the
outstanding Shares (treated as if converted and including any Conversion Shares
into which the Shares have been converted that have not been sold to the
public).
(b) The obligations of the Company and the rights of the
holders of the Shares and the Conversion Shares under the Agreement may be
waived only with the written consent of the holders of at least a majority of
the outstanding Shares (treated as if converted and including any Conversion
Shares into which the Shares have been converted that have not been sold to the
public).
6.7 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party, upon any breach, default or noncompliance
by another party under this Agreement, the Related Agreements or the Restated
Charter, shall impair any such right, power or remedy, nor shall it be construed
to be a waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
any Purchaser's part of any breach, default or noncompliance under this
Agreement, the Related Agreements or under the Restated Charter or any waiver on
such party's part of any provisions or conditions of the Agreement, the Related
Agreements, or the Restated Charter must be in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, the Related Agreements, the Restated Charter, by law, or
otherwise afforded to any party, shall be cumulative and not alternative.
16.
6.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, provided
that any facsimile transmission shall be followed immediately by notice sent
registered or certified mail as provided herein; (c) five (5) days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid; or (d) upon delivery to recipient after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at the
address as set forth on the signature page hereof and to Purchaser at the
address set forth on Exhibit A attached hereto or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
6.9 Expenses. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement. The Company shall, immediately following the Closing, reimburse
the reasonable fees of and expenses of one counsel for all Investors and shall
reimburse such counsel for reasonable expenses incurred in connection with the
negotiation, execution, delivery and performance of this Agreement; provided,
however, that the cumulative amount of said fees and expenses to such counsel
shall not exceed $10,000.
6.10 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.11 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. This Agreement may be executed and delivered by
facsimile and upon such delivery the facsimile signature will be deemed to have
the same effect as if the original signature had been delivered to the other
party.
6.13 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.13 being untrue.
6.14 Confidentiality. Each party hereto agrees that, except with the
prior written consent of the other party or parties, as applicable, it shall at
all times keep confidential and not divulge, furnish or make accessible to
anyone any confidential information, knowledge
17.
or data concerning or relating to the business or financial affairs of the other
parties to which such party has been or shall become privy by reason of this
Agreement or the Related Agreements, discussions or negotiations relating to
this Agreement or the Related Agreements, the performance of its obligations
hereunder or the ownership of the Shares purchased hereunder. The provisions of
this Section 6.14 shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by the parties
hereto.
Notwithstanding anything herein to the contrary, any party to this
Agreement (and any employee, representative, or other agent of any party to this
Agreement) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided however, that such disclosure may not be made to the extent
reasonably necessary to comply with any applicable federal or state securities
laws. For the purposes of the foregoing sentence, (i) the "tax treatment" of a
transaction means the purported or claimed federal income tax treatment of the
transaction, and (ii) the "tax structure" of a transaction means any fact that
may be relevant to understanding the purported or claimed federal income tax
treatment of the transaction.
Thus, for the avoidance of doubt, the parties acknowledge and agree that
the tax treatment and tax structure of any transaction does not include the name
of any party to a transaction or any sensitive business information (including,
without limitation, the name and other specific information about any party's
intellectual property or other proprietary assets) unless such information may
be related or relevant to the purported or claimed federal income tax treatment
of the transaction.
6.15 Pronouns. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
6.16 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
18.
IN WITNESS WHEREOF, the parties hereto have executed the SERIES B-1
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASERS:
S2 TECHNOLOGIES, INC. ORYX VENTURES, LLC
Signature: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Signature: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------- -------------------------
Print Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Print Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------ ------------------------
Title: CEO Title: CEO
----------------------------- -----------------------------
Address: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PROFILE VENTURE PARTNERS FUND 1, L.P.
Signature: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
Title: PRESIDENT & COO OF
▇▇▇▇▇▇▇ COMPUTER ASSOC.
THE SOLE G.P.
----------------------------
VMR HIGH OCTANE FUND
Signature: /s/ ▇. ▇. ▇▇▇▇▇▇
------------------------
Print Name: ▇. ▇. ▇▇▇▇▇▇
------------------------
Title: DIRECTOR
----------------------------
COLUMBUS NOVA INVESTMENTS
Signature: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
Print Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
Title: DIRECTOR
----------------------------
[SERIES B-1 PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
TABLE OF CONTENTS
PAGE
1. AGREEMENT TO SELL AND PURCHASE...........................................1
1.1 Authorization of Shares.........................................1
1.2 Sale and Purchase...............................................1
2. CLOSING, DELIVERY AND PAYMENT............................................2
2.1 Closing and Subsequent Closing..................................2
2.2 Delivery........................................................2
2.3 Subsequent Sale of Shares.......................................2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................3
3.1 Organization, Good Standing and Qualification...................3
3.2 Subsidiaries....................................................3
3.3 Capitalization; Voting Rights...................................3
3.4 Authorization; Binding Obligations..............................4
3.5 Liabilities.....................................................5
3.6 Agreements; Action..............................................5
3.7 Obligations to Related Parties..................................5
3.8 Title to Properties and Assets; Liens, Etc......................6
3.9 Intellectual Property...........................................6
3.10 Compliance with Other Instruments...............................7
3.11 Litigation......................................................7
3.12 Tax Returns and Payments........................................8
3.13 Employees.......................................................8
3.14 Obligations of Management.......................................8
3.15 Registration Rights and Voting Rights...........................8
3.16 Compliance with Laws; Permits...................................9
3.17 Offering Valid..................................................9
3.18 Full Disclosure.................................................9
3.19 Section 83(b) Elections........................................10
3.20 Insurance......................................................10
3.21 Qualified Small Business.......................................10
3.22 U.S. Real Property Holding Corporation.........................10
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.23 Compliance with Environmental Laws.............................10
3.24 Minute Books...................................................10
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................11
4.1 Requisite Power and Authority..................................11
4.2 Investment Representations.....................................11
4.3 Transfer Restrictions..........................................12
5. CONDITIONS TO CLOSING...................................................12
5.1 Conditions to Purchasers' Obligations at the Closing...........12
5.2 Conditions to Purchasers' Obligations at an Additional Closing.14
5.3 Conditions to Obligations of the Company.......................15
6. MISCELLANEOUS...........................................................15
6.1 Governing Law..................................................15
6.2 Survival.......................................................16
6.3 Successors and Assigns.........................................16
6.4 Entire Agreement...............................................16
6.5 Severability...................................................16
6.6 Amendment and Waiver...........................................16
6.7 Delays or Omissions............................................16
6.8 Notices........................................................17
6.9 Expenses.......................................................17
6.10 Attorneys' Fees................................................17
6.11 Titles and Subtitles...........................................17
6.12 Counterparts...................................................17
6.13 Broker's Fees..................................................17
6.14 Confidentiality................................................17
6.15 Pronouns.......................................................18
6.16 California Corporate Securities Law............................18
ii.
LIST OF EXHIBITS
Schedule of Purchasers Exhibit A
Amended and Restated Articles of Incorporation Exhibit B
Amended and Restated Investor Rights Agreement Exhibit C
Amended and Restated Co-Sale Agreement Exhibit D
Amended and Restated Voting Agreement Exhibit E
Proprietary Information and Inventions Agreement Exhibit F
Form of Legal Opinion Exhibit G
Business Plan Exhibit H
EXHIBIT A
SCHEDULE OF PURCHASERS
PURCHASE PRICE PAYABLE IN
IMMEDIATELY AVAILABLE
PURCHASER SHARES FUNDS AT FIRST CLOSING
--------- ------ -------------------------
FIRST CLOSING
ORYX VENTURES, LLC 571,428 $200,000.00
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
PROFILE VENTURE PARTNERS FUND 1, L.P. 214,285 $75,000.00
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
HIGH OCTANE FUND 857,142 $300,000.00
▇/▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ of Man 1M992DR
COLUMBUS NOVA INVESTMENTS 857,142 $300,000.00
c/o Columbus Nova Partners LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
TOTAL FOR FIRST CLOSING: 2,499,999 $875,000.00
--------- -----------
EXHIBIT B
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
S2 TECHNOLOGIES, INC.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
S2 TECHNOLOGIES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ hereby certifies that:
ONE: He is the duly elected and acting President and Secretary of S2
Technologies, Inc., a California corporation (the "Corporation").
TWO: The Amended and Restated Articles of Incorporation of this
Corporation are hereby amended and restated to read in full as follows:
"I.
The name of the Corporation is S2 TECHNOLOGIES, INC. (the
"Corporation").
II.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is fifty-three million
four hundred ninety-two thousand five hundred ninety-three (53,492,593) shares,
thirty-eight million (38,000,000) shares of which shall be Common Stock (the
"Common Stock") and fifteen million four hundred ninety-two thousand five
hundred ninety-three (15,492,593) shares of which shall be Preferred Stock (the
"Preferred Stock").
B. Two million five hundred ninety-two thousand five hundred
ninety-three (2,592,593) of the authorized shares of Preferred Stock are hereby
designated "Series A Preferred Stock" (the "Series A Preferred"), ten million
(10,000,000) of the authorized shares of Preferred Stock are hereby designated
"Series B Preferred Stock" (the "Series B Preferred") and two million nine
hundred thousand (2,900,000) of the authorized shares of Preferred Stock are
hereby designated "Series B-1 Preferred Stock" (the "Series B-1 Preferred") (the
Series A Preferred, Series B Preferred, and Series B-1 Preferred are referred to
herein collectively as the "Series Preferred").
C. The rights, preferences, privileges, restrictions and other matters
relating to the Series Preferred are as follows:
1.
1. DIVIDEND RIGHTS.
(a) Holders of Series Preferred, in preference to the holders of any
other stock of the Corporation ("Junior Stock"), shall be entitled to receive,
when, as and if declared by the Board of Directors, but only out of funds that
are legally available therefor, cash dividends at the rate of eight percent (8%)
of the applicable Original Issue Price (as defined below) per annum on each
outstanding share of Series Preferred (as adjusted for any stock dividends,
combinations, splits recapitalizations and the like with respect to such
shares). The "Original Issue Price" of the Series A Preferred shall be
twenty-seven cents ($0.27) (the "Series A Original Issue Price"). The Original
Issue Price of the Series B Preferred shall be thirty-five cents ($0.35) (the
"Series B Original Issue Price"). The Original Issue Price of the Series B-1
Preferred shall be thirty-five cents ($0.35) (the "Series B-1 Original Issue
Price"). Such dividends shall be payable only when, as and if declared by the
Board of Directors and shall be non-cumulative.
(b) So long as any shares of Series Preferred shall be outstanding, no
dividend, whether in cash or property, shall be paid or declared, nor shall any
other distribution be made, on any Junior Stock, nor shall any shares of any
Junior Stock of the Corporation be purchased, redeemed, or otherwise acquired
for value by the Corporation (except for acquisitions of Common Stock by the
Corporation pursuant to agreements which permit the Corporation to repurchase
such shares upon termination of services to the Corporation or in exercise of
the Corporation's right of first refusal upon a proposed transfer) until all
dividends (set forth in Section 1(a) above) on the Series Preferred shall have
been paid or declared and set apart. In the event dividends are paid on any
share of Common Stock, an additional dividend shall be paid with respect to all
outstanding shares of Series Preferred in an amount equal per share (on an
as-if-converted to Common Stock basis) to the dividend amount paid or set aside
for each share of Common Stock. The provisions of this Section 1(b) shall not,
however, apply to (i) a dividend payable in Common Stock, (ii) the acquisition
of shares of any Junior Stock in exchange for shares of any other Junior Stock,
or (iii) any repurchase of any outstanding securities of the Corporation that is
unanimously approved by the Corporation's Board of Directors. The holders of the
Series Preferred expressly waive their rights, if any, as described in Sections
502 and 503 of the General Corporation Law of California as they relate to
repurchase of shares upon termination of employment or service by any person as
a consultant or director.
2. VOTING RIGHTS.
(a) General Rights. Except as otherwise provided herein or as required
by law, the Series Preferred shall be voted equally with the shares of the
Common Stock of the Corporation and not as a separate class, at any annual or
special meeting of shareholders of the Corporation, and may act by written
consent in the same manner as the Common Stock, in either case upon the
following basis: each holder of shares of Series Preferred shall be entitled to
such number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Series Preferred
are convertible (pursuant to Section 4 hereof) immediately after the close of
business on the record date fixed for such meeting or the effective date of such
written consent.
(b) Separate Vote of Series Preferred. With respect to the Series A
Preferred, so long as at least one million (1,000,000) shares of Series A
Preferred remain
2.
outstanding, and with respect to the Series B Preferred and/or Series B-1
Preferred, so long as, in the aggregate, at least four million (4,000,000)
shares of Series B Preferred and/or Series B-1 Preferred remain outstanding (in
each case subject to adjustment for any stock split, reverse stock split or
other similar event affecting the Series Preferred), in addition to any other
vote or consent required herein or by law, the vote or written consent of the
holders of, as the case may be, a majority of the outstanding Series A Preferred
and/or sixty-six and two-thirds percent (662/3%) of the outstanding Series B
Preferred and Series B-1 Preferred, in the aggregate, shall be necessary for
effecting or validating the actions described in all enumerated clauses (i)-(x)
of this clause (b) except for clause (ii), as to which the respective Series
Preferred affected adversely must vote in favor of such adverse change by the
described percentage vote:
(i) Any amendment, alteration, or repeal of any provision of
the Articles of Incorporation or the Bylaws of the Corporation (including any
filing of a Certificate of Determination);
(ii) Any adverse change to the powers, rights, preferences,
privileges, or restrictions of the Series Preferred;
(iii) Any increase in the authorized number of shares of
Preferred Stock;
(iv) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Corporation ranking on a
parity with or senior to the Series Preferred in rights of redemption,
liquidation preference, voting or dividends or any increase in the authorized or
designated number of any such new class or series;
(v) Any repurchase or redemption of Preferred Stock (except as
expressly contemplated by the Articles of Incorporation);
(vi) Any redemption, repurchase, payment of dividends or other
distributions with respect to Junior Stock (except for acquisitions of Common
Stock by the Corporation pursuant to agreements which permit the Corporation to
repurchase such shares upon termination of services to the Corporation or in
exercise of the Corporation's right of first refusal upon a proposed
transaction; provided that excluding circumstances involving the Corporation's
right of first refusal, the repurchase price is equal to or less than the
original purchase price for such shares);
(vii) Any agreement by the Corporation or its shareholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(c));
(viii) Any action that results in the payment or declaration
of a dividend on any shares of Common Stock or Preferred Stock;
(ix) Any voluntary dissolution or liquidation of the
Corporation; or
(x) Any change in the authorized number of members of the
Corporation's Board of Directors.
3.
(c) Election of Board of Directors. The authorized number of members on
the Corporation's Board of Directors shall be five (5). For so long as at least
one million (1,000,000) shares of Series A Preferred remain outstanding (subject
to adjustment for any stock split, reverse stock split or similar event
affecting the Series A Preferred) the holders of Series A Preferred, voting as a
separate class, shall be entitled to elect two (2) members of the Board of
Directors (also referred to as the "Board") at each meeting or pursuant to each
consent of the Corporation's shareholders for the election of directors, and to
remove from office such directors and to fill any vacancy caused by the
resignation, death or removal of such directors. Notwithstanding the foregoing,
in the event of a change in control, dissolution or liquidation of either Oryx
Ventures or Oryx Technologies Corp. (collectively referred to as "Oryx") or
both, thereafter the holders of Series A shall be entitled to elect only one (1)
member of the Board. For so long as at least one million (1,000,000) shares of
Series B Preferred and/or Series B-1 Preferred, in the aggregate, remain
outstanding (subject to adjustment for any stock split, reverse stock split or
similar event affecting the Series B Preferred and/or Series B-1 Preferred) the
holders of Series B Preferred and Series B-1 Preferred, voting together as a
single class, shall be entitled to elect one (1) member of the Corporation's
Board of Directors at each meeting or pursuant to each consent of the
Corporation's shareholders for the election of directors, and to remove from
office such director and to fill any vacancy caused by the resignation, death or
removal of such director. The holders of Common Stock, voting as a separate
class, shall be entitled to elect all remaining members of the Board of
Directors at each meeting or pursuant to each consent of the Corporation's
shareholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such directors. For the purposes of this Section 2(c) only, a change of control
shall mean:
(i) any consolidation or merger of Oryx Ventures or Oryx
Technologies Corp. with or into any other corporation or other entity or person,
or any other corporate reorganization, in which the shareholders of Oryx
Ventures or Oryx Technologies Corp., as the case may be, immediately prior to
such consolidation, merger or reorganization, own less than 50% of the given
entity's voting power immediately after such consolidation, merger or
reorganization, or any transaction or series of related transactions to which
Oryx Ventures or Oryx Technologies Corp. is a party in which in excess of fifty
percent (50%) of the given entity's voting power is transferred, excluding any
consolidation or merger effected exclusively to change the domicile of Oryx
Ventures or Oryx Technologies Corp.; or
(ii) a sale, lease, pledge, license or other disposition of
all or substantially all of the assets of either Oryx Ventures or Oryx
Technologies Corp.
3. LIQUIDATION RIGHTS.
(a) Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock, the holders of the
respective Series Preferred shall be entitled to be paid out of the assets of
the Corporation an amount per share of Series Preferred equal to the applicable
Original Issue Price for the respective Series Preferred plus all declared and
unpaid dividends on such shares of Preferred Stock (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) for each share of Series Preferred held by them. If, upon any such
liquidation, dissolution, or winding up, the assets of
4.
the Corporation shall be insufficient to make payment in full to all holders of
Series Preferred of the liquidation preference set forth in this Section 3(a),
then such assets shall be distributed among the holders of the respective Series
Preferred at the time outstanding, ratably in proportion to the full amounts to
which they would otherwise be respectively entitled.
(b) After payment of the full liquidation preference of the Series
Preferred as set forth in Section 3(a) above, any remaining assets of the
Corporation legally available for distribution, if any, shall be distributed
ratably to the holders of the Common Stock and the Series Preferred on the basis
of Common Stock equivalents.
(c) The following events shall be considered a liquidation under this
Section 3:
(i) any consolidation or merger of the Corporation
with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the shareholders of the Corporation
immediately prior to such consolidation, merger or reorganization, own less than
50% of the Corporation's voting power immediately after such consolidation,
merger or reorganization, or any transaction or series of related transactions
to which the Corporation is a party in which in excess of fifty percent (50%) of
the Corporation's voting power is transferred (an "Acquisition"), excluding any
consolidation or merger effected exclusively to change the domicile of the
Corporation;
(ii) a sale, lease, pledge, license or other
disposition of all or substantially all of the assets of the Corporation (an
"Asset Transfer");
(iii) in any of such events, if the consideration
received by this Corporation is other than cash, its value will be deemed its
fair market value as determined in good faith by the Board of Directors. Any
securities shall be valued as follows:
(1) Securities not subject to investment
letter or other similar restrictions on free marketability covered by clause (B)
immediately below:
a. If traded on a securities
exchange or through the Nasdaq National Market, the value shall be deemed to be
the average of the closing prices of the securities on such quotation system
over the thirty (30) day period ending three (3) days prior to the closing;
b. If actively traded
over-the-counter, the value shall be deemed to be the average of the closing bid
or sale prices (whichever is applicable) over the thirty (30) day period ending
three (3) days prior to the closing; and
c. If there is no active public
market, the value shall be the fair market value thereof, as determined by the
Board of Directors.
(2) The method of valuation of securities
subject to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a shareholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount
5.
from the market value determined as above in (A)(1), (2) or (3) to reflect the
approximate fair market value thereof, as determined by the Board of Directors.
4. CONVERSION RIGHTS.
The holders of the Series Preferred shall have the following rights
with respect to the conversion of the Series Preferred into shares of Common
Stock (the "Conversion Rights"):
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 4, any shares of Series Preferred may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
respective Series Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the then in effect "Series A Preferred
Conversion Rate," "Series B Preferred Conversion Rate," or "Series B-1 Preferred
Conversion Rate" as applicable, (determined as provided in Section 4(b)) by the
number of shares of Series A Preferred, Series B Preferred, and Series B-1,
respectively, being converted.
(b) Series Preferred Conversion Rate. The conversion rate in
effect at any time for conversion of the Series A Preferred (the "Series A
Preferred Conversion Rate") shall be the quotient obtained by dividing the
Original Issue Price of the Series A Preferred by the "Series A Preferred
Conversion Price," calculated as provided in Section 4(c). The conversion rate
then in effect at any time for conversion of the Series B Preferred (the "Series
B Preferred Conversion Rate") shall be the quotient obtained by dividing the
Original Issue Price of the Series B Preferred by the "Series B Preferred
Conversion Price," calculated as provided in Section 4(c). The conversion rate
then in effect at any time for conversion of the Series B-1 Preferred (the
"Series B-1 Preferred Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price of the Series B-1 Preferred by the "Series B-1
Preferred Conversion Price," calculated as provided in Section 4(c).
(c) Conversion Price. The conversion price for the Series A
Preferred shall initially be the Original Issue Price of the Series A Preferred
(the "Series A Preferred Conversion Price"). The conversion price for the Series
B Preferred shall initially be the Original Issue Price of the Series B
Preferred (the "Series B Preferred Conversion Price"). The conversion price for
the Series B-1 Preferred shall initially be the Original Issue Price of the
Series B-1 Preferred (the "Series B-1 Preferred Conversion Price"). Such initial
Series Preferred Conversion Price shall be adjusted from time to time in
accordance with this Section 4. All references to the Series A Preferred
Conversion Price, the Series B Preferred Conversion Price or the Series B-1
Preferred Conversion Price herein shall mean the Series A Preferred Conversion
Price, the Series B Preferred Conversion Price and the Series B-1 Preferred
Conversion Price, in each case as adjusted.
(d) Mechanics of Conversion. Each holder of Series Preferred
who desires to convert the same into shares of Common Stock pursuant to this
Section 4 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or any transfer agent for the Series
Preferred, and shall give written notice to the Corporation at such office that
such holder elects to convert the same. Such notice shall state the number of
shares of Series Preferred being converted. Thereupon, the Corporation shall
promptly issue and deliver at such
6.
office to such holder a certificate or certificates for the number of shares of
Common Stock to which such holder is entitled and shall promptly pay (i) in cash
or, to the extent sufficient funds are not then legally available therefor, in
Common Stock (at the Common Stock's fair market value determined by the Board of
Directors as of the date of such conversion), any declared and unpaid dividends
on the shares of Series Preferred being converted and (ii) in cash (at the
Common Stock's fair market value determined by the Board of Directors as of the
date of conversion) the value of any fractional share of Common Stock otherwise
issuable to any holder of Series Preferred. Such conversion shall be deemed to
have been made at the close of business on the date of such surrender of the
certificates representing the shares of Series Preferred to be converted, and
the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.
(e) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the date that the first
share of Series B-1 Preferred is issued (the "Series B-1 Original Issue Date")
effect a subdivision of the outstanding Common Stock without a corresponding
subdivision of the Preferred Stock, the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price and the Series B-1 Preferred Conversion
Price in effect immediately before that subdivision shall be proportionately
decreased. Conversely, if the Corporation shall at any time or from time to time
after the Series B-1 Original Issue Date combine the outstanding shares of
Common Stock into a smaller number of shares without a corresponding combination
of the Preferred Stock, the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price and the Series B-1 Preferred Conversion Price in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 4(e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and Distributions.
If the Corporation at any time or from time to time after the Series B-1
Original Issue Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Series A
Preferred Conversion Price, the Series B Preferred Conversion Price and the
Series B-1 Preferred Conversion Price that is then in effect shall be decreased
as of the time of such issuance or, in the event such record date is fixed, as
of the close of business on such record date, by multiplying the Series A
Preferred Conversion Price, the Series B Preferred Conversion Price or the
Series B-1 Preferred Conversion Price then in effect by a fraction (i) the
numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price and the Series B-1
7.
Preferred Conversion Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Series A Preferred Conversion
Price, the Series B Preferred Conversion Price and the Series B-1 Preferred
Conversion Price shall be adjusted pursuant to this Section 4(f) to reflect the
actual payment of such dividend or distribution.
(g) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Series B-1 Original
Issue Date, the Common Stock issuable upon the conversion of the Series
Preferred is changed into the same or a different number of shares of any class
or classes of stock, whether by recapitalization, reclassification or otherwise
(other than an Acquisition or Asset Transfer as defined in Section 3(c) or a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this Section
4), then in any such event each holder of Series Preferred shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the maximum number of shares of Common Stock into
which such shares of Series Preferred could have been converted immediately
prior to such recapitalization, reclassification or change, all subject to
further adjustment as provided herein or with respect to such other securities
or property by the terms thereof.
(h) Reorganizations, Mergers or Consolidations. If at any time
or from time to time after the Series B-1 Original Issue Date, there is a
capital reorganization of the Common Stock or the merger or consolidation of the
Corporation with or into another corporation or another entity or person (other
than an Acquisition or Asset Transfer as defined in Section 3(c) or a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 4), as a part of
such capital reorganization, provision shall be made so that the holders of the
Series Preferred shall thereafter be entitled to receive upon conversion of the
Series Preferred the number of shares of stock or other securities or property
of the Corporation to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of Series Preferred after the capital reorganization to the end that
the provisions of this Section 4 (including adjustment of the Series A Preferred
Conversion Price, the Series B Preferred Conversion Price and the Series B-1
Preferred Conversion Price then in effect and the number of shares issuable upon
conversion of the respective Series Preferred) shall be applicable after that
event and be as nearly equivalent as practicable.
(i) Sale of Shares Below Series Preferred Conversion Price.
(i) If at any time or from time to time after the
Series B-1 Original Issue Date, the Corporation issues or sells, or is deemed by
the express provisions of this Section 4(i) to have issued or sold, Additional
Shares of Common Stock (as defined in clause (iv) of this Section 4(i) below),
other than as a dividend or other distribution on any class of stock as provided
in Section 4(f) above, and other than a subdivision or combination of shares of
Common Stock as provided in Section 4(e) above, for an Effective Price (as
defined in clause (iv) of this Section 4(i) below) less than the then effective
Series A Preferred Conversion Price, the Series B Preferred Conversion Price or
the Series B-1 Preferred Conversion Price, then and in each such case the
current Series A Preferred Conversion Price, the Series B Preferred
8.
Conversion Price or the Series B-1 Preferred Conversion Price, as the case may
be, shall be reduced, as of the opening of business on the date of such issue or
sale, to a price determined by multiplying the Series A Preferred Conversion
Price, the Series B Preferred Conversion Price or the Series B-1 Preferred
Conversion Price, as the case may be, by a fraction (i) the numerator of which
shall be (A) the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale, plus (B) the number of shares of
Common Stock which the aggregate consideration received (as defined below in
clause (ii) of this Section 4(i)) by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such respective
Series A Preferred Conversion Price, the Series B Preferred Conversion Price or
the Series B-1 Preferred Conversion Price, and (ii) the denominator of which
shall be the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued or sold. For the purposes of the
immediately preceding sentence, the number of shares of Common Stock deemed to
be outstanding as of a given date shall be the sum of (A) the number of shares
of Common Stock actually outstanding, (B) the number of shares of Common Stock
into which the then outstanding shares of Series Preferred could be converted if
fully converted on the day immediately preceding the given date, and (C) the
number of shares of Common Stock issuable upon the exercise or conversion of all
other rights, options and convertible securities outstanding on the day
immediately preceding the given date. No adjustment shall be made to the Series
A Preferred Conversion Price, the Series B Preferred Conversion Price or the
Series B-1 Preferred Conversion Price in an amount less than one-quarter of one
cent per share. Any adjustment otherwise required by this Section 4(i) that is
not required to be made due to the immediately preceding sentence shall be
included in any subsequent adjustment to the Series A Preferred Conversion
Price, the Series B Preferred Conversion Price or the Series B-1 Preferred
Conversion Price. For avoidance of doubt, any adjustment to the Series B-1
Conversion Price as a result of the provisions of Section 4(j) and 4(k) below
shall not cause any adjustments to the applicable Conversion Prices of the
Series Preferred pursuant to the provisions of this Section 4(i)(i).
(ii) For the purpose of making any adjustment
required under this Section 4(i), the consideration received by the Corporation
for any issue or sale of securities shall (A) to the extent it consists of cash,
be computed at the net amount of cash received by the Corporation after
deduction of any underwriting or similar commissions, compensation or
concessions paid or allowed by the Corporation in connection with such issue or
sale but without deduction of any expenses payable by the Corporation, (B) to
the extent it consists of property other than cash, be computed at the fair
value of that property as determined in good faith by the Board of Directors,
and (C) if Additional Shares of Common Stock, Convertible Securities (as defined
in clause (iii) of this Section 4(i) below) or rights or options to purchase
either Additional Shares of Common Stock or Convertible Securities are issued or
sold together with other stock or securities or other assets of the Corporation
for a consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by the
Board of Directors to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required
under this Section 4(i), if (x) the Corporation issues or sells any (i) stock or
other securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being herein referred to as
9.
"Convertible Securities") or (ii) rights or options for the purchase of
Additional Shares of Common Stock or Convertible Securities and (y) the
Effective Price of such Additional Shares of Common Stock is less than the
Series A Preferred Conversion Price, the Series B Preferred Conversion Price or
the Series B-1 Preferred Conversion Price, then in each case the Corporation
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration, if any,
payable to the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
thereof; provided that if in the case of Convertible Securities the minimum
amounts of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Corporation shall be deemed to
have received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further that if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities. No further
adjustment of the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price or the Series B-1 Preferred Conversion Price, as adjusted upon
the issuance of such rights, options or Convertible Securities, shall be made as
a result of the actual issuance of Additional Shares of Common Stock on the
exercise of any such rights or options or the conversion of any such Convertible
Securities. If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price or the Series B-1 Preferred Conversion Price as adjusted upon
the issuance of such rights, options or Convertible Securities shall be
readjusted to the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price or the Series B-1 Preferred Conversion Price which would have
been in effect had an adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common Stock, if
any, actually issued or sold on the exercise of such rights or options or rights
of conversion of such Convertible Securities, and such Additional Shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Corporation upon such exercise, plus the consideration, if any,
actually received by the Corporation for the granting of all such rights or
options, whether or not exercised, plus the consideration received for issuing
or selling the Convertible Securities actually converted, plus the
consideration, if any, actually received by the Corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities; provided that such
readjustment shall not apply to prior conversions of Series Preferred.
10.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Corporation or deemed issued pursuant
to this Section 4(i), whether or not subsequently reacquired or retired by the
Corporation other than: (A) shares of Series B-1 Preferred and/or any shares of
Common Stock issued upon conversion of the Series Preferred; (B) shares of
Common Stock and/or options, warrants or other Common Stock purchase rights and
the Common Stock issued pursuant to such options, warrants or other rights (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like) after the Series B-1 Original Issue Date to employees, officers or
directors of, or consultants or advisors to the Corporation or any subsidiary
pursuant to stock purchase or stock option plans or other arrangements that are
approved by the Board; (C) shares of Common Stock issued pursuant to the
exercise of options, warrants or convertible securities outstanding as of the
Series B-1 Original Issue Date; (D) shares of Common Stock issued and/or
options, warrants or other Common Stock purchase rights, and the Common Stock
issued pursuant to such options, warrants or other rights for consideration
other than cash pursuant to a merger, consolidation, acquisition or similar
business combination approved by the Board; (E) shares issued in any bona fide
strategic transactions approved by the Board; and (F) shares of Common Stock
issued pursuant to any equipment leasing arrangement, or debt financing from a
bank or similar financial institution approved by the Board. References to
Common Stock in the provisions of this clause (iv) above shall mean all shares
of Common Stock issued by the Corporation or deemed to be issued pursuant to
this Section 4(i). The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of Additional
Shares of Common Stock issued or sold, or deemed to have been issued or sold by
the Corporation under this Section 4(i), into the aggregate consideration
received, or deemed to have been received by the Corporation for such issue
under this Section 4(i), for such Additional Shares of Common Stock.
(j) Adjustment for Milestone Completion. If during the 12
month period beginning March 1, 2003 and ending February 29, 2004 (the
"Measurement Period") the Corporation does not (i) enter into written agreements
with new or existing customers providing for the license of at least three
hundred (300) annual seats for the Corporation's STRIDE software program or (ii)
achieve gross ▇▇▇▇▇▇▇▇ of at least one million eight hundred thousand dollars
($1,800,000) (together the "Primary Milestones"), then the Series B-1 Conversion
Price will be adjusted to equal fifty percent (50%) of the Series B-1 Original
Issue Price. If (x) the Corporation does not achieve either of the Primary
Milestones described in the preceding sentence, and (y) during the 12 month
period beginning March 1, 2003 and ending February 29, 2004 the Corporation also
does not (i) enter into written agreements with new or existing customers
providing for the license of at least two hundred (200) annual seats for the
Corporation's STRIDE software program or (ii) achieve gross ▇▇▇▇▇▇▇▇ of at least
one million two hundred thousand dollars ($1,200,000), then the Series B-1
Conversion Price will be adjusted to equal forty percent (40%) of the Series B-1
Original Issue Price. Such adjustments shall be automatic effective as of March
1, 2004; provided, however, that there shall be no adjustments pursuant to this
Section 4(j) if the Corporation achieves either of the Primary Milestones.
Notwithstanding the foregoing, in no event will any adjustment to the Series B-1
Conversion Price result in any increase of the Series B-1 Conversion Price to an
amount that is greater than such Series B-1 Conversion Price on February 29,
2004. For purposes of this Section 4(j) and Section 4(k), the Corporation's
"gross ▇▇▇▇▇▇▇▇" shall include license agreements for STRIDE
11.
products and professional services which includes, but is not limited to,
implementation, installation, training and support services.
(k) Notices of Adjustment for Milestone Completion. Following
any adjustment of the Series B-1 Preferred Conversion Price due to the failure
of the Corporation to achieve either of the Primary Milestones, within thirty
(30) days following February 29, 2004 the Corporation shall mail to each holder
of Series Preferred B-1 a notice specifying whether or not there was an
adjustment to the Series B Conversion Price pursuant to Section 4(j) hereof. In
the case of an adjustment, such notice shall describe the adjustment and state
the then current Series B-1 Conversion Price. Such notice shall state the
Corporation's actual gross ▇▇▇▇▇▇▇▇ during the Measurement Period and the actual
number of written agreements for the license of the Corporation's STRIDE
software entered into during the Measurement Period.
(l) Certificate of Adjustment. In each case of an adjustment
or readjustment of the Series A Preferred Conversion Price, the Series B
Preferred Conversion Price or the Series B-1 Preferred Conversion Price for the
number of shares of Common Stock or other securities issuable upon conversion of
the respective Series Preferred, if the respective Series Preferred is then
convertible pursuant to this Section 4, the Corporation, at its expense, shall
compute such adjustment or readjustment in accordance with the provisions hereof
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of Series Preferred at the holder's address as shown in the Corporation's
books. The certificate shall set forth such adjustment or readjustment, showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (i) the consideration received or deemed to be received
by the Corporation for any Additional Shares of Common Stock issued or sold or
deemed to have been issued or sold, (ii) the Series A Preferred Conversion Price
and/or the Series B Preferred Conversion Price and/or the Series B-1 Preferred
Conversion Price, as the case may be, at the time in effect, (iii) the number of
Additional Shares of Common Stock and (iv) the type and amount, if any, of other
property which at the time would be received upon conversion of the Series
Preferred.
(m) Notices of Record Date. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition (as defined in Section
3(c) or other capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, or any
Asset Transfer (as defined in Section (3c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series Preferred at least ten (10) days prior to the
record date specified therein (or such shorter period approved by a majority of
each Series of the outstanding Series Preferred voting separately as a class) a
notice specifying (A) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property
12.
deliverable upon such Acquisition, reorganization, reclassification, transfer,
consolidation, merger, Asset Transfer, dissolution, liquidation or winding up.
(n) Automatic Conversion.
(i) (A) Each respective share of Series Preferred
shall automatically be converted into shares of Common Stock, based on the
then-effective Series A Preferred Conversion Price, the Series B Preferred
Conversion Price or the Series B-1 Preferred Conversion Price, as the case may
be, immediately upon the closing of a firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Corporation in which (i) the per share price is at least $5.00 per share (as
adjusted for stock splits, dividends, recapitalizations and the like), and (ii)
the cash proceeds to the Corporation (before underwriting discounts, commissions
and fees) are at least $20,000,000.
(B) Each share of Series A Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series A Preferred Conversion Price upon the affirmative election
of the holders of at least a majority of the outstanding shares of Series A
Preferred. Each share of Series B Preferred and Series B-1 Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series B Preferred Conversion Price and Series B-1 Preferred
Conversion Price, respectively, upon the affirmative election of the holders of
at least a majority of the outstanding shares of Series B Preferred and Series
B-1 Preferred, voting together as a single class. Upon such automatic
conversion, any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(d).
(ii) Upon the occurrence of any of the events
specified in Section 4(n)(i)(A) above, the outstanding shares of Series
Preferred shall be converted automatically without any further action by the
holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series Preferred are either delivered to
the Corporation or its transfer agent as provided below, or the holder notifies
the Corporation or its transfer agent that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. Upon the occurrence of such automatic conversion of the Series
Preferred, the holders of Series Preferred shall surrender the certificates
representing such shares at the office of the Corporation or any transfer agent
for the Series Preferred. Thereupon, the Corporation shall issue and deliver to
such holder promptly at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of
shares of Common Stock into which the shares of Series Preferred surrendered
were convertible on the date on which such automatic conversion occurred, and
any declared and unpaid dividends shall be paid in accordance with the
provisions of Section 4(d).
(o) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions
13.
thereof) issuable upon conversion of more than one share of Series Preferred by
a holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of any
fractional share, the Corporation shall, in lieu of issuing any fractional
share, pay cash equal to the product of such fraction multiplied by the Common
Stock's fair market value (as determined by the Board) on the date of
conversion.
(p) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(q) Notices. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
facsimile if sent during normal business hours of the recipient and if not so
sent within such hours, then on the next business day, provided that such
facsimile notice is followed upon within three (3) days by registered or
certified mail, postage prepaid as set forth in this clause (q), (iii) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All notices shall be addressed to each holder of record
at the address of such holder appearing on the books of the Corporation.
(r) Payment of Taxes. The Corporation will pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series Preferred, excluding any tax or other charge
imposed in connection with any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the shares of Series
Preferred so converted were registered.
(s) No Dilution or Impairment. Without the consent of the
holders of the then outstanding Series Preferred, as required under Section
2(b), the Corporation shall not amend its Amended and Restated Articles of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or take any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series Preferred
against dilution or other impairment.
14.
5. REDEMPTION.
(a) The Corporation shall be obligated to redeem the Series B
Preferred and Series B-1 Preferred as follows:
(i) The holders of at least sixty-six and two-thirds
percent (66 2/3%) of the then outstanding shares of Series B Preferred and
Series B-1 Preferred, voting together as a single class, may require the
Corporation, to the extent it may lawfully do so, to redeem the Series B
Preferred and Series B-1 Preferred in three (3) equal annual installments
beginning on the fifth anniversary after the date that the first share of Series
B-1 Preferred is issued (the "Original Issue Date"), and ending on the date two
(2) years from such first redemption date (each a "Redemption Date"); provided
that the Corporation shall receive at least sixty (60) days prior to such fifth
anniversary written notice of such request of the Series B Preferred and Series
B-1 Preferred. The Corporation shall effect such redemptions on the applicable
Redemption Date by paying in cash in exchange for the shares of Series B
Preferred and Series B-1 Preferred to be redeemed a sum equal to the Series B
Original Issue Price or Series B-1 Original Issue Price, as applicable, per
share of Series B Preferred or Series B-1 Preferred, as applicable, (as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like)
plus declared and unpaid dividends with respect to such shares. The total amount
to be paid for the Series B Preferred is the "Series B Redemption Price". The
total amount to be paid for the Series B-1 Preferred is the "Series B-1
Redemption Price". The number of shares of Series B Preferred and Series B-1
Preferred that the Corporation shall be required to redeem on any one Redemption
Date shall be equal to the amount determined by dividing (A) the aggregate
number of shares of Series B Preferred and Series B-1 Preferred outstanding
immediately prior to the Redemption Date by (B) the number of remaining
Redemption Dates (including the Redemption Date to which such calculation
applies). Shares subject to redemption pursuant to this Section 5(a) shall be
redeemed from each holder of Series B Preferred and Series B-1 Preferred on a
pro rata basis.
(ii) At least thirty (30) days, but no more than
sixty (60) days prior to the first Redemption Date, the Corporation shall send a
notice (a "Redemption Notice") to all holders of Series B Preferred and Series
B-1 Preferred to be redeemed setting forth (A) the Series B Redemption Price and
the Series B-1 Redemption Price for the shares to be redeemed; and (B) the place
at which such holders may obtain payment of the Series B Redemption Price and
the Series B-1 Redemption Price upon surrender of their share certificates. If
the Corporation does not have sufficient funds legally available to redeem all
shares to be redeemed at the Redemption Date (including, if applicable, those to
be redeemed at the option of the Corporation), then it shall redeem such shares
pro rata (based on the portion of the aggregate Series B Redemption Price and
Series B-1 Redemption Price payable to them) to the extent possible and shall
redeem the remaining shares to be redeemed as soon as sufficient funds are
legally available.
(b) On or prior to the Redemption Date, the Corporation shall
deposit the Series B Redemption Price and Series B-1 Redemption Price of all
shares to be redeemed with a bank or trust company having aggregate capital and
surplus in excess of $100,000,000, as a trust fund, with irrevocable
instructions and authority to the bank or trust company to pay, on and after
such Redemption Date, the Series B Redemption Price and Series B-1 Redemption
Price, as applicable, of the shares to their respective holders upon the
surrender of their share certificates.
15.
Any moneys deposited by the Corporation pursuant to this Section 5(b) for the
redemption of shares thereafter converted into shares of Common Stock pursuant
to Section 4 hereof no later than the fifth (5th) day preceding the Redemption
Date, as applicable, shall be returned to the Corporation forthwith upon such
conversion. The balance of any funds deposited by the Corporation pursuant to
this Section 5(b) remaining unclaimed at the expiration of one (1) year
following such Series Redemption Date, as applicable, shall be returned to the
Corporation promptly upon its written request.
(c) On or after such Redemption Date, each holder of shares of
Series B Preferred and Series B-1 Preferred to be redeemed shall surrender such
holder's certificates representing such shares to the Corporation in the manner
and at the place designated in the Redemption Notice and thereupon the Series B
Redemption Price and Series B-1 Redemption Price, as applicable, of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by such certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares. From and after such Redemption Date, unless
there shall have been respectively a default in payment of the Series B
Redemption Price and Series B-1 Redemption Price or the Corporation is unable to
pay the respective Series B Redemption Price and Series B-1 Redemption Price due
to not having sufficient legally available funds, all rights of the respective
holder of Series B Preferred and/or Series B-1 Preferred (except the right to
receive the Series B Redemption Price or Series B-1 Redemption Price, as
applicable, without interest upon surrender of their certificates), shall cease
and terminate with respect to such shares; provided that in the event that
shares of Series B Preferred and Series B-1 Preferred are not redeemed due to a
default in payment by the Corporation or because the Corporation does not have
sufficient legally available funds, then such respective shares of Series B
Preferred and Series B-1 Preferred shall remain outstanding and shall be
entitled to all of the rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of
Series B Preferred and Series B-1 Preferred the Conversion Rights (as defined in
Section 4) for such Series B Preferred and Series B-1 Preferred shall terminate
as to the shares designated for redemption at the close of business on the fifth
(5th) day preceding the Redemption Date, as applicable, unless default is
respectively made in payment of the Series B Redemption Price and Series B-1
Redemption Price.
6. NO REISSUANCE OF SERIES PREFERRED.
No share or shares of Series Preferred acquired by the Corporation by
reason of purchase, conversion or otherwise shall be reissued.
IV.
A. The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
B. The Corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the General Corporation Law of California) for
breach of duty to the Corporation
16.
and its shareholders through bylaw provisions or through agreements with agents,
or both, in excess of the indemnification otherwise permitted by Section 317 of
the General Corporation Law of California, subject to the limits on such excess
indemnification set forth in Section 204 of the General Corporation Law of
California. If, after the effective date of this Article IV, California law is
amended in a manner which permits a corporation to limit the monetary or other
liability of its directors or to authorize indemnification of, or advancement of
such defense expenses to, its directors or other persons, in any such case to a
greater extent than is permitted on such effective date, the references in this
Article to "California law" shall to that extent be deemed to refer to
California law as so amended.
C. Any repeal or modification of this Article IV shall only be
prospective and shall not affect the rights under this Article in effect at the
time of the alleged occurrence of any action or omission to act giving rise to
liability."
THREE: The foregoing amendment and restatement of the Amended and
Restated Articles of Incorporation has been duly approved by the Board of
Directors of this Corporation.
FOUR: The foregoing Amended and Restated Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Section 902 of the General Corporation Law of California. The total number of
outstanding shares entitled to vote or act by written consent was five million
eight hundred seventy-two thousand nine hundred sixteen (5,872,916) shares of
Common Stock, two million five hundred ninety-two thousand five hundred
ninety-three (2,592,593) shares of Series A Preferred and nine million nine
hundred sixty-four thousand two hundred eighty-six (9,964,286) shares of Series
B Preferred. A majority of the outstanding shares of the Common Stock voting as
a single class, a majority of the outstanding shares of the Series A Preferred
Stock voting as a single class, sixty-six and two thirds percent (66 2/3%) of
the outstanding shares of the Series B Preferred Stock voting as a single class
and a majority of the outstanding shares of the Common Stock and the Preferred
Stock, voting together as a single class, approved the Amended and Restated
Articles of Incorporation by written consent in accordance with Section 603 of
the General Corporation Law of California.
17.
The undersigned, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the President and Secretary of S2
TECHNOLOGIES, INC., declares under penalty of perjury under the laws of the
State of California that the matters set out in the foregoing certificate are
true of his own knowledge.
Executed at San Diego, California on April __, 2003.
_______________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President and Secretary
AMENDED AND RESTATED ARTICLES OF INCORPORATION
SIGNATURE PAGE
TABLE OF CONTENTS
PAGE
1. DIVIDEND RIGHTS............................................................2
2. VOTING RIGHTS..............................................................2
(a) General Rights....................................................2
(b) Separate Vote of Series Preferred.................................2
(c) Election of Board of Directors....................................4
3. LIQUIDATION RIGHTS.........................................................4
4. CONVERSION RIGHTS..........................................................6
(a) Optional Conversion...............................................6
(b) Series Preferred Conversion Rate..................................6
(c) Conversion Price..................................................6
(d) Mechanics of Conversion...........................................6
(e) Adjustment for Stock Splits and Combinations......................7
(f) Adjustment for Common Stock Dividends and Distributions...........7
(g) Adjustment for Reclassification, Exchange and Substitution........7
(h) Reorganizations, Mergers or Consolidations........................8
(i) Sale of Shares Below Series Preferred Conversion Price............8
(j) Certificate of Adjustment........................................11
(k) Notices of Record Date...........................................11
(l) Automatic Conversion.............................................12
(m) Fractional Shares................................................12
(n) Reservation of Stock Issuable Upon Conversion....................13
(o) Notices..........................................................13
(p) Payment of Taxes.................................................13
(q) No Dilution or Impairment........................................13
5. REDEMPTION................................................................13
6. NO REISSUANCE OF SERIES PREFERRED.........................................15
i.
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Contents/Authorities. Deleting this break will cause Table of
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Table of Contents/Authorities.
EXHIBIT C
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
S2 TECHNOLOGIES, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
MAY 6, 2003
S2 TECHNOLOGIES, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement")
is entered into as of May 6, 2003 (the "Effective Date"), by and among S2
TECHNOLOGIES, INC., a California corporation (the "Company") and the investors
listed on Exhibit A hereto, referred to hereinafter as the "Investors" and each
individually as an "Investor."
RECITALS
WHEREAS, certain of the Investors are purchasing shares of the
Company's Series B-1 Preferred Stock (also referred to as the "Series B-1
Stock"), pursuant to that certain Series B-1 Preferred Stock Purchase Agreement
(the "Purchase Agreement") of even date herewith (the "Financing");
WHEREAS, the obligations in the Purchase Agreement are conditioned upon
the execution and delivery of this Agreement;
WHEREAS, certain of the Investors (the "Prior Investors") are holders
of the Company's Series A Preferred Stock ("Series A Stock") and Series B Stock
(the "Series B Stock" which, together with the Series A Stock and Series B-1
Stock, shall be referred to as the "Preferred Stock");
WHEREAS, the Prior Investors and the Company are parties to an Amended
and Restated Investor Rights Agreement dated October 18, 2001 (the "Prior
Agreement");
WHEREAS, the parties to the Prior Agreement desire to terminate the
Prior Agreement and accept the rights and covenants hereof in lieu of their
rights and covenants under the Prior Agreement; and
WHEREAS, in connection with the consummation of the Financing, the
Company and the Investors have agreed to the registration rights, information
rights, and other rights as set forth below.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1.
1. GENERAL.
1.1 Definitions. As used in this Agreement the following terms shall mean:
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any successor or similar registration form under the Securities
Act subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"Qualified Offering" means the Company's first firmly underwritten
public offering of shares of the Company's Common Stock at a per share price of
at least five dollars ($5.00) per share and having an aggregate offering price
to the public of at least twenty million dollars ($20,000,000) (before deduction
of Registration Expenses).
"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 effectiveness of such
registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares, and/or (b) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either (a) pursuant to a
registration statement or Rule 144 or (b) in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" means all expenses incurred by the Company in
complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of a single special
counsel for the Holders, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
2.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale.
"Shares" means (i) the Company's Series A Stock, (ii) the Company's
Series B Stock and/or (iii) the Company's Series B-1 Stock.
"Special Registration Statement" means a registration statement
relating to any employee benefit plan or with respect to any corporate
reorganization or other transaction under Rule 145 (including any replacement or
successor Rule thereto) or any other Rule or Regulation of the Securities Act.
2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (C) if reasonably requested by the Company, such Holder shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under the
Securities Act. The Company agrees not to require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder which is (A) a partnership, to its
partners or former partners in accordance with partnership interests, (B) a
corporation, to its shareholders in accordance with their interest in the
corporation, (C) a limited liability company, to its members or former members
in accordance with their interest in the limited liability company, or (D) to
the Holder's family member or trust for the benefit of an individual Holder;
provided that in each case the transferee will be subject to the terms of this
Agreement to the same extent as if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws):
3.
THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue unlegended
certificates promptly at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of thirty percent (30%)
of the Registrable Securities (the "Initiating Holders") that the Company file a
registration statement under the Securities Act covering the registration of
Registrable Securities having an aggregate offering price to the public, net of
Selling Expenses, in excess of seven million five hundred thousand dollars
($7,500,000), then the Company shall, within thirty (30) days of the receipt
thereof, give written notice of such request to all Holders, and subject to the
limitations of this Section 2.2, effect, as expeditiously as reasonably
possible, the registration under the Securities Act of all Registrable
Securities that the Holders request to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company (which underwriter or
underwriters shall be reasonably acceptable to a majority in interest of the
Holders). Notwithstanding any other provision of this Section 2.2 or Section
2.4, if the underwriter advises the Company that marketing factors require a
limitation of the number of securities to be underwritten (including Registrable
Securities) then the Company shall so advise all Holders of
4.
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be less than 30% (thirty percent) of the total shares in such
registration; provided further that in a Qualified Offering the number of
Registrable Securities to be included in such offering may be zero. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of three years from the
First Closing (as defined in Section 2.2 of the Purchase Agreement) or one
hundred eighty (180) days following the effective date of the registration
statement pertaining to the Qualified Offering;
(ii) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective;
(iii) during the period starting with the date of
filing of, and ending on the date one hundred eighty (180) days following the
effective date of the registration statement pertaining to the earlier of (1)
the Company's Qualified Offering and (2) any other public offering of the
Company's securities pursuant to which the Company's outstanding Preferred Stock
is converted into shares of Common Stock pursuant to the Company's Articles of
Incorporation; provided that the Company makes reasonable good faith efforts to
cause such registration statement to become effective;
(iv) within 12 months of a previous demand
registration pursuant to this Section 2.2;
(v) if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 2.2(a), the Company
gives notice to the Holders of the Company's intention to make a public
offering, other than pursuant to a Special Registration Statement within
forty-five (45) days;
(vi) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 2.2, a certificate
signed by the President, Chief Executive Officer, or Chairman of the Board
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be effected at such time, in which event the
Company shall have the right to defer such filing for a period of not more than
one hundred twenty (120) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period; or
5.
(vii) if the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) Underwriting. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders.
No such reduction shall reduce the amount of securities of the selling Holders
included in the registration below thirty percent (30%) of the total amount of
securities included in such registration, unless such offering is the Qualified
Offering, in which event any or all of the Registrable Securities of the Holders
may be excluded in accordance with the immediately preceding sentence. If any
Holder disapproves of the terms of any such underwriting, such Holder may elect
to withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing person shall be deemed to be a single "Holder," and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
6.
(b) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 is not available for such offering by
the Holders;
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than seven hundred fifty thousand dollars
($750,000);
(iii) if within thirty (30) days of receipt of a
written request from any Holder or Holders pursuant to this Section 2.4, the
Company gives notice to such Holder or Holders of the Company's intention to
make a public offering within ninety (90) days, other than pursuant to a Special
Registration Statement;
(iv) if the Company shall furnish to the Holders a
certificate signed by the President, Chief Executive Officer, or Chairman of the
Board of Directors of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Form S-3 registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than ninety (90)
days after receipt of the request of the Holder or Holders under this Section
2.4; provided, that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period;
7.
(v) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two (2)
registrations on Form S-3 for any of the Holders pursuant to this Section 2.4;
or
(vi) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively. All such Registration
Expenses incurred in connection with registrations requested pursuant to this
Section 2.4 after the first two (2) registrations shall be paid by the selling
Holders pro rata in proportion to the number of shares sold by each.
2.5 Expenses of Registration. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders. If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) of the
third sentence of this Section 2.5 above, then the Holders shall not forfeit
their rights pursuant to Section 2.2 or Section 2.4 to a demand registration.
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable 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,
keep such registration statement effective for up to thirty (30) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto. The Company shall not be required to file, cause to become effective or
maintain the effectiveness of any registration statement that contemplates a
distribution of securities on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.
8.
(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 be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
paragraph 2.6 (a) above.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities 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 reasonable 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 and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) 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 Securities 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. The Company will use reasonable efforts to amend or supplement such
prospectus in order to cause such prospectus not to include any untrue statement
of a material fact or omit 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.
(g) Use its reasonable efforts to furnish, on the date that
such Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the earlier of (a) the date of the Company's Qualified Offering
and (b) the date of any other public offering of the Company's securities
pursuant to which the Company's outstanding Preferred Stock is converted into
shares of common stock in accordance with the Company's Articles of
9.
Incorporation. In addition, a Holder's registration rights shall expire if all
Registrable Securities held by such Holder (including its affiliates, partners,
former partners, members and former members owning Registrable Securities
through such Holder) may be sold under Rule 144 or other Securities Act
exemption during any ninety (90) day period.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the 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 (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
10.
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the
11.
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. 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.
2.10 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member of a Holder, (b) is a Holder's family member or trust for the
benefit of an individual Holder, or (c) acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (ii) such transferee shall agree
in writing to be subject to all provisions in this Agreement.
2.11 Amendment of Registration Rights. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least sixty-six and
two-thirds percent (662/3%) of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Section 2, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.
12.
2.12 Limitation on Subsequent Registration Rights. Other than as
provided in Section 5.11, after the date of this Agreement, the Company shall
not, without the prior written consent of the Holders of at least sixty-six and
two-thirds percent (662/3%) of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would grant such holder registration rights pari passu or
senior to those granted to the Holders hereunder.
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information.
Each Holder hereby agrees that such Holder shall not sell, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that:
(i) such agreement shall apply only to the earlier of (a) the
Company's Qualified Offering and (b) any other public offering of securities of
the Company pursuant to which the Company's outstanding Preferred Stock is
converted into shares of Common Stock in accordance with the Company's Articles
of Incorporation; and
(ii) all officers, directors, founders of the Company, and
holders of at least five percent (5%) of the Company's voting securities enter
into similar agreements.
2.14 Each Holder agrees to execute and deliver such other agreements as
may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. In addition, if requested by the Company or the representative of the
underwriters of Common Stock (or other securities) of the Company, each Holder
shall provide, within ten (10) days of such request, such information as may be
required by the Company or such representative in connection with the completion
of any public offering of the Company's securities pursuant to a registration
statement filed under the Securities Act. The obligations described in this
Section 2.14 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Rule 145 transaction on
Form S-4 or similar forms that may be promulgated in the future. The Company may
impose stop-transfer instructions with respect to the shares of Common Stock (or
other securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period. Each Holder agrees that any transferee of any
shares of Registrable Securities shall be bound by Section 2.13 and 2.14. The
underwriters of the Company's stock are intended third party beneficiaries of
Section 2.13 and 2.14 and shall have the right, power and authority to enforce
the provisions of Sections 2.13 and 2.14 as though they were a party hereto.
2.15 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
13.
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of 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 as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
3. COVENANTS OF THE COMPANY.
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain accurate books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (120) days
thereafter, to the extent requested by an Investor the Company will furnish each
Investor a balance sheet of the Company, as at the end of such fiscal year, and
a statement of income and a statement of cash flows of the Company, for such
year, all prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
public accountants of national standing selected by the Company's Board of
Directors.
(c) The Company will furnish each Investor, 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 forty-five
(45) days thereafter, to the extent requested by such Investor a balance sheet
of the Company as of the end of each such quarterly period, and a statement of
income and a statement of cash flows of the Company for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles, but unaudited, with the exception that no notes need be
attached to such statements and year-end audit adjustments may not have been
made.
(d) So long as an Investor (with its affiliates) shall own not
less than five hundred thousand (500,000) shares of Registrable Securities (as
adjusted for stock splits and
14.
combinations) (a "Major Investor"), the Company will furnish each such Major
Investor (i) at least forty-five (45) days prior to the beginning of each fiscal
year an annual budget and operating plans for such fiscal year (and as soon as
available, any subsequent revisions thereto); and (ii) as soon as practicable
after the end of each month, and in any event within twenty (20) days
thereafter, upon request of such Major Investor a balance sheet of the Company
as of the end of each such month, and a statement of income and a statement of
cash flows of the Company for such month and for the current fiscal year to
date, including a comparison to plan figures for such period, prepared in
accordance with generally accepted accounting principles consistently applied,
with the exception that no notes need be attached to such statements and
year-end audit adjustments may not have been made.
3.2 Inspection Rights. Each Major Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 3.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use
its best efforts to ensure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it by the Company, or
representatives or agents of the Company, and which the Company identifies as
being confidential or proprietary (so long as such information is not in the
public domain), except that such Investor may disclose such proprietary or
confidential information to any partner, subsidiary or parent of such Investor
for the purpose of evaluating its investment in the Company as long as such
partner, subsidiary or parent is advised of the confidentiality provisions of
this Section 3.3. To the extent requested by the Company, the Investor shall
sign a confidentiality and non-disclosure agreement prior to the release of any
such confidential or proprietary information.
3.4 Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 Stock Vesting. Unless otherwise approved by the Board of Directors
(including a majority of the directors elected by the Preferred Stock) or a
Compensation Committee thereof, all stock options and other stock equivalents
issued after the date of this Agreement to employees, directors, consultants and
other service providers shall be subject to vesting as follows: (a) twenty-five
percent (25%) of such stock shall vest at the end of the first year following
the earlier of the date of issuance or such person's services commencement date
with the Company, and (b) seventy-five percent (75%) of such stock shall vest
over the remaining three (3) years. The Company shall not permit the transfer of
unvested stock by any such person prior to vesting. With respect to any shares
of stock purchased by any such person, the Company's repurchase option shall
provide that upon such person's termination of employment or service with the
Company, with or without cause, the Company or its assignee (to the extent
15.
permissible under applicable securities laws and other laws) shall have the
option to purchase at cost any unvested shares of stock held by such person. The
Company's Board of Directors may only change the provisions applicable to
vesting of stock or options described in this Section 3.5 by a unanimous vote,
including those Directors representing (i) the Series A Preferred Stock and (ii)
the Series B Preferred Stock.
3.6 Proprietary Information and Inventions Agreement. The Company shall
require all employees, officers and consultants to execute and deliver a
Proprietary Information and Inventions Agreement in the form attached to the
Purchase Agreement.
3.7 Assignment of Right of First Refusal. If the Company elects not to
exercise any right of first refusal or right of first offer the Company may have
on a proposed transfer of any of the Company's outstanding common stock held by
employees, consultants, and others pursuant to the Company's bylaws, articles of
incorporation, contract or otherwise, the Company shall, to the extent it may do
so, assign such right of first refusal or right of first offer to each Investor.
In the event of such assignment, each Investor shall have a right to purchase
its pro rata portion (as defined in Section 4.1) of the common stock proposed to
be transferred.
3.8 Approval. The Company shall not without the approval of a majority
of the Board of Directors, with all non-interested Directors voting and the
approval at least one of the Directors designated by holders of the Series A
Preferred Stock, authorize or enter into any transactions with any director or
management employee, or such director's or employee's immediate family.
3.9 Compensation Committee. The Company shall form a Compensation
Committee that will be responsible for determining all compensation arrangements
relating to the Company's executive officers. One member of such Committee shall
be a Director representing the Series A Preferred Stock and one member shall be
a Director representing the Series B and Series B-1 Preferred Stock, together as
a single class.
3.10 Directors' Compensation. The Company shall not pay any cash
compensation to any member of the Company's Board of Directors in connection
with the performance of such member's duties as a Director. Notwithstanding the
foregoing, the Company may grant options to purchase Common Stock of the Company
to any member of the Board of Directors in connection with the performance of
his or her duties as a Director, provided, that such Director is neither an
employee of the Company nor an affiliate of any Holder.
3.11 Directors' Liability and Indemnification. The Company's Articles
of Incorporation and Bylaws shall provide (a) for elimination of the liability
of director to the maximum extent permitted by law and (b) for indemnification
of directors for acts on behalf of the Company to the maximum extent permitted
by law.
3.12 Termination of Covenants. All covenants of the Company contained
in Section 3 of this Agreement shall expire and terminate as to each Investor
upon the earlier of (i) the effective date of the registration statement
pertaining to a Qualified Offering or any other public offering of Company's
securities in which all of the Company's outstanding Preferred Stock is
converted into Common Stock in accordance with the Company's Articles of
Incorporation or
16.
(ii) upon (a) the sale, lease or other disposition of all or substantially all
of the assets of the Company or (b) an acquisition of the Company by another
corporation or entity by consolidation, merger or other reorganization in which
the holders of the Company's outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities representing
less than fifty percent (50%) of the voting power of the Company or other entity
surviving such transaction (a "Change in Control"), provided that this Section
3.13(ii)(b) shall not apply to a merger effected exclusively for the purpose of
changing the domicile of the Company.
4. RIGHTS OF FIRST REFUSAL.
4.1 Subsequent Offerings. Each Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
4.6 hereof. Each Investor's pro rata share shall be the ratio of (a) the number
of shares of the Company's Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Preferred Stock) of which such
Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities; provided
however, that with respect to Oryx Technologies Corp., which includes Oryx
Ventures LLC (collectively referred to herein as "Oryx"), the pro rata share
shall be the ratio of (c) the number of shares of the Company's Common Stock
(including all shares of Common Stock issued or issuable upon conversion of the
Shares or exercise of that certain warrant for seven hundred thousand (700,000)
shares of the Company's Common Stock issued pursuant to that certain Business
and Consultant Management Agreement dated July 20, 2000, between Oryx and the
Company) which Oryx is deemed to be a holder immediately prior to the issuance
of such Equity Securities to (d) the total number of shares of the Company's
outstanding Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Shares or upon the exercise of any outstanding
warrants or options) immediately prior to the issuance of the Equity Securities.
The term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase its pro rata share
of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
17.
4.3 Issuance of Equity Securities to Other Persons. If not all of the
Investors elect to purchase their pro rata share of the Equity Securities, then
the Company shall promptly notify in writing the Investors who do so elect and
shall offer such Investors the right to acquire such unsubscribed shares. Each
respective Investor shall then have five (5) days after its receipt of such
notice to notify the Company of its election to purchase all or a portion
thereof of the unsubscribed shares. If all such Investors fail to exercise in
full the rights of first refusal, the Company shall have ninety (90) days
thereafter to sell any such remaining Equity Securities to persons selected in
the Company's discretion, at a price and upon general terms and conditions
materially no more favorable to the purchasers thereof than those specified in
the Company's notice to the Investors pursuant to Section 4.2 hereof. If the
Company has not sold all such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 4.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to the
Investors in the manner provided above.
4.4 Termination and Waiver of Rights of First Refusal. The rights of
first refusal established by this Section 4 shall not apply to, and shall
terminate upon the earlier of (i) the effective date of the registration
statement pertaining to the Company's Qualified Offering, (ii) the effective
date of the registration statement pertaining to any other public offering of
the Company's securities in which all of the Company's outstanding Preferred
Stock is converted into Common Stock in accordance with the Company's Articles
of Incorporation, or (iii) a Change in Control. The rights of first refusal
established by this Section 4 may be amended, or any provision waived with the
written consent of Investors holding a majority of the Registrable Securities
held by all Investors, or as permitted by Section 5.6.
4.5 Transfer of Rights of First Refusal. The rights of first refusal of
each Investor under this Section 4 may be transferred, subject to the same
restrictions as any transfer of registration rights pursuant to Section 2.10.
4.6 Excluded Securities. The rights of first refusal established by
this Section 4 shall have no application to the sale or issuance of any of the
following Equity Securities:
(a) shares of Common Stock and/or options, warrants or other
Common Stock purchase rights and the Common Stock issued pursuant to such
options, warrants or other rights issued or to be issued to employees, officers
or directors of, or consultants or advisors to the Company or any subsidiary,
pursuant to stock purchase or stock option plans or other arrangements that are
approved by the Board of Directors;
(b) stock issued pursuant to any rights, agreements, options
or warrants outstanding as of the date of this Agreement;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination approved by the Board of Directors;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
18.
(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing or loan arrangement, or debt financing from a bank or similar financial
or lending institution approved by the Board of Directors;
(g) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act;
(h) any Equity Securities issued in connection with strategic
transactions involving the Company and other entities, including (i) joint
ventures, manufacturing, marketing or distribution arrangements or (ii)
technology transfer or development arrangements; provided that any such
strategic transactions and the issuance of shares therein, have been approved by
the Company's Board of Directors; and
(i) up to two million nine hundred thousand (2,900,000) shares
of the Company's Series B-1 Preferred Stock that the Company may issue and sell
pursuant to the Purchase Agreement.
5. MISCELLANEOUS.
5.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
5.2 Survival. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Investor and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
5.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 Entire Agreement.
(a) The Prior Agreement is hereby amended in its entirety and
restated herein. Such amendment and restatement is effective upon the execution
of the Agreement by the Company and the Prior Investors holding at least
sixty-six and two-thirds percent (662/3%) in interest of the Registrable
Securities that remain outstanding as of the date of this Agreement.
19.
Upon such execution, all provisions of, rights granted and covenants made in the
Prior Agreement are hereby waived, released and terminated in their entirety and
shall have no further force and effect.
(b) This Agreement, the Exhibits and Schedules hereto, the
Purchase Agreement and the other documents delivered pursuant thereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
5.5 Severability. If one or more of the provisions of this Agreement
is, for any reason, 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 as if such
invalid, illegal or unenforceable provision had never been contained herein.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Company and the
Investors holding at least sixty-six and two-thirds percent (662/3%) of the
Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Investors under this Agreement may be waived
only with the written consent of the holders of at least sixty-six and
two-thirds percent (662/3%) of the Registrable Securities.
(c) For the purposes of determining the number of Investors
entitled to vote or exercise any rights hereunder, the Company shall be entitled
to rely solely on the list of record holders of its stock as maintained by or on
behalf of the Company.
5.7 Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any Investor, upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. Any waiver, permit, consent, or
approval of any kind or character on any Investor's part of any breach, default
or noncompliance under the Agreement or any waiver on such Investor's part of
any provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to
Investors, shall be cumulative and not alternative.
5.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient; if not, then on the next business day (provided
that to be effective upon receipt, any notice by facsimile must be followed up
immediately by notice sent by registered or certified mail as provided in this
Section
20.
5.8); (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) upon receipt after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature pages hereof
or Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.9 Attorneys' Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, reasonable fees and expenses of
attorneys, which shall include, without limitation, reasonable fees, costs and
expenses of appeals.
5.10 Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 Additional Investors. Notwithstanding anything to the contrary
contained herein, (a) if the Company shall issue additional shares of its Series
B-1 Preferred Stock pursuant to the Purchase Agreement, any additional purchaser
of such shares of Preferred Stock shall become a party to this Agreement by
executing and delivering an additional counterpart signature page to this
Agreement and shall be deemed an "Investor" hereunder and (b) if the Company
shall issue Equity Securities in accordance with Section 4.6 (c), (f) or (h) of
this Agreement, any purchaser of such Equity Securities may become a party to
Section 2 of this Agreement by executing and delivering an additional
counterpart signature page to this Agreement and in such case shall be deemed a
"Holder" hereunder; provided further that (i) upon any such issuance covered by
Section 4.6(c), (f), or (h), if agreed by the Company and such Holder, the
Common Stock underlying such Equity Securities so issued shall, without any
further action on the part of the Investors, be considered Registrable
Securities under this Agreement and (ii) for purposes of such Section 2, no
further action shall be required by any Investor to make such purchaser a party
to Section 2.
5.12 Counterparts; Facsimile. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. This Agreement may be executed and
delivered by facsimile and upon such delivery the facsimile signature will be
deemed to have the same effect as if the original signature had been delivered
to the other party.
[THIS SPACE INTENTIONALLY LEFT BLANK]
21.
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
S2 TECHNOLOGIES, INC. COLUMBUS NOVA INVESTMENTS
By:________________________________ By:__________________________________
Title:_____________________________ Title:_______________________________
ORYX VENTURES LLC
By:__________________________________
Name:________________________________
Title:_______________________________
ORYX TECHNOLOGIES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
PROFILE VENTURE PARTNERS FUND 1, L.P.
By:__________________________________
Name:________________________________
Title:_______________________________
[AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
STAR TRUST 1982
By:__________________________________
Name:________________________________
Title:_______________________________
HIGH OCTANE FUND
By:__________________________________
Name:________________________________
Title:_______________________________
DIABLO PARTNERS
By:__________________________________
Name:________________________________
Title:_______________________________
[AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
EXHIBIT A
SCHEDULE OF INVESTORS
INVESTOR SHARES
------------------------------------------------------------ ---------------
Holders of Series A Preferred Stock:
------------------------------------------------------------
ORYX TECHNOLOGIES, INC. 1,851,852
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
STAR TRUST 1982 370,371
c/o ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
VMR HIGH OCTANE FUND 370,370
▇/▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, Isle of Man 1M992DR
Holders of Series B Preferred Stock:
------------------------------------------------------------
ORYX VENTURES, LLC 5,835,715
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
PROFILE VENTURE PARTNERS FUND 1, L.P. 2,000,000
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
VMR HIGH OCTANE FUND 957,142
▇/▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ of Man 1M992DR
COLUMBUS NOVA INVESTMENTS LIMITED, A.V.V. 1,142,858
c/o Columbus Nova Partners LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
INVESTOR SHARES
------------------------------------------------------------ ---------------
DIABLO PARTNERS 28,571
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Purchasers of Series B-1 Preferred Stock:
------------------------------------------------------------
ORYX VENTURES, LLC 571,428
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
PROFILE VENTURE PARTNERS FUND 1, L.P. 214,285
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
HIGH OCTANE FUND 857,142
▇/▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ of Man 1M992DR
COLUMBUS NOVA INVESTMENTS 857,142
c/o Columbus Nova Partners LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
SECTION 1. GENERAL.............................................................2
1.1 Definitions.......................................................2
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER..............................3
2.1 Restrictions on Transfer..........................................3
2.2 Demand Registration...............................................4
2.3 Piggyback Registrations...........................................6
2.4 Form S-3 Registration.............................................7
2.5 Expenses of Registration..........................................8
2.6 Obligations of the Company........................................8
2.7 Termination of Registration Rights................................9
2.8 Delay of Registration; Furnishing Information....................10
2.9 Indemnification..................................................10
2.10 Assignment of Registration Rights...............................12
2.11 Amendment of Registration Rights................................12
2.12 Limitation on Subsequent Registration Rights....................12
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information..13
2.14 ............................................................13
2.15 Rule 144 Reporting..............................................13
SECTION 3. COVENANTS OF THE COMPANY...........................................14
3.1 Basic Financial Information and Reporting........................14
3.2 Inspection Rights................................................15
3.3 Confidentiality of Records.......................................15
3.4 Reservation of Common Stock......................................15
3.5 Stock Vesting....................................................15
3.6 Proprietary Information and Inventions Agreement.................16
3.7 Assignment of Right of First Refusal.............................16
3.8 Approval.........................................................16
3.9 Compensation Committee...........................................16
3.10 Directors' Expenses.............................................16
3.11 Directors' Liability and Indemnification........................16
3.13 Termination of Covenants........................................16
i.
SECTION 4. RIGHTS OF FIRST REFUSAL............................................17
4.1 Subsequent Offerings.............................................17
4.2 Exercise of Rights...............................................17
4.3 Issuance of Equity Securities to Other Persons...................17
4.4 Termination and Waiver of Rights of First Refusal................18
4.5 Transfer of Rights of First Refusal..............................18
4.6 Excluded Securities..............................................18
SECTION 5. MISCELLANEOUS......................................................19
5.1 Governing Law....................................................19
5.2 Survival.........................................................19
5.3 Successors and Assigns...........................................19
5.4 Entire Agreement.................................................19
5.5 Severability.....................................................20
5.6 Amendment and Waiver.............................................20
5.7 Delays or Omissions..............................................20
5.8 Notices..........................................................20
5.9 Attorneys' Fees..................................................21
5.10 Titles and Subtitles............................................21
5.11 Additional Investors............................................21
5.12 Counterparts....................................................21
ii.
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EXHIBIT D
AMENDED AND RESTATED CO-SALE AGREEMENT
S2 TECHNOLOGIES, INC.
AMENDED AND RESTATED
CO-SALE AGREEMENT
MAY 6, 2003
2.
S2 TECHNOLOGIES, INC.
AMENDED AND RESTATED
CO-SALE AGREEMENT
THIS AMENDED AND RESTATED CO-SALE AGREEMENT (the "Agreement") is made
and entered into as of May 6, 2003 (the "Effective Date"), by and among S2
TECHNOLOGIES, INC., a California corporation (the "Company"), the holders of the
Company's Series A Preferred Stock, Series B Preferred Stock, and Series B-1
Preferred Stock listed on Exhibit A hereto (collectively, the "Investors"), and
certain holders of the Company's Common Stock listed on Exhibit B hereto (the
"Shareholders"). Collectively, the Company, Shareholders and the Investors are
referred to as the "Parties."
RECITALS
WHEREAS, certain of the Investors hold shares of the Company's Series A
Preferred Stock (the "Series A Preferred Stock") and Series B Preferred Stock
(the "Series B Preferred Stock") and possess certain co-sale rights pursuant to
an existing Amended and Restated Co-Sale Agreement dated as of October 18, 2001
by and among the Company, the Shareholders and such Investors (the "Prior
Agreement");
WHEREAS, the undersigned Investors hold more than a majority in
interest of the Common Stock (as defined in the Prior Agreement) held by the
Investors and the Shareholders hold more than a majority in interest of the
Common Stock held by Shareholders and such Investors, Shareholders and the
Company desire to terminate the Prior Agreement and to accept the rights created
pursuant hereto in lieu of the rights granted under the Prior Agreement, with
the Prior Agreement being superseded hereby and of no further force or effect as
of the Effective Date hereof;
WHEREAS, certain of the Investors are purchasing shares of the
Company's Series B-1 Preferred Stock (the "Series B-1 Preferred Stock" and,
collectively with the Series A Preferred Stock and Series B Preferred Stock, the
"Preferred Stock") pursuant to that certain Series B-1 Preferred Stock Purchase
Agreement (the "Purchase Agreement") of even date herewith among such Investors
and the Company (the "Financing");
WHEREAS, the obligations in the Purchase Agreement are conditioned upon
the execution and delivery of this Agreement; and
WHEREAS, in connection with the consummation of the Financing, the
Parties desire to enter into this Agreement in order to grant rights of co-sale
to each Investor.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1.
7. DEFINITIONS.
(a) "Co-Sale Stock" shall mean shares of the Company's Common Stock now
owned or subsequently acquired by the Shareholders by gift, purchase, dividend,
option exercise or any other means whether or not such securities are registered
in Shareholder's name or beneficially or legally owned by any such Shareholder,
including any interest of a spouse in any of the Co-Sale Stock, whether that
interest is asserted pursuant to marital property laws or otherwise. The number
of shares of Co-Sale Stock owned by the Shareholders as of the date hereof is
set forth on Exhibit B, which Exhibit may be amended from time to time by the
Company to reflect changes in the number of shares owned by the Shareholders,
but the failure to so amend shall have no effect on such Co-Sale Stock subject
to this Agreement.
(b) "Common Stock" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon conversion of the Company's outstanding
Preferred Stock or exercise of any option, warrant or other security or right of
any kind convertible into or exchangeable for Common Stock.
(c) For the purpose of this Agreement, the term "Transfer" shall
include any sale, assignment, encumbrance, hypothecation, pledge, conveyance in
trust, gift, transfer by request, devise or descent, or other transfer or
disposition of any kind, including, but not limited to, transfers to receivers,
levying creditors, trustees or receivers in bankruptcy proceedings or general
assignees for the benefit of creditors, whether voluntary or by operation of
law, directly or indirectly, of any of the Co-Sale Stock.
8. TRANSFERS BY A SHAREHOLDER.
(a) If a Shareholder proposes to Transfer any shares of Co-Sale Stock
then the Shareholder shall promptly give written notice (the "Notice")
simultaneously to the Company and to each of the Investors at least thirty (30)
days prior to the proposed closing of such Transfer. The Notice shall describe
in reasonable detail the proposed Transfer including, without limitation, the
number of shares of Co-Sale Stock to be transferred, the nature of such
Transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the Transfer is being
made pursuant to the provisions of Section 3(a), the Notice shall state under
which section the Transfer is being made.
(b) Each Investor shall have the right, exercisable upon written notice
to such Shareholder within fifteen (15) days after the Notice, to participate in
such Transfer of Co-Sale Stock on the same terms and conditions. Such notice
shall indicate the number of shares of Common Stock such Investor wishes to sell
under his, her or its right to participate. To the extent one or more of the
Investors exercise such right of participation in accordance with the terms and
conditions set forth below, the number of shares of Co-Sale Stock that such
Shareholder may sell in the transaction shall be correspondingly reduced.
(c) Each Investor may sell all or any part of that number of shares
equal to the product obtained by multiplying (i) the aggregate number of shares
of Co-Sale Stock covered by the Notice by (ii) a fraction the numerator of which
is the number of shares of Common Stock owned by such Investor at the time of
the Transfer and the denominator of which is the total
2.
number of shares of Common Stock owned by such Shareholder and the Investors at
the time of the Transfer. If not all of the Investors elect to sell their share
of the Co-Sale Stock proposed to be transferred within said fifteen (15) day
period, then the Shareholder shall promptly notify in writing the Investors who
do so elect and shall offer such Investors the additional right to participate
in the sale of such additional shares of Co-Sale Stock proposed to be
transferred on the same percentage basis as set forth above in this Section
2(c). The Investors shall have five (5) days after receipt of such notice to
notify the Shareholder of their election to sell all or a portion thereof of the
unsubscribed shares.
(d) Each Investor who elects to participate in the Transfer pursuant to
this Section 2 (a "Participant") shall effect its participation in the Transfer
by promptly delivering to such Shareholder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent:
(i) the type and number of shares of Common Stock which such
Participant elects to sell; or
(ii) that number of shares of Preferred Stock which is at that
time convertible into the number of shares of Common Stock such Participant
elects to sell; provided, however, that if the prospective purchaser objects to
the delivery of Preferred Stock in lieu of Common Stock, such Participant shall
convert such Preferred Stock into Common Stock and deliver Common Stock as
provided in Section 2(d)(i) above. The Company shall make any such conversion
concurrent with the actual Transfer of such shares to the proposed purchaser.
(e) The stock certificate or certificates that the Participant delivers
to such Shareholder pursuant to Section 2(d) shall be transferred to the
prospective purchaser in consummation of the sale of the Common Stock pursuant
to the terms and conditions specified in the Notice, and the Shareholder shall
concurrently therewith remit to such Participant that portion of the sale
proceeds to which such Participant is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser or purchasers prohibits
such assignment or otherwise refuses to purchase shares or other securities from
a Participant exercising its rights of co-sale hereunder, such Shareholder shall
not sell to such prospective purchaser or purchasers any Co-Sale Stock unless
and until, simultaneously with such sale, such Shareholder shall purchase such
shares or other securities from such Participant on the same terms and
conditions specified in the Notice.
(f) The exercise or non-exercise of the rights of the Investors
hereunder to participate in one or more Transfers of Co-Sale Stock made by such
Shareholder shall not adversely affect their rights to participate in subsequent
Transfers of Co-Sale Stock subject to Section 2(a).
(g) If none of the Investors elects to participate in the sale of the
Co-Sale Stock subject to the Notice, such Shareholder may, not later than sixty
(60) days following delivery to the Company of the Notice, enter into an
agreement providing for the closing of the Transfer of the Co-Sale Stock covered
by the Notice within thirty (30) days of such agreement on terms and conditions
not more materially favorable to the transferee than those
3.
described in the Notice. Any proposed Transfer on terms and conditions
materially more favorable than those described in the Notice, as well as any
subsequent proposed Transfer of any of the Co-Sale Stock by a Shareholder, shall
again be subject to the co-sale rights of the Investors and require compliance
by a Shareholder with the procedures described in this Section 2.
9. EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the co-sale rights of the Investors
shall not apply to (i) any Transfer or Transfers by a Shareholder which in the
aggregate, over the term of this Agreement, amount to less than 10% (measured on
a cumulative basis) of all outstanding Co-Sale Stock as of the date hereof (as
adjusted for stock splits, dividends and the like), (ii) any Transfer to the
ancestors, descendants or spouse or to trusts for the benefit of such persons or
the Shareholder, or (iii) any bona fide gift; provided that in the event of any
Transfer made pursuant to one of the exemptions provided by clauses (ii) or
(iii), (A) the Shareholder shall inform the Investors of such pledge, Transfer
or gift prior to effecting it and (B) the pledgee, transferee or donee shall
furnish the Investors with a written agreement to be bound by and comply with
all provisions of Section 2. Except with respect to Co-Sale Stock transferred
under clause (i) immediately above (which Co-Sale Stock shall no longer be
subject to the co-sale rights of the Investors), such transferred Co-Sale Stock
shall remain "Co-Sale Stock" hereunder, and such pledgee, transferee or donee
shall be treated as a "Shareholder" for all purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2 shall
not apply to the sale of any Co-Sale Stock as part of a firmly underwritten
public offering of the Company's Common Stock at a price per share of at least
five dollars ($5.00) per share and having an aggregate offering price to the
public of at least twenty million dollars ($20,000,000) before deduction of
underwriting discounts and selling commissions (a "Qualified Offering") or as
part of any other public offering of the Company's securities in which the
Company's outstanding Preferred Stock is converted into Common Stock in
accordance with the Company's Articles of Incorporation.
(c) This Agreement is subject to, and shall in no manner limit the
right which the Company may have to repurchase securities from the Shareholders
pursuant to (i) a stock restriction agreement or other agreement among the
Company and the Shareholders and (ii) any right of first refusal set forth in
the Bylaws of the Company.
10. PROHIBITED TRANSFERS.
(a) In the event that a Shareholder Transfers any Co-Sale Stock in
contravention of the co-sale rights of any Investor under this Agreement (a
"Prohibited Transfer"), each Investor, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
below, and such Shareholder shall be bound by the applicable provisions of such
option.
(b) In the event of a Prohibited Transfer, each Investor shall have the
right to sell to such Shareholder the type and number of shares of Common Stock
equal to the number of shares each Investor would have been entitled to Transfer
to the purchaser under Section 2(c)
4.
hereof had the Prohibited Transfer been effected pursuant to and in compliance
with the terms hereof. Such sale shall be made on the following terms and
conditions:
(i) The price per share at which the shares are to be sold to the
Shareholder shall be equal to the price per share paid by the purchaser to such
Shareholder in such Prohibited Transfer. In such instance of a put option being
exercised, the respective Shareholders shall also reimburse each Investor for
any and all reasonable fees and expenses, including reasonable legal fees and
expenses, incurred pursuant to the exercise or the attempted exercise of the
Investor's rights under Section 2.
(ii) Within ninety (90) days after the date on which an Investor
received notice of the Prohibited Transfer or otherwise became aware of the
Prohibited Transfer, such Investor shall, if exercising the option created
hereby, deliver to the Shareholder the certificate or certificates representing
shares to be sold, each certificate to be properly endorsed for Transfer. If the
Investor does not exercise its put option right within such ninety (90) days,
then such Investor shall lose all rights it has under this Section 4 with
respect to such Prohibited Transfer.
(iii) Such Shareholder shall, upon receipt of the certificate or
certificates for the shares to be sold by an Investor, pursuant to this Section
4(b), pay the aggregate purchase price therefor and the amount of reimbursable
fees and expenses, as specified in Section 4(b)(i), in cash or by other means
acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by a Shareholder to
Transfer Co-Sale Stock in violation of Section 2 hereof shall be voidable at the
option of a majority in interest of the Investors if a majority in interest of
the Investors does not elect to exercise the put option set forth in this
Section 4, and the Company agrees it will not effect such a Transfer nor will it
treat any alleged transferee as the holder of such shares without the written
consent of a majority in interest of the Investors; provided, however that no
such Transfer shall be voidable as provided in this clause (iv) unless said
majority in interest advises the Shareholder of its intent to void (in writing)
within ninety (90) days after the date any Investor learns of such Transfer.
11. LEGEND.
(a) Each certificate representing shares of Co-Sale Stock now or
hereafter owned by the Shareholder or issued to any person in connection with a
Transfer pursuant to Section 3(a) hereof shall be endorsed with the following
legend:
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER
OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN AMENDED AND RESTATED
CO-SALE AGREEMENT BY AND BETWEEN THE
SHAREHOLDER, THE COMPANY AND CERTAIN HOLDERS
OF STOCK OF THE COMPANY. COPIES OF SUCH
AGREEMENT MAY
5.
BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY.
(b) The Shareholders agree that the Company may instruct its transfer
agent to impose Transfer restrictions on the shares represented by certificates
bearing the legend referred to in Section 5(a) above to enforce the provisions
of this Agreement and the Company agrees to promptly do so. The legend shall be
removed upon termination of this Agreement.
12. MISCELLANEOUS.
(a) Conditions to Exercise of Rights. Exercise of the Investors' rights
under this Agreement shall be subject to and conditioned upon, and the
Shareholders and the Company shall use their best efforts to assist each
Investor in, compliance with applicable laws.
(b) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
(c) Amendment. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of (i)
as to the Company, only the Company, (ii) as to the Investors, persons holding
more than a majority in interest of the Common Stock held by the Investors and
their assignees, pursuant to Section 6(d) hereof, and (iii) as to the
Shareholders, only those persons holding a majority in interest of the Common
Stock held by the Shareholders and their assignees; provided, that no consent of
Shareholders shall be necessary for any amendment and/or restatement which
includes additional holders of Preferred Stock or other preferred stock of the
Company as "Investors" and Parties hereto. Any amendment or waiver effected in
accordance with clauses (i), (ii), and (iii) of this Section 6(c) shall be
binding upon each Investor, its successors and assigns, the Company and the
Shareholders.
(d) Assignment of Rights. This Agreement constitutes the entire
agreement between the Parties relative to the specific subject matter hereof.
Any previous agreement among the Parties relative to the specific subject matter
hereof is superseded by this Agreement. 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.
(e) Term. This Agreement shall continue in full force and effect from
the date hereof through the earliest of the following dates, on which date it
shall terminate in its entirety:
(i) the date of the closing of a Qualified Offering;
(ii) the date of the closing of any other public offering of
the Company's securities in which the Company's outstanding Preferred Stock is
converted into Common Stock in accordance with the Company's Articles of
Incorporation;
6.
(iii) the date of the closing of a sale, lease, or other
disposition of all or substantially all of the Company's assets or the Company's
merger into or consolidation with any other corporation or other entity, or any
other corporate reorganization, in which the holders of the Company's
outstanding voting stock immediately prior to such transaction own, immediately
after such transaction, securities representing less than fifty percent (50%) of
the voting power of the corporation or other entity surviving such transaction,
provided that this Section 6(e)(iii) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company; or
(iv) the date as of which the Parties hereto terminate this
Agreement by written consent of a majority in interest of the Investors and by
written consent of a majority in interest of the Shareholders.
(f) Ownership. The Shareholders respectively represent and warrant that
they are the only legal and beneficial owners of those shares of Co-Sale Stock
they currently hold subject to the Agreement and that no other person has any
interest (other than a community property interest) in such shares.
(g) Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
Party to be notified; (ii) when sent by confirmed facsimile if sent during
normal business hours of the recipient, provided, that such facsimile
transmission shall be followed up by certified or registered mail as provided
herein; (iii) five (5) days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (iv) upon receipt after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the Party to be notified at the address as set forth on the signature page
hereof or at such other address as such Party may designate by ten (10) days
advance written notice to the other Parties.
(h) Severability. If one or more of the provisions of this Agreement
is, for any reason, 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 as if such
invalid, illegal or unenforceable provision had never been contained herein.
(i) Attorneys' Fees. If any suit or action is instituted to enforce any
provision in this Agreement, the prevailing Party in such dispute shall be
entitled to recover from the losing Party(ies) all reasonable fees, costs and
expenses of enforcing any right of such prevailing Party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys, which shall include, without limitation, reasonable fees,
costs and expenses of appeals.
(j) Entire Agreement. This Agreement and its Exhibits constitute the
full and entire understanding and agreement among the Parties with regard to the
subject hereof and no Party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements respecting such
subject matter except as specifically set forth herein.
7.
(k) Additional Investors. Notwithstanding anything to the contrary
contained herein, if, after the Effective Date, the Company shall issue
additional shares of Series B Preferred Stock pursuant to the Purchase
Agreement, any purchaser of such shares of Series B Preferred Stock may become a
Party to this Agreement after the Effective Date by executing and delivering an
additional counterpart signature page to this Agreement and for all purposes,
such Purchaser shall be deemed an "Investor" hereunder.
(l) Counterparts; Facsimile. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. This Agreement may be executed and
delivered by facsimile and upon such delivery the facsimile signature will be
deemed to have the same effect as if the original signature had been delivered
to the other party.
(m) Termination of Prior Agreement. Pursuant to the Prior Agreement,
upon execution of this Agreement by the Company, the Shareholders holding a
majority in interest of the Common Stock held by the Shareholders and the
holders of at least a majority in interest of the Common Stock held by the
Investors named in the Prior Agreement and that remain outstanding as of the
date of this Agreement, the Prior Agreement is hereby terminated in its entirety
and restated herein. Upon such execution, all provisions of, rights granted and
covenants made in the Prior Agreement are hereby waived, released and terminated
in their entirety and shall have no further force to effect.
[THIS SPACE INTENTIONALLY LEFT BLANK]
8.
The foregoing CO-SALE AGREEMENT is hereby executed as of the date first
above written.
COMPANY: INVESTORS:
S2 TECHNOLOGIES, INC. COLUMBUS NOVA INVESTMENTS
By:______________________________ By:__________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President and CEO Name:________________________________
Title:_______________________________
SHAREHOLDERS:
ORYX VENTURES LLC
_________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By:__________________________________
_________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Name:________________________________
Title:_______________________________
ORYX TECHNOLOGIES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
PROFILE VENTURE PARTNERS FUND 1, L.P.
By:__________________________________
Name:________________________________
Title:_______________________________
AMENDED AND RESTATED CO-SALE AGREEMENT
SIGNATURE PAGE
STAR TRUST 1982
By:_________________________________
Name:_______________________________
Title:______________________________
VMR HIGH OCTANE FUND
By:_________________________________
Name:_______________________________
Title:______________________________
DIABLO PARTNERS
By:_________________________________
Name:_______________________________
Title:______________________________
AMENDED AND RESTATED CO-SALE AGREEMENT
SIGNATURE PAGE
EXHIBIT A
LIST OF INVESTORS
Oryx Technologies, Inc.
Oryx Ventures, LLC
Profile Venture Partners Fund 1, L.P.
Star Trust 1982
VMR High Octane Fund
Columbus Nova Investments
Diablo Partners
AMENDED AND RESTATED CO-SALE AGREEMENT
EXHIBIT B
CO-SALE STOCK OWNERSHIP
Name of Shareholder Co-Sale Stock
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 5,100,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 300,000
Oryx Ventures, LLC 466,666
AMENDED AND RESTATED CO-SALE AGREEMENT
TABLE OF CONTENTS
PAGE
1. DEFINITIONS......................................................2
2. TRANSFERS BY A SHAREHOLDER.......................................2
3. EXEMPT TRANSFERS.................................................4
4. PROHIBITED TRANSFERS.............................................4
5. LEGEND...........................................................5
6. MISCELLANEOUS....................................................6
i.
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EXHIBIT E
AMENDED AND RESTATED VOTING AGREEMENT
S2 TECHNOLOGIES, INC.
AMENDED AND RESTATED
VOTING AGREEMENT
MAY 6, 2003
S2 TECHNOLOGIES, INC.
AMENDED AND RESTATED
VOTING AGREEMENT
THIS AMENDED AND RESTATED VOTING AGREEMENT (the "Agreement") is made
and entered into as of May 6, 2003 ("Effective Date"), by and among S2
TECHNOLOGIES, INC., a California corporation (the "Company"), those certain
holders of the Company's Common Stock listed on Exhibit A hereto (the "Key
Stockholders") and the persons and entities listed on Exhibit B hereto (the
"Investors"). Together, the Company, the Key Stockholders and the Investors are
referred to as the "parties," each a "party."
Witnesseth:
WHEREAS, certain of the Investors hold shares of the Company's Series A
Preferred Stock (the "Series A Preferred Stock") and certain of the Investors
hold shares of the Company's Series B Preferred Stock (the "Series B Preferred
Stock"), and possess certain voting rights pursuant to an existing Voting
Agreement dated as of October 18, 2001 by and among the Company and such
Investors (the "Prior Voting Agreement");
WHEREAS, the undersigned Key Stockholders and Investors who hold Series
A Preferred Stock and Series B Stock hold a majority in interest of the
Company's Common Stock, the Series A Preferred Stock and Series B Preferred
Stock held by such Key Stockholders and Investors, respectively, and such Key
Stockholders, Investors and the Company desire to amend and restate the Prior
Voting Agreement to add the holders of Series B-1 Preferred Stock of the Company
as parties thereto;
WHEREAS, the Key Stockholders are the beneficial owners of an aggregate
of five million eight hundred sixty-six thousand six hundred and sixty-six
(5,866,666) shares of the Common Stock of the Company (the "Key Stockholder
Shares");
WHEREAS, the Company proposes to sell shares of Series B-1 Preferred
Stock (the "Series B-1 Preferred Stock") to certain of the Investors pursuant to
the Series B-1 Preferred Stock Purchase Agreement (the "Purchase Agreement") of
even date herewith (the "Financing");
WHEREAS, the obligations in the Purchase Agreement are conditioned upon
the execution and delivery of this Agreement; and
WHEREAS, in connection with the consummation of the Financing, the
Company, the Key Stockholders and Investors have agreed to provide for the
future voting of their shares of the Company's capital stock as set forth below.
NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1.
AGREEMENT
6. VOTING.
6.1 Common Shares; Investor Shares.
(a) Each Key Stockholder agrees to hold all shares of voting
capital stock of the Company registered in its respective name or beneficially
owned by it as of the date hereof (and any and all other securities of the
Company legally or beneficially acquired by each of the Key Stockholders after
the date hereof) (hereinafter collectively referred to as the "Common Shares")
subject to, and to vote the Common Shares in accordance with, the provisions of
this Agreement.
(b) Each Investor agrees to hold all shares of voting capital
stock of the Company (including but not limited to all shares of Common Stock
issued upon conversion of the Series A Preferred Stock, the Series B Preferred
Stock or the Series B-1 Preferred Stock) registered in its respective name or
beneficially owned by it as of the date hereof and any and all other securities
of the Company legally or beneficially acquired by each Investor after the date
hereof (hereinafter collectively referred to as the "Investor Shares") subject
to, and to vote the Investor Shares in accordance with, the provisions of this
Agreement.
6.2 Election of Directors. During the term of this Agreement, the
authorized size of Company's Board of Directors shall be five (5). On all
matters relating to the election of Directors of the Company, the Key
Stockholders and the Investors agree to vote all Common Shares and Investor
Shares held by them (or the holders thereof shall consent pursuant to an action
by written consent of the holders of capital stock of the Company) so as to
elect members of the Company's Board of Directors as follows:
(a) So long as (i) the holders of the Series A Preferred Stock
have a right to elect at least one (1) Director to the Company's Board of
Directors in accordance with the Company's Amended and Restated Articles of
Incorporation (the "Restated Charter"), and (ii) Oryx Ventures and/or Oryx
Technologies Corp. (collectively referred to as "Oryx") continues to hold at
least five hundred thousand (500,000) shares of Series A Preferred Stock, then
the Investors holding shares of the Series A Preferred Stock shall vote for ▇▇▇▇
▇▇▇▇▇▇▇▇. If (i) the holders of Series A Preferred Stock have a right to elect
two (2) Directors to the Company's Board of Directors in accordance with the
Company's Restated Charter, and (ii) Oryx continues to hold at least five
hundred thousand (500,000) shares of Series A Preferred Stock, then the
Investors holding Series A Preferred Stock shall also vote for one (1) other
person designated by Oryx. If ▇▇▇▇ ▇▇▇▇▇▇▇▇ shall die or become disabled, then
Oryx shall designate his replacement and Investors holding shares of Series A
Preferred Stock shall vote for such designee. Any vote taken to remove any
Director elected pursuant to this Section 1.2(a) or to fill any vacancy created
by the resignation or death of a Director elected pursuant to this Section
1.2(a) shall also be subject to the provisions of this Section 1.2(a).
(b) So long as (i) the holders of the Series B Preferred Stock
and Series B-1 have a right to elect one (1) Director to the Company's Board of
Directors in accordance with the Company's Restated Charter, and (ii) Profile
Venture Partners ("PVP") continues to hold at least
2.
one million (1,000,000) shares of Series B Preferred Stock and Series B-1
Preferred Stock, in the aggregate, the Investors holding shares of the Series B
Preferred Stock and Series B-1 Preferred Stock shall vote for ▇▇▇▇ ▇▇▇▇▇▇▇ or
another representative designated by PVP. Any vote taken to remove any Director
elected pursuant to this Section 1.2(b), or to fill any vacancy created by the
resignation or death of a Director elected pursuant to this Section 1.2(b),
shall also be subject to the provisions of this Section 1.2(b).
(c) At each election of Directors in which the holders of
Common Stock, voting as a separate class, are entitled to elect Directors of the
Company, the Key Stockholders shall vote all of their respective Key Stockholder
Shares so as to elect: (i) the person serving as Chief Executive Officer of the
Company, and (ii) one (1) individual nominated by the holders of a majority in
interest of the Key Stockholder Shares. Any vote taken to remove any Director
elected pursuant to this Section 1.2(c), or to fill any vacancy created by the
resignation, removal or death of a Director elected pursuant to this Section
1.2(c), shall also be subject to the provisions of this Section 1.2(c).
6.3 Legend.
(a) Concurrently with the execution of this Agreement, there
shall be imprinted or otherwise placed, on certificates representing Key
Stockholder Shares and the Investor Shares the following restrictive legend (the
"Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN
AMENDED AND RESTATED VOTING AGREEMENT WHICH
PLACES CERTAIN RESTRICTIONS ON THE VOTING OF
THE SHARES REPRESENTED HEREBY. ANY PERSON
ACCEPTING ANY INTEREST IN SUCH SHARES SHALL
BE DEEMED TO AGREE TO AND SHALL BECOME BOUND
BY ALL THE PROVISIONS OF SUCH AGREEMENT. A
COPY OF SUCH VOTING AGREEMENT WILL BE
FURNISHED TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE
OF BUSINESS."
(b) The Company agrees that, during the term of this
Agreement, it will not remove, and will not permit to be removed (upon
registration of transfer, reissuance or otherwise), the Legend from any such
certificate and will place or cause to be placed the Legend on any new
certificate issued to represent Key Stockholder Shares or Investor Shares
theretofore represented by a certificate carrying the Legend.
6.4 Successors. The provisions of this Agreement shall be binding upon
the successors in interest to any of the Key Stockholder Shares or Investor
Shares. The Company shall not permit the transfer of any of the Key Stockholder
Shares or Investor Shares on its books or issue a new certificate representing
any of the Key Stockholder Shares or Investor Shares unless and until the person
to whom such security is to be transferred shall have executed a written
agreement, substantially in the form of this Agreement, pursuant to which such
person
3.
agrees to be bound by all the provisions hereof as if such person were a Key
Stockholder or Investor, as applicable.
6.5 Other Rights. Except as provided by this Agreement or any other
agreement entered into in connection with the Financing, each Key Stockholder
and Investor shall exercise the full rights of a holder of capital stock of the
Company with respect to the Key Stockholder Shares and Investor Shares,
respectively.
7. TERMINATION.
7.1 This Agreement shall continue in full force and effect from the
date hereof through the earliest of the following dates, on which date it shall
terminate in its entirety:
(a) the date of the closing of a firmly underwritten public
offering of the Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission, and declared effective under the Securities
Act of 1933, as amended, which results in the Series A, Series B and Series B-1
Preferred Stock being converted into Common Stock;
(b) the date of the closing of any other public offering of
the Company's securities pursuant to which the Company's outstanding Preferred
Stock is converted into shares of Common Stock pursuant to the Company's
Articles of Incorporation;
(c) at such time as the Investors hold less than an aggregate
of one million (1,000,000) shares of Series A Preferred Stock, one million
(1,000,000) shares of the Series B Preferred Stock and five hundred thousand
(500,000) shares of the Series B-1 Preferred Stock (each as adjusted for stock
splits, dividends or the like);
(d) ten (10) years from the Effective Date;
(e) the date of the closing of a sale, lease, or other
disposition of all or substantially all of the Company's assets or the Company's
merger into or consolidation with any other corporation or other entity, or any
other corporate reorganization, in which the holders of the Company's
outstanding voting stock immediately prior to such transaction own, immediately
after such transaction, securities representing less than fifty percent (50%) of
the voting power of the corporation or other entity surviving such transaction,
provided that this Section 2.1(e) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company; or
(f) the date as of which the parties terminate this Agreement
by written consent of a majority in interest of the Investors and a majority in
interest of the Key Stockholders.
8. MISCELLANEOUS.
8.1 Specific Performance. The parties declare that it is impossible to
measure in money the damages which will accrue to a party hereto or to its
heirs, personal representatives, or assigns by reason of a failure to perform
any of the obligations under this Agreement and agree that the terms of this
Agreement shall be specifically enforceable. If any party or its heirs,
4.
personal representatives, or assigns institutes any action or proceeding to
specifically enforce the provisions hereof, any person against whom such action
or proceeding is brought hereby waives any claim or defense that such party or
personal representative has an adequate remedy at law, and such person shall not
offer in any such action or proceeding any claim or defense that such remedy at
law exists.
8.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as such laws apply to
agreements among California residents made and to be performed entirely within
the State of California.
8.3 Amendment or Waiver. This Agreement shall be amended (or provisions
of this Agreement waived) only by an instrument in writing signed by (i) the
Company, (ii) a majority in interest of the Investors and (iii) a majority in
interest of the Key Stockholders. Any amendment or waiver so effected shall be
binding upon each of the parties and any of their assignees.
8.4 Severability. If one or more of the provisions of this Agreement is
held 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 as if such invalid, illegal or
unenforceable provision had never been contained herein.
8.5 Successors. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective heirs, successors, assigns,
administrators, executors and other legal representatives.
8.6 Additional Shares. If subsequent to the Effective Date, any shares
or other securities are issued on, or in exchange for, any of the Key
Stockholder Shares or Investor Shares by reason of any stock dividend, stock
split, combination of shares, reclassification or the like, such shares or
securities shall be deemed to be Key Stockholder or Investor Shares, as the case
may be, for purposes of this Agreement.
8.7 Addition of Investors. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Series B-1
Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares
of Series B-1 Preferred Stock shall become a party to this Agreement (without
any further action by any then current signatory hereto or successor in interest
to such signatory's interest in Series B-1 Preferred Stock) by executing and
delivering an additional counterpart signature page to this Agreement and shall
be deemed an "Investor" hereunder.
8.8 Counterparts; Facsimile. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. This Agreement may be executed and
delivered by facsimile and upon such delivery the facsimile signature will be
deemed to have the same effect as if the original signature had been delivered
to the other party.
5.
8.9 Waiver. No waivers of any breach of this Agreement by any party
shall be construed as a waiver of any rights or remedies of any other party or
with respect to any subsequent breach, unless such waiver so provides by its
terms.
8.10 Attorney's Fees. If any suit or action is instituted to enforce
any provision in this Agreement, the prevailing party in such dispute shall be
entitled to recover from the losing party reasonable fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys, which shall include, without limitation, fees, costs and expenses of
appeals.
8.11 Notices. Any notices required in connection with this Agreement
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified; (ii) when sent by confirmed facsimile if
sent during normal business hours of the recipient (provided that same is
followed up by certified or registered mail immediately as otherwise provided
herein; (iii) five (5) days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (iv) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written notification of receipt. All notices shall be addressed
to the holder appearing on the books of the Company or at such address as such
party may designate by ten (10) days advance written notice to the other parties
hereto.
8.12 Entire Agreement. This Agreement and its Exhibits constitute the
full and entire understanding and agreement among the parties with regard to its
subject matter and no party shall be liable or bound to any other in any manner
with respect to such subject matter by any other representations, warranties,
covenants and agreements.
8.13 Termination of Prior Agreement. Upon the execution of this
Agreement by the Company, a majority in interest of the Key Stockholders and the
holders of a majority in interest of the Series A Preferred Stock and Series B
Preferred Stock held by the Investors named in the Prior Voting Agreement and
outstanding as of the date of this Agreement, the Prior Voting Agreement is
hereby terminated in its entirety and restated herein. Upon such execution, all
provisions of, rights granted and covenants made in the Prior Voting Agreement
are hereby waived, released and terminated in their entirety and shall have no
further force and effect.
6.
IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED VOTING AGREEMENT as of the date first above written.
COMPANY: INVESTORS:
S2 TECHNOLOGIES, INC. COLUMBUS NOVA INVESTMENTS
By:________________________ By:__________________________________
President
Name:________________________________
Title:_______________________________
ORYX VENTURES LLC
By:______________________________
Name:____________________________
Title:___________________________
ORYX TECHNOLOGIES, INC.
By:______________________________
Name:____________________________
Title:___________________________
PROFILE VENTURE PARTNERS FUND
1, L.P.
By:______________________________
Name:____________________________
Title:___________________________
STAR TRUST 1982
By:______________________________
Name:____________________________
Title:___________________________
VMR HIGH OCTANE FUND
By:______________________________
Name:____________________________
Title:___________________________
DIABLO PARTNERS
By:______________________________
Name:____________________________
Title:___________________________
KEY STOCKHOLDERS:
_________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
EXHIBIT A
LIST OF KEY STOCKHOLDERS
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
EXHIBIT B
LIST OF INVESTORS
Oryx Technologies, Inc.
Oryx Ventures, LLC
Profile Venture Partners Fund 1, L.P.
Star Trust 1982
VMR High Octane Fund
Columbus Nova Investments
Diablo Partners
EXHIBIT F
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
EXHIBIT G
FORM OF LEGAL OPINION
EXHIBIT H
BUSINESS PLAN