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EXHIBIT 10.2
CLICKOVER, INC.
SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
March 14,1997
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TABLE OF CONTENTS
Page
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1. Purchase and Sale of Stock...........................................................1
1.1 Sale and Issuance of Series B Preferred Stock.................................1
1.2 Closing.......................................................................1
2. Representations and Warranties of the Company........................................1
2.1 Organization, Good Standing, and Qualification................................1
2.2 Capitalization and Voting Rights..............................................2
2.3 Subsidiaries..................................................................2
2.4 Authorization.................................................................2
2.5 Valid Issuance of Preferred Stock.............................................3
2.6 Governmental Consents.........................................................3
2.7 Offering......................................................................3
2.8 Litigation....................................................................3
2.9 Proprietary Information.......................................................3
2.10 Patents and Trademarks........................................................4
2.11 Compliance with Other Instruments.............................................4
2.12 Agreements; Action............................................................4
2.13 Related-Party Transactions....................................................5
2.14 Registration Rights...........................................................5
2.15 Corporate Documents...........................................................5
2.16 Title to Property and Assets..................................................5
2.17 Employee Benefit Plans........................................................5
2.18 Insurance.....................................................................5
2.19 Employment Matters............................................................6
2.20 Disclosure....................................................................6
3. Representations and Warranties of the Investors......................................6
3.1 Authorization.................................................................6
3.2 Purchase Entirely for Own Account.............................................6
3.3 Disclosure of Information.....................................................6
3.4 Investment Experience.........................................................6
3.5 Restricted Securities.........................................................7
3.6 Further Limitations on Disposition............................................7
3.7 Legends. I...................................................................7
3.8 Further Representations by Foreign Investors..................................8
4. California Commissioner of Corporations..............................................8
4.1 Corporate Securities Law......................................................8
5. Conditions of Investor's Obligations at Closing......................................8
5.1 Representations and Warranties................................................8
5.2 Performance...................................................................8
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5.3 Compliance Certificate........................................................8
5.4 Qualifications................................................................8
5.5 Board of Directors............................................................9
5.6 Restated Articles.............................................................9
5.7 Investor Rights Agreement.....................................................9
5.8 Management Rights Letter......................................................9
5.9 Opinion of Company Counsel....................................................9
6. Conditions of the Company's Obligations at Closing...................................9
6.1 Representations and Warranties................................................9
6.2 Payment of Purchase Price.....................................................9
6.3 Qualifications................................................................9
6.4 Restated Articles.............................................................9
6.5 Investor Rights Agreement.....................................................9
7. Miscellaneous.......................................................................10
7.1 Survival of Warranties.......................................................10
7.2 Successors and Assigns.......................................................10
7.3 Governing Law................................................................10
7.4 Counterparts.................................................................10
7.5 Titles and Subtitles.........................................................10
7.6 Notices......................................................................10
7.7 Finder's Fee.................................................................10
7.8 Expenses.....................................................................10
7.9 Amendments and Waivers.......................................................11
7.10 Severability.................................................................11
7.11 Aggregation of Stock.........................................................11
7.12 Entire Agreement.............................................................11
SCHEDULE A Schedule of Investors
EXHIBIT A Amended and Restated Articles of Incorporation
EXHIBIT B Investor Rights Agreements
EXHIBIT C Opinion of Company Counsel
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SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of
the 14th day of March, 1997, by and among ClickOver, Inc., a California
corporation (the "Company"), and the investors listed on Schedule A hereto, each
of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series B Preferred Stock.
(a) The Company shall adopt and file with
the Secretary of State of the State of California on or before the Closing (as
defined below) the Amended and Restated Articles of Incorporation in the form
attached hereto as Exhibit A (the "Restated Articles").
(b) Subject to the terms and conditions of
this Agreement, each Investor agrees, severally, to purchase at the Closing and
the Company agrees to sell and issue to each Investor at the Closing, that
number of shares of the Company's Series B Preferred Stock set forth opposite
each Investor's name on Schedule A hereto for the purchase price set forth
thereon.
1.2 Closing. The purchase and sale of the Series B
Preferred Stock shall take place at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, 155 Constitution, Menlo Park, California,
at 1:00 P.M., on March 14, 1997, or at such other time and place as the Company
and Investors acquiring in the aggregate more than half the shares of Series B
Preferred Stock sold pursuant hereto mutually agree upon orally or in writing
(which time and place are designated as the "Closing"). At the Closing, the
Company shall deliver to each Investor a certificate representing the Series B
Preferred Stock that such Investor is purchasing against payment of the purchase
price therefor by check, wire transfer, cancellation of indebtedness, or any
combination thereof. In the event that payment by an Investor is made, in whole
or in part, by cancellation of indebtedness, then such Investor shall surrender
to the Company for cancellation at the Closing any evidence of such indebtedness
or shall execute an instrument of cancellation in form and substance acceptable
to the Company.
2. Representations and Warranties of the Company. The
Company hereby represents and warrants to each Investor, except as set forth on
a Schedule of Exceptions (the "Schedule of Exceptions") furnished to each
Investor, which exceptions shall be deemed to be representations and warranties
as if made hereunder, the following:
2.1 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 and has all requisite
corporate power and authority to carry on its business as now conducted. The
Company is duly qualified to transact business and is in good standing in each
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jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization and Voting Rights. Assuming the
filing of the Restated Articles and the consummation of the transactions
contemplated herein, the authorized capital of the Company consists, or will
consist as of the Closing, of:
(a) Preferred Stock. 6,037,000 shares of
Preferred Stock (the "Preferred Stock"), of which 525,000 shares have been
designated Series A Preferred Stock (the "Series A Preferred Stock"), all of
which shall be issued and outstanding, and 5,512,000 shares have been designated
Series B Preferred Stock (the "Series B Preferred Stock"), all of which shall be
issued and outstanding. The rights, privileges and preferences of the Series A
Preferred Stock and the Series B Prefer-red Stock will be as stated in the
Company's Restated Articles.
(b) Common Stock. 14,000,000 shares of
common stock ("Common Stock"), of which 4,776,001 shares shall be issued and
outstanding.
(c) Except for (A) the conversion privileges
of the Series A Preferred Stock, (B) the conversion privileges of the Series B
Preferred Stock to be issued under this Agreement, and (C) 2,650,000 shares of
Common Stock reserved for issuance, either directly or through options, to
employees, directors and consultants to the Company, of which 75,000 shares of
Common Stock are currently committed to employees of the Company, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock. Except as provided in the Restated Articles, the
Company is not a party or subject to any agreement or understanding, and, to the
Company's knowledge, there is no agreement or understanding between any persons
and/or entities, which affects or relates to the voting or giving of written
consents with respect to any security or by a director of the Company.
2.3 Subsidiaries. The Company does not presently own
or control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in any
joint venture, partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part
of the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Investor Rights
Agreement, the performance of all obligations of the Company hereunder and
thereunder, and the authorization, issuance (or reservation for issuance), sale
and delivery of the Series B Preferred Stock being sold hereunder and the Common
Stock issuable upon conversion of the Series B Preferred Stock has been taken or
will be taken prior to the Closing, and this Agreement and the Investor Rights
Agreement constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Investor Rights Agreement may be
limited by applicable federal or state securities laws.
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2.5 Valid Issuance of Preferred Stock. The Series B
Preferred Stock that is being purchased by the Investors hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investor Rights Agreement
and under applicable state and federal securities laws. The Common Stock
issuable upon conversion of the Series B Preferred Stock purchased under this
Agreement has been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Restated Articles, will be duly and validly
issued, fully paid, and nonassessable and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Investor Rights Agreement and under applicable state and federal securities
laws.
2.6 Governmental Consents. No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local governmental authority
on the part of the Company is required in connection with the consummation of
the transactions contemplated by this Agreement, except for the filing pursuant
to Section 25102(f) of the California Corporate Securities Law of 1968, as
amended, and the rules thereunder, which filing will be effected within 15 days
of the sale of the Series B Preferred Stock hereunder.
2.7 Offering. Subject in part to the truth and
accuracy of each Investor's representations set forth in Section 3 of this
Agreement, (i) the offer, sale and issuance of the Series B Preferred Stock as
contemplated by this Agreement are exempt from the registration requirements of
the Act, and neither the Company nor any authorized agent acting on its behalf
will take any action hereafter that would cause the loss of such exemption and
(ii) the Series B Preferred Stock that is being purchased by the Investors
hereunder will be issued in compliance with all applicable federal and state
securities laws.
2.8 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, the Investor
Rights Agreement or the right of the Company to enter into such agreements, or
to consummate the transactions contemplated hereby or thereby, or that might
result either individually or in the aggregate, in any material adverse changes
in the assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions, suits, proceedings or investigations
pending or threatened (or any basis therefore known to the Company) involving
the prior employment of any employees of the Company, 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 party or subject to the
provisions of any order, writ, injunction, judgment or proceeding or
investigation by the Company currently pending or that the Company intends to
initiate.
2.9 Proprietary Information. Each key employee,
officer and consultant (with respect to software developers only) of the Company
has executed a Proprietary Information and Inventions Agreement in substantially
the form provided to special counsel to
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the Investors. The Company is not aware that any of its employees are in
violation of such agreements.
2.10 Patents and Trademarks. To its knowledge, the
Company has sufficient license, title or ownership of all patents, trademarks,
service marks, trade names and copyrights necessary for its business without any
conflict with or infringement of the rights of others. The Company has not
received any communications alleging that the Company has violated any of the
patents, trademarks, service marks, trade names or copyrights of any other
person or entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employees' best efforts to promote the interests of the Company or that would
conflict with the business of the Company as now conducted. Except for
inventions that may be licensed by the Company without charge, the Company does
not believe it is or will be necessary to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior to their
employment by the Company.
2.11 Compliance with Other Instruments. To its
knowledge, the Company is not in violation or default in any material respect of
any provision of its Restated Articles or Bylaws, or in any material respect of
any instrument, judgment, order, writ, decree or contract to which it is a party
or by which it is bound, or, to its knowledge, of any provision of any federal
or state statute, rule or regulation applicable to the Company. The execution,
delivery and performance of this Agreement and the Investor Rights Agreement,
and the consummation of the transactions contemplated hereby and thereby will
not result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event that results in the creation of any lien, charge or encumbrance upon any
assets of the Company or the suspension, revocation, impairment, forfeiture, or
non renewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations or any of its assets or
properties.
2.12 Agreements; Action.
(a) Except for agreements explicitly
contemplated hereby and by the Investor Rights Agreement, there are no
agreements, understandings or proposed transactions between the Company and any
of its officers, directors, affiliates, or any affiliate thereof.
(b) The Schedule of Exceptions contains a
list of all agreements of the Company that involves current obligations of the
Company or any other party thereto in excess of $50,000 and the loss of which
would have a material adverse effect on the business of the Company.
(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 individually in excess of $50,000 or, in the
case of indebtedness and/or liabilities individually less than $50,000,
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in excess of $100,000 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 subsection (c)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company or the Subsidiaries have reason to
believe are affiliated therewith) shall be aggregated for the purpose of meeting
the individual minimum dollar amounts of such subsections.
(e) The Company is not a party to and is not
bound by any contract, agreement or instrument, or subject to any restriction
under its Restated Articles or Bylaws that adversely affects its business, its
properties or its financial condition as now conducted or as proposed to be
conducted.
2.13 Related-Party Transactions. No employee,
officer, or director of the Company or member of his or her immediate family is
indebted to the Company, nor is the Company indebted (or committed to make loans
or extend or guarantee credit) to any of them. To the Company's knowledge, none
of such persons 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 that competes with the
Company, except that employees, officers, or directors of the Company and
members of their immediate families may own stock in publicly traded companies
that may compete with the Company. No member of the immediate family of any
officer or director of the Company is directly or indirectly interested in any
material contract with the Company.
2.14 Registration Rights. Except as provided in the
Investor Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.15 Corporate Documents. The Restated Articles and
Bylaws of the Company are in the form provided to special counsel for the
Investors.
2.16 Title to Property and Assets. The Company owns
its property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens that arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the Company's knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.
2.17 Employee Benefit Plans. The Company does not
have any Employee Benefit Plan as defined in the Employee Retirement Income
Security Act of 1974.
2.18 Insurance. The Company has in full force and
effect fire and casualty insurance policies, with extended coverage, sufficient
in amount (subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed.
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2.19 Employment Matters. The Company is not aware
that any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. The employment of
each officer and employee of the Company is terminable at the will of the
Company.
2.20 Disclosure. To the Company's knowledge, neither
this Agreement, the Investor Rights Agreement, nor any other statements or
certificates made or delivered in connection herewith or therewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading in light of the
circumstances under which they were made.
3. Representations and Warranties of the Investors. Each
Investor hereby represents and warrants that:
3.1 Authorization. Such Investor has full power and
authority to enter into this Agreement and the Investor Rights Agreement, and
each such Agreement constitutes its valid and legally binding obligation,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Investor Rights Agreement may be limited by
applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This
Agreement is made with such Investor in reliance upon such Investor's
representation to the Company, which by such Investor's execution of this
Agreement such Investor hereby confirms, that the Series B Preferred Stock to be
received by such Investor and the Common Stock issuable upon conversion thereof
(collectively, the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing or disposing of the same. By executing this Agreement, such
Investor further represents that such Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
3.3 Disclosure of Information. Such Investor
believes it has received all the information it considers necessary or
appropriate for deciding whether to purchase the Series B Preferred Stock. Such
Investor further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Series B Preferred Stock and the business, properties, prospects
and financial condition of the Company. The foregoing, however, does not limit
or modify the representations and warranties of the Company in Section 2 hereto
or the right of the Investors to rely thereon.
3.4 Investment Experience. Such Investor
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of
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the investment in the Series B Preferred Stock. If other than an individual,
Investor also represents it has not been organized for the purpose of acquiring
the Series B Preferred Stock.
3.5 Restricted Securities. Such Investor understands
that the Securities it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Act, only in certain limited circumstances. In
this connection, such Investor represents that it is familiar with SEC Rule 144,
as presently in effect, and understands the resale limitations imposed thereby
and by the Act.
3.6 Further Limitations on Disposition. Without in
any way limiting the representations set forth above, such Investor further
agrees not to make any disposition of all or any portion of the Securities
unless and until the transferee has agreed in writing for the benefit of the
Company to be bound by this Section 3 and Section 7 of this Agreement and the
Investor Rights Agreement, and:
(a) There is then in effect a Registration
Statement under the Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified
the Company of the proposed disposition and shall have furnished the Company
with a detailed statement of the circumstances surrounding the proposed
disposition, and (ii) if reasonably requested by 'the Company, such Investor
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 Act. It is agreed that the Company will not require
opinions of counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of
paragraphs (a) and (b) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by an Investor that is a, partnership
to a partner of such partnership or a retired partner of such partnership who
retires after the date hereof, or to the estate of any such partner or retired
partner or the transfer by gift, will or intestate succession of any partner to
his or her spouse or to the siblings, lineal descendants or ancestors of such
partner or his or her spouse if the transferee agrees in writing to be subject
to the terms hereof to the same extent as if he or she were an original Investor
hereunder.
3.7 Legends. It is understood that the certificates
evidencing the Securities may bear one or all of the following legends:
(a) "These securities have not been
registered under the Securities Act of 1933, as amended. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such Act or an opinion
of counsel satisfactory to the Company that such registration is not required or
unless sold pursuant to Rule 144 of such Act."
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(b) Any legend required by the laws of the
State of California, including any legend required by the California Department
of Corporations and Sections 417 and 418 of the California Corporations Code.
3.8 Further Representations by Foreign Investors. If
an Investor is not a United States person, such Investor hereby represents that
he or she has satisfied himself or herself as to the full observance of the laws
of his or her jurisdiction in connection with any invitation to subscribe for
the Securities or any use of this Agreement, including (i) the legal
requirements within his jurisdiction for the purchase of the Securities, (ii)
any foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale, or transfer of the Securities. Such Investor's
subscription and payment for, and his or her continued beneficial ownership of
the Securities, will not violate any applicable securities or other laws of his
or her jurisdiction.
4. California Commissioner of Corporations.
4.1 Corporate Securities Law. THE SALE OF THE
SECURITIES THAT 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 FOR
SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
5. Conditions of Investor's Obligations at Closing. The
obligations of each Investor under subsection 1.1(b) of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
5.1 Representations and Warranties. The
representations and warranties of the Company contained in Section 2 shall be
true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.
5.2 Performance. The Company shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
5.3 Compliance Certificate. The President of the
Company shall deliver to each Investor at the Closing a certificate stating that
the conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.4 Qualifications. All authorizations, approvals,
or permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are
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required in connection with the lawful issuance and sale of the Securities
pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
5.5 Board of Directors. The directors of the Company
shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and there shall be one vacancy.
5.6 Restated Articles. The Restated Articles shall
have been duly adopted by the Company by all necessary corporate action of its
Board of Directors and shareholders, and shall have been duly filed with the
Secretary of State of the State of California and become legally effective.
5.7 Investor Rights Agreement. The Company and each
Investor shall have entered into the Investor Rights Agreement in the form
attached hereto as Exhibit B.
5.8 Management Rights Letter. The Company shall have
executed and delivered a management rights letter to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ VIII.
5.9 Opinion of Company Counsel. Each Investor shall
have received from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
LLP, counsel for the Company, an opinion, dated as of the Closing, in the form
attached hereto as Exhibit C.
6. Conditions of the Company's Obligations at Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
that Investor:
6.1 Representations and Warranties. The
representations and warranties of the Investor contained in Section 3 shall be
true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
6.2 Payment of Purchase Price. The Investor shall
have delivered the purchase price specified in Section 1.1(b).
6.3 Qualifications. All authorizations, approvals,
or permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the lawful
issuance and sale of the Securities pursuant to this Agreement shall be duly
obtained and effective as of the Closing.
6.4 Restated Articles. The Restated Articles shall
have been duly adopted by the Company by all necessary corporate action of its
Board of Directors and shareholders, and shall have been duly filed with the
Secretary of State of the State of California and become legally effective.
6.5 Investor Rights Agreement. The Company and each
Investor shall have entered into the Investor Rights Agreement in the form
attached hereto as Exhibit B.
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7. Miscellaneous.
7.1 Survival of Warranties. The warranties,
representations and covenants of the Company and Investors contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Investors or the
Company.
7.2 Successors and Assigns. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including transferees of any Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 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.
7.4 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given to the party so
notified in writing and shall be deemed effectively given upon personal
delivery, upon delivery by confirmed facsimile or electronic transmission (with
duplicate original sent by United States mail) or three business days after
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party 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.
7.7 Finder's Fee. Each party represents that it
neither is nor will be obligated for any finders' fee or commission in
connection with this transaction. Each Investor agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which such Investor or any of its
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless each Investor from any liability for any
commission or compensation in the nature of a finders' fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is
effected, the Company shall pay all costs and expenses that it incurs with
respect to the negotiation,
10
14
execution, delivery and performance of this Agreement. If the Closing is
effected, the Company shall reimburse the reasonable fees and expenses of
special counsel for the Investors, such reimbursement not to exceed $10,000. If
any action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the Investor Rights Agreement or the Restated Articles, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
7.9 Amendments and Waivers. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the Series
B Preferred Stock. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and the
Company.
7.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.11 Aggregation of Stock. All shares of the
Preferred Stock held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
7.12 Entire Agreement. This Agreement and the
documents referred to herein constitute the entire agreement among the parties
and no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
11
15
IN WITNESS WHEREOF, the parties have executed this Series B
Preferred Stock Purchase Agreement as of the date first above written.
CLICKOVER, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
16
INVESTORS:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII
By: KPCB VIII Associates, its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: General Partner
----------------------------------------
KPCB INFORMATION SCIENCES ZAIBATSU FUND II
By: KPCB VIII Associates, its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: General Partner
----------------------------------------
KPCB JAVA FUND
By: KPCB VIII Associates, its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: General Partner
----------------------------------------
Address: c/o Kleiner ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
SIGNATURE PAGE TO CLICKOVER, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
17
/s/ Fah-▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
Fah-▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SIGNATURE PAGE TO CLICKOVER, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
18
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
SIGNATURE PAGE TO CLICKOVER, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
▇▇
/▇/ ▇▇▇▇-▇▇▇▇ ▇▇▇
-------------------------------------------
▇▇▇▇-▇▇▇▇ ▇▇▇
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
SIGNATURE PAGE TO CLICKOVER, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
20
/s/ ▇▇▇▇-▇▇▇▇ ▇▇▇
-------------------------------------------
▇▇▇▇-▇▇▇▇ ▇▇▇
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
SIGNATURE PAGE TO CLICKOVER, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
21
/s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SIGNATURE PAGE TO CLICKOVER, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
22
/s/ ▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇
Address: ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SIGNATURE PAGE TO CLICKOVER, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
23
SCHEDULE A
SCHEDULE OF INVESTORS
NUMBER OF
SHARES
OF SERIES B AGGREGATE
INVESTOR PREFERRED STOCK PURCHASE PRICE
----------------------------------------------------------------------------------------
KPCB Java Fund 3,710,000 $1,750,007.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII 1,457,500 $ 687,502.75
KPCB Information Sciences
Zaibatsu Fund II 132,500 $ 62,500.25
------------- -------------
Subtotal 5,300,000 $2,500,010.00
------------- -------------
Fah-▇▇▇▇ ▇▇▇▇▇▇ 53,000 $ 25,000.10
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 10,600 $ 5,000.02
▇▇▇▇-▇▇▇▇ ▇▇▇ 42,400 $ 20,000.08
▇▇▇▇-▇▇▇▇ ▇▇▇ 42,400 $ 20,000.08
▇▇▇▇ ▇▇▇▇▇ 42,400 $ 20,000.08
▇▇▇ ▇▇▇▇▇▇▇ 21,200 $ 10,000.04
------------- -------------
Subtotal 212,000 $ 100,000.40
------------- -------------
TOTAL 5,512,000 $2,600,010.40
============= =============
24
EXHIBIT A
Amended and Restated Articles of Incorporation
25
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
CLICKOVER, INC.
a California corporation
The undersigned ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and Thi Thumasathit hereby
certify that:
ONE: They are the President and Assistant Secretary,
respectively, of ClickOver, Inc., a California corporation.
TWO: The Articles of Incorporation of this corporation are
hereby amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is ClickOver, Inc.
ARTICLE II
The purpose of this corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the, trust
company business or the practice of a profession permitted to be incorporated by
the California Corporations Code.
ARTICLE III
A. Classes of Stock. 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 twenty million thirty-seven thousand (20,037,000) shares.
Fourteen million (14,000,000) shares shall be Common Stock and six million
thirty-seven thousand (6,037,000) shares shall be Preferred Stock.
B. Rights, Preferences and Restrictions of the Preferred
Stock. The Preferred Stock may be issued from time to time in series. The
rights, preferences, privileges and restrictions granted to and imposed on the
Series A Preferred Stock (the "Series A Preferred Stock"), which series shall
consist of five hundred twenty-five thousand (525,000) shares, and the Series B
Preferred Stock (the "Series B Preferred Stock"), which series shall consist of
five million five hundred twelve thousand (5,512,000) shares, are as set forth
below in this Article III(B). The Board of Directors of this corporation (the
"Board") is hereby authorized to fix or alter the rights, preferences,
privileges, and restrictions granted to or imposed upon additional series of
Preferred Stock, and the number of shares constituting any such series and the
designation thereof, or of any of them. Subject to compliance with the
applicable protective voting rights which have been or may be granted to the
Preferred Stock or any series thereof in Certificates of Determination or this
corporation's Articles of Incorporation ("Protective Provisions"), but
notwithstanding any other rights of the Preferred Stock or any series thereof,
the rights, privileges, preferences, and restrictions of any such additional
series may be subordinated to, pari passu with, or senior to any of those of any
present or future class or series
26
of Preferred Stock or Common Stock. Subject to compliance with any applicable
Protective Provisions, the Board is also authorized to increase or decrease the
number of shares of any series prior or subsequent to the issue of that series,
but not below the number of shares of such series then outstanding. In case any
shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
1. Dividend Provisions.
(a) Subject to the rights of series of Preferred
Stock that may from time to time come into existence, the holders of shares of
Series A Preferred Stock and Series B Preferred Stock shall be entitled to
receive dividends at the rate of $0.01 per share per annum for the Series A
Preferred Stock and at the rate of $0.03 per share per annum for the Series B
Preferred Stock, out of any assets legally available therefor, prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of this corporation) on the Common Stock of this corporation payable when,
as and if declared by a unanimous vote or consent of the Board of Directors.
Such dividends shall not be cumulative. Declared but unpaid dividends with
respect to a share of Series A Preferred Stock or Series B Preferred Stock
shall, upon conversion of such share to Common Stock, be paid to the extent
assets are legally available therefor either in cash or in Common Stock (valued
at the fair market value on the date of payment as determined by the Board of
Directors of this corporation). Any amounts for which assets are not legally
available shall be paid promptly as assets become legally available therefor.
(b) After payment of any such dividends, any
additional dividends or distributions shall be distributed among all holders of
Common Stock and all holders of Series A Preferred Stock and Series B Preferred
Stock in proportion to the number of shares of Common Stock which would be held
by each such holder if all shares of Series A Preferred Stock and Series B
Preferred Stock were converted to Common Stock at the then effective conversion
rate.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of this corporation, either voluntary or involuntary, subject to the
rights of series of Preferred Stock that may from time to time come into
existence, the holders of Series A Preferred Stock and Series B Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets of this corporation to the holders of Common Stock by reason of
their ownership thereof, (i) for the Series A Preferred Stock, an amount per
share equal to $0.20 for each outstanding share of Series A Preferred Stock (the
"Original Series A Issue Price"), and (ii) for the Series B Preferred Stock, an
amount per share equal to $0.4717 for each outstanding share of Series B
Preferred Stock (the "Original Series B Issue Price"). If upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A Preferred Stock and Series B Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then, subject to the rights of series of Preferred Stock that may from time to
time come into existence, the entire assets and funds of the corporation legally
liable for distribution shall be distributed ratably among the holders of the
Series A Preferred
2
27
Stock and Series B Preferred Stock in proportion to the preferential amount each
such holder is otherwise entitled to receive.
(b) Upon the completion of the distribution required
by subparagraph (a) of this Section 2 and any other distribution that may be
required with respect to series of Preferred Stock that may from time to time
come into existence, the remaining assets of the corporation available for
distribution to shareholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Series A Preferred Stock and Series B Preferred Stock) until, (i) with respect
to the holders of Series A Preferred Stock, such holders shall have received an
aggregate of $0.80 per share (including amounts paid pursuant to subsection (a)
of this Section 2) and (ii) with respect to the holders of Series B Preferred
Stock, such holders shall have received an aggregate of $1.8868 per share
(including amounts paid pursuant to subsection (a) of this Section 2);
thereafter, subject to the rights of series of Preferred Stock that may from
time to time come into existence, if assets remain in this corporation, the
holders of the Common Stock of this corporation shall receive all of the
remaining assets of this corporation pro rata based on the number of shares of
Common Stock held by each.
(c) (i) For purposes of this Section 2, a
liquidation, dissolution or winding up of this corporation shall be deemed to be
occasioned by, or to include, (A) the acquisition of the corporation by another
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation but, excluding
any merger effected exclusively for the purpose of changing the domicile of the
corporation); or (B) a sale of all or substantially all of the assets of the
corporation; unless the corporation's shareholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
corporation's acquisition or sale or otherwise) hold at least 50% of the voting
power of the surviving or acquiring entity.
(ii) In any of such events, if the
consideration received by the corporation is other than cash, its value will be
deemed its fair market value. Any securities shall be valued as follows:
(A) Securities not subject to
investment letter or other similar restrictions on free marketability covered by
(B) below:
(1) If traded on a
securities exchange or through NASDAQ-NMS, the value shall be deemed to be the
average of the closing prices of the securities on such exchange over the
thirty-day period ending three (3) days prior to the closing;
(2) 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-day period ending three
(3) days prior to the closing; and
3
28
(3) If there is no active
public market, the value shall be the fair market value thereof, as mutually
determined by the corporation and the holders of at least a majority of the
voting power of all then outstanding shares of Preferred Stock.
(B) 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 from the market value determined as above in (A) (1), (2)
or (3) to reflect the approximate fair market value thereof, as mutually
determined by the corporation and the holders of at least a majority of the
voting power of all then outstanding shares of such Preferred Stock.
(iii) In the event the requirements of this
subsection 2(c) are not complied with, this corporation shall forthwith either:
(A) cause such closing to be
postponed until such time as the requirements of this Section 2 have been
complied with; or
(B) cancel such transaction, in
which event the rights, preferences and privileges of the holders of the Series
A Preferred Stock and the Series B Preferred Stock shall revert to and be the
same as such rights, preferences and privileges existing immediately prior to
the date of the first notice referred to in subsection 2(c)(iv) hereof.
(iv) The corporation shall give each holder
of record of Series A Preferred Stock and Series B Preferred Stock written
notice of such impending transaction not later than twenty (20) days prior to
the shareholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 2, and the
corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after the corporation has given the first notice provided for herein or
sooner than ten (10) days after the corporation has given notice of any material
changes provided for herein; provided, however, that such periods may be
shortened upon the written consent of the holders of Preferred Stock that are
entitled to such notice rights or similar notice rights and that represent at
least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
(v) This Section 2(c) shall not effect the
rights set forth in Section 5 herein.
3. Redemption. The Preferred Stock is not redeemable.
4. Conversion. The holders of the Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A
Preferred Stock and Series B Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of this corporation or any transfer agent for
4
29
such stock, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing the Original Issue Price for such series by
the Conversion Price applicable to such series, determined as hereafter
provided, in effect on the date the certificate is surrendered for conversion.
The initial Conversion Price per share for each series shall be the Original
Issue Price for such series; provided, however, that the Conversion Price shall
be subject to adjustment as set forth in subsection 4(d).
(b) Automatic Conversion. (i) Each share of Series B
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such series of Preferred Stock
immediately upon the earlier of (A) except as provided below in subsection 4(c),
the corporation's sale of its Common Stock in a firm commitment underwritten
public offering pursuant to a registration statement under the Securities Act of
1933, as amended, the public offering price of which was not less than $1.4151
per share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and $10 million in the aggregate or (B) the date specified by
written consent or agreement of the holders of at least a majority of the then
outstanding shares of Series B Preferred Stock.
(ii) Each share of Series A Preferred Stock
shall automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for such series of Preferred Stock immediately upon
the earlier of (A) except as provided below in subsection 4(c), the
corporation's sale of its Common Stock in a firm commitment underwritten public
offering pursuant to a registration statement under the Securities Act of 1933,
as amended, the public offering price of which was not less than $1.84 per share
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and $10 million in the aggregate or (B) the date specified by
written consent or agreement of the holders of at least a majority of the then
outstanding shares of Series A Preferred Stock.
(c) Mechanics of Conversion. Before any holder of
Series A Preferred Stock or Series B Preferred Stock shall be entitled to
convert the same into shares of Common Stock, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of this
corporation or of any transfer agent for the Series A Preferred Stock or Series
B Preferred Stock, and shall give written notice to this corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock or Series B Preferred Stock, or to the nominee or nominees of
such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred Stock or Series B
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933, the conversion
may, at the option of any holder tendering Series A Preferred Stock or Series B
Preferred Stock for conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive the Common Stock upon conversion of the Series
A Preferred Stock or Series B Preferred Stock
5
30
shall not be deemed to have converted such Series A Preferred Stock or Series B
Preferred Stock until immediately prior to the closing of such sale of
securities.
(d) Conversion Price Adjustments of Preferred Stock
for Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of
the Preferred Stock shall be subject to adjustment from time to time as follows:
(i) (A) If the corporation shall issue,
after the date upon which any shares of Series B Preferred Stock were first
issued (the "Purchase Date" with respect to such series), any Additional Stock
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for such series in effect immediately prior to the
issuance of such Additional Stock, the Conversion Price for such series in
effect immediately prior to each such issuance shall forthwith (except as
otherwise provided in this clause (i)) be adjusted to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock that the aggregate
consideration received by the corporation for such issuance would purchase at
such Conversion Price and the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to such issuance plus the number
of shares of such Additional Stock.
(B) No adjustment of the Conversion
Price for the Series A Preferred Stock or Series B Preferred Stock shall be made
in an amount less than one cent per share, provided that any adjustments which
are not required to be made by reason of this sentence shall be carried forward
and shall be either taken into account in any subsequent adjustment made prior
to 3 years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of 3 years from the date of the
event giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections (E)(3) and (E)(4), no adjustment of such
Conversion Price pursuant to this subsection 4(d)(1) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
(C) In the case of the issuance of
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by this corporation for any
underwriting or otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of
the Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as
determined by the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance
(whether before, on or after the applicable Purchase Date) of options to
purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable securities, the
6
31
following provisions shall apply for all purposes of this subsection 4(d)(i) and
subsection 4(d)(ii):
(1) The aggregate maximum
number of shares of Common Stock deliverable upon exercise (assuming the
satisfaction of any conditions to exercisability, including without limitation,
the passage of time, but without taking into account potential antidilution
adjustments) of such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration (determined in the
manner provided in subsections 4(d)(i)(C) and (d)(i)(D)), if any, received by
the corporation upon the issuance of such options or rights plus the minimum
exercise price provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum
number of shares of Common Stock deliverable upon conversion of or in exchange
(assuming the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time, but without
taking into account potential antidilution adjustments) for any such convertible
or exchangeable securities or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the corporation (without
taking into account potential antidilution adjustments) upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any
change in the number of shares of Common Stock deliverable or in the
consideration payable to this corporation upon exercise of such options or
rights or upon conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series A Preferred
Stock and Series B Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.
(4) Upon the expiration of
any such options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to such convertible
or exchangeable securities, the Conversion Price of the Series A Preferred Stock
and Series B Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon
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the exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of
Common Stock deemed issued and the consideration deemed paid therefor pursuant
to subsections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect
any change, termination or expiration of the type described in either subsection
4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares
of Common Stock issued (or deemed to have been issued pursuant to subsection
4(d)(i)(E)) by this corporation after the Purchase Date other than
(A) Common Stock issued pursuant to
a transaction described in subsection 4(d)(iii) hereof;
(B) shares of Common Stock issuable
or issued to employees consultants, directors or vendors (if in transactions
with primarily non-financing purposes) of this corporation directly or pursuant
to a stock option plan or restricted stock plan approved by the Board of
Directors of this corporation at any time when the total number of shares of
Common Stock so issuable or issued (and not repurchased at cost by the
corporation in connection with the termination of employment) does not exceed
2,650,000;
(C) Common Stock issued upon
conversion of shares of Preferred Stock;
(D) up to 100,000 shares of Common
Stock issued to banks or equipment lessors, provided such issuances are for
other than primarily equity financing purposes and approval by the Board of
Directors; and
(E) up to 250,000 shares of Common
Stock issued in connection with business combinations or corporate partnering
agreements approved by the Board of Directors.
(iii) In the event the corporation should at
any time or from time to time after the Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of the Series A Preferred Stock and Series B Preferred
Stock shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
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(iv) If the number of shares of Common Stock
outstanding at any time after the Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock and Series B
Preferred Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event this
corporation shall declare a distribution payable in securities of other persons,
evidences of indebtedness issued by this corporation or other persons, assets
(excluding cash dividends) or options or rights not referred to in subsection
4(d)(iii), then, in each such case for the purpose of this subsection 4(e), the
holders of the Series A Preferred Stock and Series B Preferred Stock shall be
entitled to a proportionate share of any such distribution as though they were
the holders of the number of shares of Common Stock of the corporation into
which their shares of Series A Preferred Stock or Series B Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time
to time there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 4 or Section 2) provision shall be made so that the
holders of the Series A Preferred Stock and Series B Preferred Stock shall
thereafter be entitled to receive upon conversion of such series of Preferred
Stock the number of shares of stock or other securities or property of the
corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. 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 the Series A
Preferred Stock and Series B Preferred Stock after the recapitalization to the
end that the provisions of this Section 4 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
(g) No Impairment. This corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock and Series B
Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to
Adjustments.
(i) No fractional shares shall be issued
upon the conversion of any share or shares of the Series A Preferred Stock or
Series B Preferred Stock, and the number of shares of Common Stock to be issued
shall be rounded to the nearest whole share. Whether or not fractional shares
are issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock the holder is at the time converting into
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34
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment
or readjustment of the Conversion Price of Series A Preferred Stock or Series B
Preferred Stock pursuant to this Section 4, this corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series A Preferred Stock
and Series B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock or Series B Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price for such series
of Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of such series of Preferred Stock.
(i) Notices of Record Date. In the event of any
taking by this corporation of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Preferred Stock, at least 20 days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion.
This 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 A Preferred Stock and
Series B Preferred Stock, 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 A Preferred Stock and Series B Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock and Series B Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Preferred Stock, this
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 purposes,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to these articles.
(k) Notices. Any notice required by the provisions
of this Section 4 to be given to the holders of shares of Series A Preferred
Stock or Series B Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each holder of record at
his address appearing on the books of this corporation.
5. Voting Rights.
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(a) The holder of each share of Series A Preferred
Stock and Series B Preferred Stock shall have the right to one vote for each
share of Common Stock into which such Preferred Stock could then be converted,
and with respect to such vote, such holder shall have full voting rights and
powers equal to the voting rights and powers of the holders of Common Stock, and
shall be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting in accordance with the bylaws of this corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote.
Fractional votes shall not, however, be permitted and any fractional voting
rights available on an as-converted basis (after aggregating all shares into
which shares of Series A Preferred Stock and Series B Preferred Stock held by
each holder could be converted) shall be rounded to the nearest whole number
(with one-half being rounded upward).
(b) So long as 2,650,000 shares of Series B
Preferred Stock remain outstanding (as adjusted for subsequent reverse stock
splits, recapitalizations and the like), one member of the Board of Directors of
this corporation shall be elected by the holders of the Series B Preferred
Stock, voting as a single class.
6. Protective Provisions. Subject to the rights of series
of Preferred Stock which may from time to time come into existence, so long as
at least twenty-five percent (25%) of the shares of Series A Preferred Stock and
Series B Preferred Stock remain outstanding, this corporation shall not without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of Preferred Stock which is entitled, other than solely by law, to
vote with respect to the matter (including, without limitation, the Series A
Preferred Stock and Series B Preferred Stock), and which Preferred Stock
represents at least a majority of the voting power of the then outstanding
shares of such Preferred Stock:
(a) sell, convey, or otherwise dispose of or
encumber all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the corporation is
disposed of;
(b) alter or change the rights, preferences or
privileges of the shares of Series A Preferred Stock or Series B Preferred Stock
so as to affect adversely the shares;
(c) authorize or issue, or obligate itself to issue,
any other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on a
parity with, the Series A Preferred Stock or Series B Preferred Stock with
respect to voting, dividends, redemption or upon liquidation;
(d) amend the corporation's Articles of
Incorporation or bylaws.
7. Status of Converted Stock. In the event any shares of
Series A Preferred Stock or Series B Preferred Stock shall be converted pursuant
to Section 4 hereof, the
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shares so converted shall be cancelled and shall not be issuable by the
corporation. The Articles of Incorporation of this corporation shall be
appropriately amended to effect the corresponding reduction in the corporation's
authorized capital stock.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders
of all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when,
as and if declared by the unanimous vote or written consent of the Board of
Directors, out of any assets of the corporation legally available therefor, such
dividends as may be declared from time to time by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
winding up of the corporation, the assets of the corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IIII
hereof.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock
shall have the right to one vote, and shall be entitled to notice of any
shareholders' meeting in accordance with the bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE 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. This corporation is authorized, to the fullest extent
permissible under California law, to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with the agents, vote of shareholders or disinterested
directors, or otherwise in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the corporation and its shareholders.
* * *
THREE: The foregoing amendment and restatement has been approved
by the Board of Directors of said corporation.
FOUR: The foregoing amendment and restatement was approved by
the holders of the requisite number of shares of said corporation in accordance
with Sections 902 and 903 of the California General Corporation Law; the total
number of outstanding shares of each class entitled to vote with respect to the
foregoing amendment and restatement was 4,776,001 shares of Common Stock and
525,000 shares of Series A Preferred Stock. The number of shares voting in favor
of the foregoing amendment and restatement equaled or exceeded the vote
required, such required vote being (i) a majority of the outstanding shares of
Common Stock and Series A
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Preferred Stock, voting together, as a single class, (ii) a majority of the
outstanding shares of Series A Preferred Stock, voting as a single series, and
(iii) a majority of the outstanding shares of Common Stock, voting as a single
class.
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EXHIBIT B
Investor Rights Agreements
39
CLICKOVER, INC.
INVESTOR RIGHTS AGREEMENT
March 14, 1997
40
TABLE OF CONTENTS
Page
----
1. Registration Rights.....................................................................1
1.1 Definitions..................................................................1
1.2 Request for Registration.....................................................2
1.3 Company Registration.........................................................3
1.4 Obligations of the Company...................................................4
1.5 Furnish Information..........................................................5
1.6 Expenses of Registration.....................................................5
1.7 Blank........................................................................6
1.8 Underwriting Requirements....................................................6
1.9 Delay of Registration........................................................6
1.10 Indemnification..............................................................6
1.11 Reports Under Securities Exchange Act of 1934................................8
1.12 Form S-3 Registration........................................................9
1.13 Assignment of Registration Rights...........................................10
1.14 "Market Stand-Off" Agreement................................................10
1.15 Termination of Registration Rights..........................................11
2. Covenants of the Company................................................................11
2.1 Delivery of Financial Statements............................................11
2.2 Delivery of Additional Information..........................................11
2.3 Inspection..................................................................12
2.4 Termination of Information and Inspection Covenants.........................12
2.5 Confidentiality of Information..............................................12
2.6 Chief Executive Officer.....................................................12
3. Miscellaneous...........................................................................12
3.1 Successors and Assigns......................................................12
3.2 Governing Law...............................................................13
3.3 Counterparts................................................................13
3.4 Titles and Subtitles........................................................13
3.5 Notices.....................................................................13
3.6 Expenses....................................................................13
3.7 Amendments and Waivers......................................................13
3.8 Severability................................................................13
3.9 Aggregation of Stock........................................................13
3.10 Entire Agreement; Amendment; Waiver.........................................13
Schedule A Schedule of Investors
(i)
41
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT is made as of the 14th day of
March, 1997, by and between ClickOver, Inc., a California corporation (the
"Company"), and the investors listed on Schedule A hereto, each of which is
herein referred to as an "Investor."
RECITALS
WHEREAS, the Company and the Investors are parties to that
certain Series B Preferred Stock Purchase Agreement of even date herewith (the
"Series B Stock Purchase Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series
B Stock Purchase Agreement and to induce the Investors to invest funds in the
Company pursuant to the Series B Stock Purchase Agreement, the Investors and the
Company hereby agree that this Agreement shall govern the rights of the
Investors to cause the Company to register shares of Common Stock issuable to
the Investors and certain other matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933,
as amended.
(b) The term "Form S-3" means such form under the
Act as in effect on the date hereof or any registration form under the Act
subsequently adopted by the Securities and Exchange Commission (the "SEC") which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1. 13 hereof.
(d) The term "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
(e) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(f) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Series B Preferred Stock
and (ii) 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 the shares referenced in (i) above, excluding in all cases,
however, any
42
Registrable Securities sold by a person in a transaction in which his or her
rights under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
1.2 Request for Registration.
(a) If the Company shall receive at any time after
the earlier of March 14, 2002, or (ii) twelve (12) months after the effective
date of the first registration statement for a public offering of securities of
the Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
the Holders of at least thirty percent (30%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act for a
public offering in which the aggregate proceeds from the offering would exceed
$10,000,000, then the Company shall:
(i) within ten (10) days of the receipt
thereof, give written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in
any event shall use its best efforts to effect within 120 days of the receipt of
such request, the registration under the Act of all Registrable Securities which
the Holders request to be registered, subject to the limitations of subsection
1.2(b), within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 3.5 hereof.
(b) If the Holders initiating the registration
request hereunder ("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 subsection 1.2(a)
and the Company shall include such information in the written notice referred to
in subsection 1.2(a). The underwriter will be selected by the Company and shall
be reasonably acceptable to a majority in interest of the Initiating Holders. 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 (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the
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43
Company owned by each Holder; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other securities are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of at least 90 days after receipt of
the request of the Initiating Holders; provided, however, the Company may not
exercise this right more than once in any twelve month period.
(d) In addition, the Company shall not be obligated
to effect, or to take any action
to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two
registrations pursuant to this Section 1.2 and such registrations have been
declared or ordered effective;
(ii) During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of filing
of, and ending on a date one hundred eighty (180) days after the effective date
of, a registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) 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 1. 12 below.
1.3 Company Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.5 hereof, the Company
shall, subject to the provisions of Section 1.8 hereof, cause to be registered
under the Act all of the Registrable Securities that each such Holder has
requested to be registered.
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1.4 Obligations of the Company. Whenever required under this
Section 1 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 its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for a period of up to
ninety (90) days.
(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 Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(1) Provided such securities are being sold
through underwriters, use its best efforts to furnish, at the request of any
Holder requesting registration of
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Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, (i) an opinion, dated 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 and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated 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
and to the Holders requesting registration of Registrable Securities.
1.5 Furnish Information.
(a) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
(b) The Company shall have no obligation with
respect to any registration requested pursuant to Section 1.2 or Section 1.12
if, due to the operation of subsection 1.5(a), 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 subsection
1.2(a) or subsection 1.12(b)(2), whichever is applicable.
1.6 Expenses of Registration. The Company shall bear and pay
all expenses incurred in connection with a registration requested pursuant to
Sections 1.2, 1.3 and 1.12, including (without limitation) all registration,
filing, qualification, printer's and accounting fees and counsel for the
Company, but excluding underwriter discounts and commissions relating to
Registrable Securities and the fees and disbursements of counsel for the selling
Holders; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
Participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to one
demand registration pursuant to Section 1.2; provided further that if such
withdrawal is due to a material adverse change in the business of the Company
that Holders were not previously aware of, then Holders shall not be required to
pay any such expenses and shall not forfeit as provided above any rights to one
demand registration pursuant to Section 1.2.
1.7 This section intentionally left blank.
1.8 Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by
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46
it (or by other persons entitled to select the underwriters), and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders) but in no event shall (i) the amount of securities
of the selling Holders included in the offering be reduced below thirty percent
(30%) of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities in which
case the selling shareholders may be excluded if the underwriters make the
determination described above and no other shareholder's securities are included
or (ii) notwithstanding (i) above, any shares being sold by a shareholder
exercising a demand registration right similar to that granted in Section 1.2 be
excluded from such offering. For purposes of the preceding sentence concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and 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 persons shall be deemed to be a single "selling shareholder," and
any pro-rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
this sentence.
1.9 Delay of Registration. 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 1.
1.10 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act or other federal or state securities laws,
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"): (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 Act, the 1934 Act or other federal or
state securities laws, or any rule or regulation promulgated under the Act, or
the 1934 Act or other federal or state securities laws; and the Company will pay
to each such Holder,
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47
underwriter or controlling person 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 subsection 1.10(a) 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 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 any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, or the 1934 Act or other federal or
state securities laws, 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 expressly for use in connection with such registration; and each such
Holder will pay any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 1.10(b), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 1.10(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, that, in no event shall any indemnity under this subsection 1.10(b)
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 1.10 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 1.10,
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
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate 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 prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
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(d) If the indemnification provided for in this
Section 1.10 is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense 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 statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined 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.
(e) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders under
this Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the 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 Act and the 1934 Act;
(c) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form;
and
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49
(d) take such action as is necessary to allow the
Holders to use Form S-3.
1.12 Form S-3 Registration. In case the Company shall receive
from any Holder or Holders a written request or requests that the Company effect
a registration on Form S-3 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;
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 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 1.12: (1) if
Form S-3 is not available for such offering by the Holders; (2) 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 price to the public (net of any underwriters'
discounts or commissions) of less than $500,000; 3) if the Company shall furnish
to the Holders a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such 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 at least 90 days after receipt of the request of the Holder or Holders
under this Section 1.12; provided, however, that the Company shall not utilize
this right more than once in any twelve month period; (4) if the Company has,
within the twelve month period preceding the date of such request, already
effected two registrations on Form S-3 for the Holders pursuant to this Section
1.12; (5) if the Company has already effected three registrations on Form S-3
for the Holders pursuant to this Section 1.2; or (6) 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 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 1.12 shall not be counted as demands for registration or registrations
effected pursuant to Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
9
50
recapitalizations), provided: (a) the Company is, within a reasonable time after
such transfer, furnished with 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; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1. 14 below;
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.
1.14 "Market Stand-Off" Agreement. Each Investor hereby
agrees that, during the period of duration specified by the Company and an
underwriter of common stock or other securities of the Company, following the
effective date of a registration statement of the Company filed under the Act,
it shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period which was
not acquired directly in the public market or in a public offering by the
Company, except common stock included in such registration; provided, however,
that:
(a) such Market Stand-Off shall terminate after the
Company has effected two registrations under the Act;
(b) all officers and directors of the Company and
all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements; and
(c) such market stand-off time period shall not
exceed 180 days.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.15 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1, and all such
rights shall terminate, following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public if all shares of Registrable Securities held or
entitled to be held upon conversion by such Holder may immediately be sold under
Rule 144 during any 90-day period, or on such date after the closing of such
sale of securities as all shares of Registrable Securities held or entitled to
be held upon conversion by such Holder may immediately be sold under Rule 144
during any 90-day period.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall
deliver to each Holder:
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a
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51
balance sheet of the Company and statement of shareholder's equity as of the end
of such year, and a statement of cash flows for such year, such year-end
financial reports to be in reasonable detail, prepared in accordance with
generally accepted accounting principles ("GAAP") and audited by nationally
recognized independent accountants;
(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement, an
unaudited balance sheet, an unaudited statement of cash flows and a statement of
shareholder's equity as of the end of such fiscal quarter; and
(c) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request,
provided, however, that the Company shall not be obligated under this subsection
(c) or any other subsection of Section 2.1 to provide information which it deems
in good faith to be a trade secret or similar confidential information.
2.2. Delivery of Additional Information. The Company shall
deliver to each Holder who holds at least 500,000 shares of Registrable
Securities:
(a) within twenty (20) days of the end of each
month, an unaudited income statement and statement of cash flows and balance
sheet for and as of the end of such month, in reasonable detail; provided,
however, that the Company's obligation under this subsection 2.2(a) shall not
commence until the end of the third month from the date hereof, and
(b) as soon as practicable, but in any event thirty
(30) days prior to the end of each fiscal year, a business plan for the next
fiscal year.
2.3. Inspection. The Company shall permit each Investor, at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Investor; provided, however, that the Company shall not be
obligated pursuant to this Section 2.3 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information; and, provided further, that the Investors coordinate their
visitations and inspections so as to minimize the disruptions and interruptions
to the Company.
2.4. Termination of Information and Inspection Covenants. The
covenants set forth in subsections 2.2(a) and (b) and Section 2.3 shall
terminate as to Investors and be of no further force or effect when the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the firm commitment underwritten offering of its
securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the 1934 Act, whichever event shall first occur.
2.5. Confidentiality of Information. The information provided
pursuant to Sections 2.1 and 2.2 shall be used by each Holder or any permitted
assignee of each Holder solely in furtherance of its interests as an investor in
the Company, and such Holder and any permitted assignee of such Holder shall
maintain the confidentiality of all information of the
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52
Company obtained under Sections 2.1 and 2.2, unless such information (i) was
known by such Holder or permitted assignee prior to its disclosure to them by
the Company, (ii) is disclosed to such Holder or permitted assignee without
restriction as a matter of right by a third party not affiliated with or working
for the Company, or (iii) has become publicly available through no fault of such
Investor or permitted assignee. Notwithstanding the foregoing, a Holder may
disclose, if applicable, (i) to Holder's general and limited partners, or (ii)
Holder's board of Directors or executive officers such information provided that
such general or limited partners, or such Board of Directors or executive
officers agree to be bound by the terms of this Section 2.5.
2.6. Chief Executive Officer. The Company shall recruit and
hire a Chief Executive Officer that is acceptable to at least a majority of the
Holders within six (6) months from the date hereof.
3. Miscellaneous.
3.1. Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
3.3. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4. Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5. Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon (i) personal delivery to the party to be notified, (ii)
five (5) days following deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party 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, or (iii) facsimile with confirmed receipt.
3.6. Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
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53
3.7. Amendments and Waiver. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company, whether or not such holder is fact
consented to such amendment or waiver.
3.8. Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.9. Aggregation of Stock. All shares of Registrable
Securities held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
3.10. Entire Agreement; Amendment; Waiver. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof.
IN WITNESS WHEREOF, the parties have executed this Investor
Rights Agreement as of the date first above written.
CLICKOVER, INC.
By:
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇.
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
SIGNATURE PAGE TO
INVESTOR RIGHTS AGREEMENT
54
INVESTORS:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII
By: KPCB VII Associates, it General Partner
By:
--------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
KPCB INFORMATION SCIENCES ZAIBATSU FUND II
By: KPCB VII Associates, its General Partner
By:
--------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
KPCB JAVA FUND
By:
--------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
Address: c/o Kleiner ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
SIGNATURE PAGE TO
INVESTOR RIGHTS AGREEMENT
55
------------------------------------------------
Fah-▇▇▇▇ ▇▇▇▇▇▇
Address:
------------------------------------------------
------------------------------------------------
SIGNATURE PAGE TO
INVESTOR RIGHTS AGREEMENT
56
------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address:
------------------------------------------------
------------------------------------------------
SIGNATURE PAGE TO
INVESTOR RIGHTS AGREEMENT
57
------------------------------------------------
▇▇▇▇-▇▇▇▇ ▇▇▇
Address:
------------------------------------------------
------------------------------------------------
SIGNATURE PAGE TO
INVESTOR RIGHTS AGREEMENT
58
------------------------------------------------
▇▇▇▇-▇▇▇▇ ▇▇▇
Address:
------------------------------------------------
------------------------------------------------
SIGNATURE PAGE TO
INVESTOR RIGHTS AGREEMENT
59
------------------------------------------------
▇▇▇▇ ▇▇▇▇▇
Address:
------------------------------------------------
------------------------------------------------
SIGNATURE PAGE TO
INVESTOR RIGHTS AGREEMENT
60
------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇
Address:
------------------------------------------------
------------------------------------------------
SIGNATURE PAGE TO
INVESTOR RIGHTS AGREEMENT
61
SCHEDULE A
SCHEDULE OF INVESTORS
KPCB Java Fund
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII
KPCB Information Sciences Zaibatsu Fund II
Fah-▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇▇ ▇▇▇
▇▇▇▇-▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
S-1
62
EXHIBIT C
Opinion of Company Counsel
63
March 14, 1997
To the Investors Listed on the Schedule
of Investors to the ClickOver, Inc.
Series B Preferred Stock Purchase Agreement
Dated March 14, 1997
Ladies and Gentlemen:
We have acted as counsel for ClickOver, Inc., a California
corporation (the "Company"), in connection with the issuance and sale of shares
of its Series B Preferred Stock pursuant to the ClickOver, Inc. Series B
Preferred Stock Purchase Agreement dated March 14, 1997 (the "Stock Purchase
Agreement") between the Company and you. This opinion is being rendered to you
pursuant to Section 5.9 of the Stock Purchase Agreement in connection with the
Closing of the sale of the Series B Preferred Stock. Capitalized terms not
otherwise defined in this opinion have the meaning given them in the Stock
Purchase Agreement.
In connection with the opinions expressed herein we have made
such examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the opinions
expressed herein, we have relied upon the representations and warranties as to
factual matters contained in and made by the Company pursuant to the Stock
Purchase Agreement and upon certificates and statements of government officials
and of officers of the Company. We have also examined originals or copies of
such corporate documents or records of the Company as we have considered
appropriate for the opinions expressed herein. We have assumed for the purposes
of this opinion that the signatures on documents and instruments examined by us
are authentic, that each document is what it purports to be, and that all
documents submitted to us as copies conform with the originals, which facts we
have not independently verified.
In rendering this opinion we have also assumed: (A) that the
Stock Purchase Agreement and the Investor Rights Agreement of even date herewith
by and among the Company and you (the "Investor Rights Agreement") have been
duly and validly executed and delivered by you or on your behalf and constitute
valid, binding and enforceable obligations upon you; (B) that the
representations and warranties made in the Stock Purchase Agreement by you are
true and correct; (C) that any wire transfers, drafts or checks tendered by you
will be honored; (D) if you are a corporation or other entity, that you have
filed any required state franchise, income or similar tax returns and have paid
any required state franchise, income or taxes; and (E) that there are no
extrinsic agreements or understandings among the parties similar to the Stock
Purchase Agreement and Investor Rights Agreement that would modify or interpret
the terms of the Stock Purchase Agreement and the Investor Rights Agreement or
the respective rights or obligations of the parties thereunder.
As used in this opinion, the expression "we are not aware" or
the phrase "to our knowledge" means as to matters of fact that, based on the
actual knowledge of individual attorneys within the firm principally responsible
for handling current matters for the Company and after an examination of
documents referred to herein and after inquiries of certain officers of
64
To the Investors Listed on the Schedule
of Investors to the ClickOver, Inc.
Series B Preferred Stock Purchase Agreement
Dated March 14, 1997
the Company, we find no reason to believe that the opinions expressed herein are
factually incorrect; but beyond that we have made no factual investigation for
the purposes of rendering this opinion. Specifically, but without limitation, we
have made no inquiries of securities holders or employees of the Company.
This opinion relates solely to the laws of the State of
California and the federal law of the United States and we express no opinion
with respect to the effect or application of any other laws. Special rulings of
authorities administering such laws or opinions of other counsel have not been
sought or obtained.
Based upon our examination of and reliance upon the foregoing
and subject to the limitations, exceptions, qualifications and assumptions set
forth below and except as set forth in the Stock Purchase Agreement or the
Schedule of Exceptions relating thereto, we are of the opinion that as of the
date hereof:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, and the
Company has the requisite corporate power and authority to own its properties
and conduct its business.
2. The Company has the requisite corporate power and
authority to execute, deliver and perform the Stock Purchase Agreement and the
Investor Rights Agreement. Each of the foregoing has been duly and validly
authorized by the Company, duly executed and delivered by an authorized officer
of the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company according to its terms; provided,
however, that no opinion is expressed with respect to the enforceability of the
indemnity obligations of Section 1.10 of the Investor Rights Agreement.
3. We are not aware that there is any action, proceeding or
governmental investigation pending against the Company that questions the
validity of the Stock Purchase Agreement or the Investor Rights Agreement, or
the right of the Company or its officers or directors to enter into such Stock
Purchase Agreement or Investor Rights Agreement, nor are we aware of any
litigation pending against the Company.
Our opinions expressed above are specifically subject to the
following limitations, exceptions, qualifications and assumptions:
(A) The effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the relief of debtors
or the rights and remedies of creditors generally, including without limitation
the effect of statutory or other law regarding fraudulent conveyances and
preferential transfers.
(B) We express no opinion as to the Company's compliance or
noncompliance with applicable federal or state antifraud or antitrust statutes,
laws, rules and regulations.
65
To the Investors Listed on the Schedule
of Investors to the ClickOver, Inc.
Series B Preferred Stock Purchase Agreement
Dated March 14, 1997
(C) Limitations imposed by state law, federal law or general
equitable principles upon the specific enforceability of any of the remedies,
covenants or other provisions of any applicable agreement and upon the
availability of injunctive relief or other equitable remedies, regardless of
whether enforcement of any such agreement is considered a proceeding in equity
or at law.
(D) The effect of court decisions, invoking statutes or
principles of equity, which have held that certain covenants and provisions of
agreements are unenforceable where enforcement of such covenants or provisions
under the circumstances would violate the enforcing party's implied covenant of
good faith and fair dealing.
(E) The unenforceability under certain circumstances of
provisions indemnifying a party against, or requiring contributions toward, that
party's liability for its own wrongful or negligent acts, or where
indemnification or contribution is contrary to public policy. In this regard, we
advise you that in the opinion of the Securities and Exchange Commission,
indemnification of directors, officers and controlling persons of an issuer
against liabilities arising under the Securities Act of 1933, as amended, is
against public policy and is therefore unenforceable.
(F) The effect of California law, federal law or equitable
principles that limits the amount of attorneys' fees that can be recovered under
certain circumstances.
(G) The effect of Section 1717 of the California Civil Code,
which provides that, where a contract permits one party to the contract to
recover attorneys' fees, the prevailing party in any action to enforce any
provision of the contract shall be entitled to recover its reasonable attorneys'
fees.
(H) The effect of Chapter Five, Chapter Thirteen and Chapter
Eighteen of Division One of the California Corporations Code or any other
California law, federal law or equitable principles restricting in certain
circumstances distributions by a corporation to its shareholders, relating to
dissenters' rights or relating to involuntary dissolution.
(I) The effect of subsequent issuances of securities of the
Company, to the extent that further issuances that may be integrated with the
securities issued at the Closing may include purchasers which do not meet the
definition of "accredited investors" under Rule 501 of Regulation D and
equivalent definitions under state securities or "blue sky" laws, and to the
extent that the Company may issue so many shares of Common Stock that there are
not enough remaining authorized but unissued shares of Common Stock for the
conversion of the Series B Preferred Stock (or may issue securities which so
reduce the Conversion Price of the Series B Preferred Stock that the outstanding
shares of the Series B Preferred Stock become convertible for more shares of
Common Stock than remain authorized but unissued).
66
To the Investors Listed on the Schedule
of Investors to the ClickOver, Inc.
Series B Preferred Stock Purchase Agreement
Dated March 14, 1997
This opinion is rendered as of the date first written above
solely for your benefit in connection with the Stock Purchase Agreement and may
not be delivered to, quoted or relied upon by any person other than you, or for
any other purpose, without our prior written consent. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company. We
assume no obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.
Very truly yours,
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▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP