Exhibit 99.01
KANA SOFTWARE, INC.
SHARE PURCHASE AGREEMENT
November 28, 2001
SHARE PURCHASE AGREEMENT
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THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made as of November 28,
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2001, by and among KANA SOFTWARE, INC. a Delaware corporation (the "Company"),
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and the investors listed on Exhibit A hereto, each of which is herein referred
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to as an "Investor" and all of which are collectively referred to herein as the
"Investors."
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RECITALS
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WHEREAS, the Company desires to sell and the Investors desire to purchase
shares of the Company's 8% Series A Convertible Preferred Stock, par value
$0.001 per share (the "Series A Preferred Stock").
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WHEREAS, in connection with entering into this Agreement, the Company and
the Investors have entered into Stock Purchase Warrants (the "Warrants")
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pursuant to which, in certain instances, the Investors may purchase shares of
the Company's common stock, par value $0.001 per share (the "Common Stock") at a
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price of $1.00 per share (as adjusted for any stock dividends paid in common
stock, and any combinations, stock splits, recapitalizations and the like each
with respect to the Company's Common Stock).
AGREEMENT
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NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration the receipt and
adequacy of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Purchase and Sale of Stock.
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1.1. Sale and Issuance of Series A Preferred Stock. Subject to the
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terms and conditions of this Agreement, each Investor agrees, severally but not
jointly, 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 A
Preferred Stock equal to (x) the Aggregate Purchase Price (as defined below),
divided by the Purchase Price (as defined below), multiplied by (y) the
percentage set forth opposite each Investor's name on Exhibit A hereto. The
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shares of Series A Preferred Stock to be sold pursuant to this Agreement are
collectively referred to herein as the "Shares." The Investors shall purchase
the Shares for a per share purchase price equal to the lesser of (i)$10.00 (as
adjusted for any stock dividends paid in common stock, and any combinations,
stock splits, recapitalizations and the like each with respect to the Company's
Common Stock) and (ii) the product of (A) 10, multiplied by (B) sixty-six and
two/thirds percent (66-2/3%) of the average of the Daily Volume-Weighted Average
Price (as defined below) for the Common Stock on The Nasdaq National Market for
the ten consecutive trading days through and including the second trading day
prior to the date of the Closing (the lesser of (i) and (ii), the "Purchase
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Price"). The "Aggregate Purchase Price" shall be a number between $38,000,000
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and $45,000,000 determined by the Investors representing a majority of the
percentages set forth on Exhibit A hereto, in their sole discretion, no later
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than the second trading day prior to the Closing; provided, however, that in no
event shall the Aggregate Purchase Price be greater than
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the number that would result in the issuance to the Investors at the Closing of
Shares representing 40% of the outstanding Common Stock on the Closing Date
(assuming the conversion of the Shares into shares of Common Stock). "Daily
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Volume-Weighted Average Price" shall mean with respect to a trading day (1) if
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the Common Stock is traded on a securities exchange or through the Nasdaq
National Market (or a similar national quotation system), the volume-weighted
average sales price of the Common Stock on such exchange or quotation system
with respect to such trading day, and (2) if clause (1) is inapplicable, the
volume-weighted average sale price in the over-the-counter market with respect
to such trading day. The Series A Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the form of certificate of
designation for the Series A Preferred Stock attached hereto as Exhibit B (the
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"Certificate of Designation").
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1.2. Closing. The closing of the purchase and sale of the Shares
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shall take place at the offices of Xxxxxx & Xxxxxxx, 000 Xxxxxxxxxxxx Xxxxx,
Xxxxx Xxxx, Xxxxxxxxxx promptly following the satisfaction or waiver of the
conditions set forth in Sections 4 and 5 (other than satisfaction of conditions
which will be satisfied at the closing) or at such other time and place as the
Company and Investors purchasing a majority of the Shares mutually agree (which
time and place are designated as the "Closing"). At the Closing, (i) the Company
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shall deliver to each Investor a certificate or certificates representing that
number of Shares purchased hereunder against payment of the purchase price
therefor by wire transfer of immediately available funds to an account
designated by the Company and (ii) the Company and the Investors shall make the
other deliveries provided for in Sections 4 and 5.
2. Representations and Warranties of the Company. Except as set forth in
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the Schedule of Exceptions attached hereto as Exhibit C and delivered to the
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Investors at or prior to the date of this Agreement (it being understood that
any information disclosed in any section of the Schedule of Exceptions shall be
deemed disclosed in all other applicable sections of the Schedule of Exceptions
even though not expressly set forth in such other section(s), provided that it
is reasonably apparent on its face that such disclosure is applicable to the
other section(s) and that the Company shall use reasonable best efforts to
number all exceptions noted in the Schedule of Exceptions to correspond to all
applicable sections of this Agreement to which such exception refers), the
Company hereby represents and warrants to the Investors as follows (it being
understood that, except in the case of any representation or warranty that by
its terms is made only as of a specified date, each representation and warranty
set forth in this Section 2 shall be deemed to be made by the Company both as of
the date of this Agreement and, if the Closing occurs, as of the date of the
Closing):
2.1. Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company and its Subsidiaries each has the
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and as proposed to be
conducted. The Company is duly qualified to do business as a foreign corporation
in each other jurisdiction in which the conduct of its business requires such
qualification, except where the failure to so qualify would not reasonably be
expect to have a Material Adverse Effect.
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2.2. Capitalization. As of the date hereof, the authorized capital
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stock of the Company consists of 1,000,000,000 shares of common stock, par value
$0.001 per share, ("Common Stock"), 193,059,156 of which were issued and
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outstanding as of the close of business on November 27, 2001, and 5,000,000
shares of preferred stock, par value $0.001 per share ("Preferred Stock"), none
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of which are issued and outstanding. The Company has reserved an aggregate of
85,479,303 shares of Common Stock for issuance to employees, consultants and
other service providers pursuant to the Company's stock plans, of which options
to purchase 39,056,476 shares were outstanding as of the close of business on
November 27, 2001. All issued and outstanding shares of Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable, and
were issued in compliance with the provisions of any applicable securities laws
including any relevant federal or state securities laws, or pursuant to valid
exemptions therefrom. Except for the Warrants and as set forth on the Schedule
of Exceptions, there are no other outstanding rights, options, warrants,
preemptive rights, conversion rights, rights of first refusal or similar rights
for the purchase or acquisition from the Company of any securities of the
Company nor are there any commitments to issue or execute any such rights,
options, warrants, preemptive rights, conversion rights or rights of first
refusal. The consummation of the transactions contemplated by this Agreement and
the Warrants will not trigger the anti-dilution provisions or other price
adjustment mechanisms of any outstanding rights, options, warrants, preemptive
rights, conversion rights, rights of first refusal or similar rights for the
purchase or acquisition from the Company of any securities of the Company. As of
the date hereof, the Company has furnished to Xxxxxx & Xxxxxxx, counsel to the
Investors, a true and complete copy of its Certificate of Incorporation and
Bylaws.
2.3. Subsidiaries. Except as set forth on the Schedule of Exceptions,
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the Company does not 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. The
Company holds the stock of its Subsidiaries free and clear of all mortgages,
liens, loans and encumbrances or any other rights.
2.4. Authorization. Except for the affirmative vote of the Company's
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stockholders by the Requisite Company Vote (as defined in Section 4.12) as
contemplated hereby and the formal call of the Company Stockholders Meeting (as
defined in Section 6.8), all corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the Warrants and the Investor Rights Agreement,
in substantially the form attached hereto as Exhibit D (the "Investor Rights
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Agreement") the performance of all obligations of the Company hereunder and
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thereunder, and the authorization, issuance, sale and delivery of the Shares
being sold hereunder has been taken, and this Agreement and the Warrants
constitute, and when executed and delivered by the parties thereto at the
Closing the Investor Rights Agreement will constitute, a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its respective terms, subject to: (i) judicial principles limiting the
availability of specific performance, injunctive relief, and other equitable
remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights; and (iii) limitations on the enforceability of any
indemnification provisions.
2.5. Valid Issuance of Shares. The Shares being purchased by the
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Investors hereunder, when issued, sold and delivered in accordance with the
terms of this Agreement for
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the consideration expressed herein, will be duly and validly issued, fully paid,
nonassessable, free of the exercise of pre-emptive rights and will be free of
restrictions on transfer other than under applicable state and federal
securities laws and the Investor Rights Agreement. The shares of Common Stock
issued upon conversion of the Shares (the "Conversion Shares"), when issued in
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accordance with the Certificate of Designation, will be duly and validly issued,
fully paid, nonassessable, free of the exercise of pre-emptive rights and will
be free of restrictions on transfer other than under applicable state and
federal securities laws and the Investor Rights Agreement.
2.6. Governmental Consents. No consent, approval, order or
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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 offer, sale or issuance of the
Shares or the consummation of any other transaction contemplated hereby, except
for the following: (i) under applicable federal and state securities laws and
(ii) the filing of the Certificate of Designation with the Delaware Secretary of
State, all of which filings will have occurred within the appropriate time
periods therefor. Assuming that the representations of the Investors set forth
in Section 3 below are true and correct, the offer, sale and issuance of the
Shares in conformity with the terms of this Agreement are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the "Securities Act"), and from qualification requirements under applicable
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state securities laws.
2.7. Litigation. Except as disclosed in the SEC Documents (as defined
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below), there is no material action, suit, proceeding or investigation
(including, without limitation, any suit, proceeding or investigation involving
the prior employment of any of the Company's or its Subsidiaries' employees,
their use in connection with the Company's or its Subsidiaries' business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers)
pending or, to the Company's knowledge, currently threatened before any court,
administrative agency or other governmental body (nor, to the Company's
knowledge, is there any reasonable basis for any such material action, suit,
proceeding or investigation). The Company and its Subsidiaries are not a party
or subject to, and none of the assets of the Company or its Subsidiaries are
bound by, the provisions of any material order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no
material action, suit, proceeding or investigation by the Company or its
Subsidiaries currently pending which the Company or its Subsidiaries intends to
initiate.
2.8. Intellectual Property. To the knowledge of the Company, the
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Company and its Subsidiaries own or have the right to use all material patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes necessary for their business as
now conducted. The Company has not received any written communications alleging,
nor to the Company's knowledge has, it or any of its Subsidiaries violated, or
by the conduct of their business as proposed will they violate, any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights or processes of any other Person, and to the knowledge
of the Company, neither it nor any of its Subsidiaries is infringing or
violating such rights of any other Person, that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
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2.9. Employees. To the Company's knowledge, (i) none of the Company's
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or its Subsidiaries' employees are 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 his or her best efforts to promote the interests
of the Company or its Subsidiaries or that would conflict with the Company's and
its Subsidiaries' business as now conducted or as proposed to be conducted, (ii)
the carrying on of the Company's and its Subsidiaries' business by the employees
of the Company and its Subsidiaries, and the conduct of the Company's or its
Subsidiaries' business as proposed, will not conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any of such employees is now
obligated, and (iii) none of the Company's or its Subsidiaries' current
employees is, by virtue of such employee's activities in connection with the
Company's or its Subsidiaries' business, violating, infringing or
misappropriating any patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights or
processes of any former employer of such employee, in the case of (i), (ii) or
(iii) that would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
2.10. Compliance with Other Instruments.
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(a) The Company is not in violation or default of any provision
of its Certificate of Incorporation or Bylaws, each as amended and in effect as
of the Closing. To the Company's knowledge, neither the Company nor any of its
Subsidiaries are in breach, violation or default (with or without notice or
passage of time, or both) of any provision of any instrument, mortgage, deed of
trust, loan, contract, commitment, judgment, decree, order or obligation to
which they are a party or by which they or any of their properties or assets are
bound, which breach, violation or default would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, or, to the
Company's knowledge, of any provision of any federal, state or local statute,
rule or governmental regulation, which breach, violation or default would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) The execution, delivery and performance of each of this
Agreement, the Warrants and the Investor Rights Agreement and the consummation
of the transactions contemplated hereby and thereby will not result in, or give
rise to, (A) any violation, default, breach, termination, right of termination,
right of acceleration, or be in conflict with (in each case, with or without
notice or passage of time, or both) (a) the Certificate of Incorporation or
Bylaws or other organizational documents of the Company or its Subsidiaries, (b)
any material instrument, mortgage, deed of trust, loan, contract, commitment,
judgment, order, writ, decree or contract to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound, or (c) any material provision of any state, federal, or local statute,
rule or regulation applicable to the Company or its Subsidiaries, in case of (b)
and (c) only in any manner that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or (B) an event that
results in the creation of any lien, charge or encumbrance upon any assets of
the Company or its Subsidiaries or the suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to the Company or any of its Subsidiaries, their respective business
or operations or any of their respective assets or properties.
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2.11. SEC Documents; Financial Statements. Since January 1, 1999,
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each of the Company and Broadbase Software, Inc. has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Securities and Exchange Commission (the "SEC") pursuant to the Securities
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Exchange Act of 1934, as amended (the "Exchange Act"), and has filed all
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registration statements and other documents required to be filed by it with the
SEC pursuant to the Securities Act. All of the foregoing reports on Forms 10-K,
10-Q and 8-K and proxy statements filed after December 31, 2000 and prior to the
date hereof, together with all registration statements filed after December 31,
2000 and prior to the date hereof, and in each case all amendments thereto,
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, are hereinafter referred to herein
as the "SEC Documents". As of their respective dates, the SEC Documents complied
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in all material respects with the requirements of the Exchange Act or the
Securities Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any statements
made in any such SEC Documents that are or were required to be updated or
amended under the Exchange Act or the Securities Act, as the case may be, have
been so updated or amended.
2.12. Financial Statements. As of their respective dates, the
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financial statements of the Company included in the SEC Documents complied in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company as of the dates thereof and the results of
their operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal and recurring year-end audit adjustments
which are not material).
2.13. Changes. Since September 30, 2001, there has not been:
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(a) any change, event or development in the business, assets,
liabilities, condition (financial or otherwise), results of operations or
prospects of the Company and its Subsidiaries, taken as a whole, from that
reflected in the SEC Documents (when read together), except changes in the
ordinary course of business that have not, in the aggregate, had a Material
Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, that could have a Material Adverse Effect;
(c) any waiver or compromise by the Company or any of its
Subsidiaries of a valuable right or of a material debt owed to it other than in
the ordinary course of business;
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(d) any satisfaction or discharge of any material lien, claim,
encumbrance or payment of any obligation by the Company or any of its
Subsidiaries, except (i) for obligations set forth on, or liabilities
specifically reserved for in, the Company's balance sheet as of September 30,
2001 included in the SEC Documents and (ii) in the ordinary course of business
and that has not had a Material Adverse Effect;
(e) any material sale or other disposition of assets, except
(i) sales or dispositions in the ordinary course of business and (ii) sales of
equipment in connection with the Company's restructuring in the quarter ended
September 30, 2001;
(f) any material change to a material contract or agreement by
which the Company or any of its Subsidiaries or any of their assets is bound or
subject other than in the ordinary course of business;
(g) any material change in any compensation arrangement or
agreement with any key technical employee, executive officer or director of the
Company or any of its Subsidiaries or any holder of more than 5% of the
outstanding capital stock of the Company other than in the ordinary course of
business;
(h) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets other than
pursuant to non-exclusive licenses in the ordinary course of business;
(i) any resignation or termination of employment of any
officer or key technical employee of the Company or any of its Subsidiaries; and
the Company is not aware of any impending resignation or termination of
employment of any such officer or key technical employee;
(j) any mortgage, pledge, transfer of a security interest in,
or lien, created by the Company or any of its Subsidiaries with respect to any
of their material properties or assets, except liens for taxes not yet due or
payable;
(k) any loans or guarantees made by the Company or any of its
Subsidiaries to or for the benefit of their employees, officers or directors or
any members of their immediate families, other than (i) travel advances and
other advances made in the ordinary course of business and (ii) loans to
employees, officers or directors in connection with the early exercise of stock
options granted pursuant to the Company's stock option plans;
(l) any declaration, setting aside or payment or other
distribution in respect to any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(m) to the Company's knowledge, any other event or condition
of any character that would reasonably be expected to have a Material Adverse
Effect; or
(n) any arrangement or commitment by the Company to do any of
the things described in this Section 2.13.
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2.14. Agreements. Other than (i) this Agreement, (ii) the Warrants,
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(iii) the Investor Rights Agreement, and (iv) the material contracts (within the
meaning of Item 601 of Regulation S-K) listed in, or filed as exhibits to, the
SEC Documents, Section 2.14 of the Schedule of Exceptions contains a complete
list of all contracts to which the Company or any of its Subsidiaries are party,
or to which any of their respective assets or properties are subject, in each
case which are significant to the business, assets, liabilities, condition
(financial or otherwise), results of operations or prospects of the Company and
its Subsidiaries, taken as a whole.
2.15. Taxes. The Company and its Subsidiaries have filed all
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necessary federal, state, foreign and local property, income, franchise, sales,
and use tax returns, which were true and correct in all material respects on the
date of each such filing, and have paid all taxes shown as due thereon or
otherwise owed by each of them to any taxing authority except those contested in
good faith and for which appropriate amounts have been reserved in accordance
with generally accepted accounting principles. There is no tax deficiency that
has been, or might be, asserted against the Company or any of its Subsidiaries
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
2.16. Permits. The Company and its Subsidiaries have all franchises,
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permits, licenses and any similar authority necessary for the conduct of their
business as now being conducted, the lack of which, individually or in the
aggregate, could reasonably be expect to have a Material Adverse Effect, and the
Company and its Subsidiaries believe they can obtain, without undue burden or
expense, any similar authority for the conduct of their business as planned to
be conducted. Neither the Company nor any of its Subsidiaries is in default in
any material respect under any of such franchises, permits, licenses or other
similar authority.
2.17. Related Party Transactions. Except as disclosed in the SEC
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Documents, no holder of more than 5% of the outstanding capital stock of the
Company and no employee, officer, or director of the Company or any of its
Subsidiaries or member of his or her immediate family is indebted to the Company
or its Subsidiaries, nor is the Company or its Subsidiaries indebted (or
committed to make loans or extend or guarantee credit) to any of them, for an
amount in excess of $150,000, except for loans made by the Company to certain of
its employees in exchange for promissory notes in connection with the early
exercise of stock options granted under the Company's stock option plans.
2.18. Registration Rights. Except as set forth in Section 2.18 of the
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Schedule of Exceptions (collectively, the "Existing Registration Rights
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Agreements") and as contemplated by the Investor Rights Agreement, the Company
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has not granted or agreed to grant any registration rights, including piggyback
rights, to any Person. The provisions of the Investor Rights Agreement, and the
performance by the Company of its obligations thereunder, will not result in, or
give rise to, any violation, default, breach, termination or right of
termination under, or be in conflict with, (with or without notice or passage of
time, or both) any Existing Registration Rights Agreement.
2.19. Disclosure. The Company has fully provided the Investors with
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all the information that the Investors or their counsel have requested for
deciding whether to acquire the Shares and all information that the Company
believes is reasonably necessary to enable the
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Investors to make such a decision. The representations and warranties contained
in this Agreement and the exhibits attached hereto and any certificate furnished
or to be furnished to Investors at Closing do not contain any untrue statement
of a material fact or, taken together with the SEC Documents (excluding the
disclosure regarding risk factors and risks associated with the Company's
business and future operating results), omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.
2.20. Delaware Section 203. The Board of Directors of the Company, at
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meetings duly called and held on November 26 and 28, 2001, has approved, (i) the
terms of this Agreement, the Warrants, the Certificate of Designation and the
Investor Rights Agreement, and the consummation of the transactions contemplated
hereby and thereby (including without limitation the sale and issuance of the
Shares and the issuance of the Conversion Shares upon conversion of the Shares),
and such approval constitutes approval of such transactions by the Board of
Directors of the Company under the provisions of Section 203 of the Delaware
General Corporation Law, and (ii) in addition to the shares of Common Stock
obtained upon conversion of the Shares, the purchase or other acquisition,
whether in market transactions, privately negotiated transactions or otherwise,
by the Investors of up to 9,500,000 shares (as adjusted for any stock dividends
paid in common stock, and any combinations, stock splits, recapitalizations and
the like each with respect to the Company's Common Stock) of Common Stock (the
"Market Purchases"), and such approval constitutes approval of such transactions
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by the Board of Directors of the Company under the provisions of Section 203 of
the Delaware General Corporation Law.
2.21. Stockholder Approval Not Required. Other than as contemplated
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to be obtained at the Company Stockholders Meeting, no approval of the
stockholders of the Company is required in connection with (a) this Agreement,
the Investor Rights Agreement and the consummation of the transactions
contemplated hereby and thereby and/or (b) any other pending or proposed
issuance of equity securities of the Company.
2.22. No Undisclosed Liabilities. Except (a) as disclosed in the SEC
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Documents (including, without limitation, obligations set forth on, or
liabilities specifically reserved for in, the Company's balance sheet as of
September 30, 2001 included in the SEC Documents), (b) for liabilities incurred
since September 30, 2001 in the ordinary course of business, (c) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby and (d) as set forth in Section 2.22 of the Schedule of Exceptions, the
Company and its Subsidiaries do not have any liabilities, either accrued,
contingent or otherwise (whether or not required to be reflected in financial
statements in accordance with generally accepted accounting principles), and
whether due or to become due, which individually or in the aggregate are
reasonably likely to have Material Adverse Effect.
2.23. Financial Projections. Prior to the date hereof, the Company
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has provided the Investors with its most current financial projections for the
Company (the "Financial Projections"). The Financial Projections were prepared
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in good faith, are based on assumptions that the Company believes to be
reasonable as of the date of this Agreement. Notwithstanding the foregoing,
however, the Company makes no representation or warranty with respect to the
Company's ability to achieve such projections.
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3. Representations and Warranties of the Investors. Each Investor hereby,
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severally and not jointly, represents and warrants as of the date hereof and as
of the Closing as follows:
3.1. Experience; Accredited Investor. Such Investor is experienced in
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evaluating companies such as the Company, and has either individually or through
its current officers such knowledge and experience in financial and business
matters that such Investor is capable of evaluating the merits and risks of such
Investor's prospective investment in the Company, and has the ability to bear
the economic risks of the investment. Such Investor is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
3.2. Purchase Entirely for Own Account. Such Investor is acquiring
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the Shares for investment for such Investor's own account and not with the view
to, or for resale in connection with, any distribution thereof, except for
transfers to affiliated fund partnerships. Such Investor understands that the
Shares have not been registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent as
expressed herein. Such Investor further represents that it does not have any
contract, undertaking, agreement or arrangement with any Person to sell,
transfer or grant participation to any third Person with respect to any of the
Shares. Such Investor understands and acknowledges that the offering of the
Shares pursuant to this Agreement will not be registered under the Securities
Act on the ground that the sale provided for in this Agreement and the issuance
of securities hereunder is exempt from the registration requirements of the
Securities Act.
3.3. Rule 144. Such Investor acknowledges that the Shares must be
--------
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Such Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions. Such Investor understands and acknowledges that the
certificate evidencing its Shares will be imprinted with certain legends,
including but not limited to, the form of legend set forth in Section 3 of the
Investor Rights Agreement.
3.4. Access to Data. Such Investor has received and reviewed
--------------
information about the Company and has had an opportunity to discuss the Company'
business, management and financial affairs with its management and to review the
Company's facilities. Nothing contained in this Section 3.4 shall limit in any
respect the Company's representations and warranties contained in this
Agreement.
3.5. Authorization. This Agreement has been duly authorized, executed
-------------
and delivered by such Investor and constitutes a valid and legally binding
obligation of such Investor, enforceable against such Investor in accordance
with its terms subject to: (i) judicial principles limiting the availability of
specific performance, injunctive relief, and other equitable remedies; (ii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights; and
(iii) limitations on the enforceability of any indemnification provisions.
11
4. Conditions of Investor's Obligations at Closing. The obligation of
-----------------------------------------------
each Investor to purchase Shares at the Closing is subject to the fulfillment or
waiver by the Investor on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Investor who
does not consent in writing thereto:
4.1. Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true and correct 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, except for (a)
changes contemplated by this Agreement and (ii) where the reason for or
circumstances giving rise to the failure of the representations set forth in
Sections 2.7, 2.13(f), (g) and (i), and 2.14 to be true and correct as of the
date of the Closing, individually or in the aggregate and without regard to any
qualification as to materiality or Material Adverse Effect, has not had and is
not reasonably likely to have a Material Adverse Effect.
4.2. Performance. The Company shall have performed and complied in
-----------
all material respects with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Closing.
4.3. Compliance Certificate. The Company shall deliver to each
----------------------
Investor at the Closing a certificate of the President of the Company dated the
date of the Closing stating that the conditions specified in Sections 4.1, 4.2,
4.9, 4.10 and 4.12 have been fulfilled.
4.4. Blue Sky. The Company shall have obtained all necessary permits
--------
and qualifications, if any, or secured an exemption therefrom, required by any
state for the offer and sale of the Shares.
4.5. Investor Rights Agreement. The Company and each Investor shall
-------------------------
have entered into the Investor Rights Agreement.
4.6. Opinion of Company Counsel. The Company shall have provided an
--------------------------
opinion addressed to the Investors rendered by its legal counsel in form and
substance reasonably satisfactory to the Investors, in substantially the form
attached hereto as Exhibit E.
4.7. Regulatory Approvals. All consents, approvals, filings and
--------------------
registrations with, and notifications to, all federal, state, local and foreign
governmental or regulatory agencies, authorities, instrumentalities or other
bodies having jurisdiction over the parties hereto required for the consummation
of the transactions contemplated hereby have been obtained or made and shall be
in full force and effect.
4.8. Legal Proceedings. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or enacted any law of order (whether temporary, preliminary or
permanent) or taken any other action which prohibits or makes illegal
consummation of the transactions contemplated by this Agreement, and there shall
be no suit, claim, action, proceeding or governmental investigation pending
against the Company which seeks to challenge the transactions contemplated by
this Agreement.
12
4.9. Material Adverse Change. Since September 30, 2001, there shall
-----------------------
have been no change, event or development which has had or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
4.10. Board Representative; Indemnification Agreement. Xxx X. Xxxx
-----------------------------------------------
shall be elected to the Board of Directors of the Company as the Series A
Designee (as such term is defined in the Certificate of Designation), and the
Company shall have entered into an Indemnification Agreement with Xx. Xxxx in
form and substance reasonably acceptable to the Investors.
4.11. Listing. The Conversion Shares shall have been approved for
-------
listing, subject only to notice of issuance, on the Nasdaq National Market.
4.12. Stockholder Approval. Unless the Company has received written
--------------------
confirmation from The Nasdaq Stock Market, Inc. ("Nasdaq") that stockholder
------
approval is not required in connection with the Share Issuance, the stockholders
of the Company entitled to vote at the Company Stockholders Meeting shall have
approved by the requisite vote under the rules of Nasdaq the Share Issuance
(collectively, the "Requisite Company Vote").
----------------------
5. Conditions of the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to sell Shares to each Investor at the Closing are subject to the
fulfillment, or waiver by the Company, on or before the Closing of each of the
following conditions by that Investor:
5.1. Representations and Warranties. The representations and
------------------------------
warranties of such Investor contained in Section 3 shall be true and correct in
all material respects 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.
5.2. Performance. Such Investor shall have performed and complied in
-----------
all material respects with all covenants, 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. Blue Sky. The Company shall have obtained all necessary permits
--------
and qualifications, if any, or secured an exemption therefrom, required by any
state for the offer and sale of the Shares.
5.4. Investor Rights Agreement. The Company and each Investor shall
-------------------------
have entered into the Investor Rights Agreement.
5.5. Regulatory Approvals. All consents, approvals, filings and
--------------------
registrations with, and notifications to, all federal, state, local and foreign
governmental or regulatory agencies, authorities, instrumentalities or other
bodies having jurisdiction over the parties hereto required for the consummation
of the transactions contemplated hereby have been obtained or made and shall be
in full force and effect.
5.6. Legal Proceedings. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or enacted any law of
13
order (whether temporary, preliminary or permanent) or taken any other action
which prohibits or makes illegal consummation of the transactions contemplated
by this Agreement, and there shall be no suit, claim, action, proceeding or
governmental investigation pending against the Company which seeks to challenge
the transactions contemplated by this Agreement.
5.7. Stockholder Approval. Unless the Company has received written
--------------------
confirmation from Nasdaq that stockholder approval is not required in connection
with the Share Issuance, the stockholders of the Company entitled to vote at the
Company Stockholders Meeting shall have approved the Share Issuance by the
Requisite Company Vote.
6. Covenants.
---------
6.1. Satisfaction of Conditions. The parties shall use reasonable
--------------------------
best efforts to satisfy in a timely manner each of the conditions set forth in
Section 4 and Section 5 of this Agreement.
6.2. Listing. The Company shall prepare and file with NASDAQ, as
-------
promptly as practicable after the date hereof, a Notification of Additional
Listing with respect to the Conversion Shares, and the Company shall give all
notices and make all filings with NASDAQ required in connection with the
transactions contemplated herein.
6.3. Antitrust Notification. Within 90 days after the date of this
----------------------
Agreement, the Company will timely (and as promptly as practicable) file with
the United States Federal Trade Commission and the United States Department of
Justice (a) the notification and report form required and (b) any supplemental
or additional information which may reasonably be required in connection
therewith pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976,
as amended (the "HSR Act"). Each party (1) will cooperate with each other party
-------
in the preparation and filing of such notification and report forms and
supplemental or additional information and (2) will comply in all material
respects with the requirements of the HSR Act. Each Person shall pay its own
costs of preparing and filing all such notification and report forms and
providing such supplemental or additional information, provided that the Company
shall pay all filing fees incurred by the Company and/or the Investors relating
to such filing.
6.4. Market Purchases. The Company acknowledges that the Investors
----------------
may effect the Market Purchases. Notwithstanding the foregoing, the Investors
shall not effect a Market Purchase if, immediately following the completion
thereof, the Investors together with their affiliates would own in excess of 45%
of the outstanding Common Stock on such date (assuming the conversion of the
shares of Series A Preferred Stock owned by the Investors and their Affiliates
into shares of Common Stock). The Company acknowledges that the Investors have
no obligation or commitment to purchase any shares of Common Stock in the Market
Purchases.
6.5. Interim Covenants of the Company. During the period from the
--------------------------------
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Closing (except as expressly contemplated or permitted by
this Agreement, as permitted or disclosed pursuant to the Schedule of Exceptions
or to the extent that the Investors otherwise consent in writing):
14
(a) Neither the Company nor any of its Subsidiaries shall, and
shall not propose to, (i) declare or pay any dividend on or make other
distributions in respect of its capital stock, (ii) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of, or in substitution for shares of its
capital stock or (iii) repurchase, redeem or otherwise acquire any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock, except for (x) the acquisition of shares of its capital
stock in whole or partial satisfaction of the exercise price or applicable tax
withholding requirements in respect of any option, restricted stock or similar
award made pursuant to any benefit or compensation plan, agreement or
arrangement maintained or assumed by the Company or any of its Subsidiaries
which provides for the issuance of Company capital stock and (y) for
acquisitions by the Company of shares of the Company's capital stock pursuant to
stock-based compensation arrangements or agreements that permit the repurchase
of such shares upon termination of services to the Company or its Subsidiaries
for a price not greater than the cost thereof to the applicable service
provider.
(b) The Company shall not issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class or any securities convertible into or exercisable or exchangeable for,
or any rights, warrants or options to acquire, any such shares or enter into any
agreement with respect to any of the foregoing, other than (u) the sale of up to
10,000,000 shares of Common Stock under the Company's existing registration
statement on Form S-3, (v) pursuant to the Company's employee stock purchase
plan, (w) grants of options, restricted stock and other equity-based awards to
directors, employees and consultants of the Company and its Subsidiaries
(including any newly hired employee) pursuant to the Company's stock option
plans in amounts consistent with past practices taking into account the relative
position and responsibilities with the Company or its Subsidiaries of each such
award recipient, (x) the issuance of warrants to channel partners and other
parties with whom the Company has entered or is entering into commercial
relationships, in the ordinary course of business and consistent with past
practices other than in connection with a financing transaction, (y) the
issuance of Common Stock upon exercise of options and warrants that are
outstanding on the date of this Agreement or granted after the date of this
Agreement in compliance with the provisions of this Agreement or (z) the payment
of dividends on the Series A Preferred Stock and the issuance of shares of
Common Stock in connection with the conversion of Series A Preferred Stock
pursuant to the provisions of the Certificate of Incorporation.
(c) Except to the extent required to comply with its obligations
hereunder or as required by law, the Company shall not amend or propose to amend
its Certificate of Incorporation or Bylaws
6.6. Exclusivity. Without the prior approval of the Investors, until
-----------
the earlier to occur of the Closing of the termination of this Agreement
pursuant to its terms, neither the Company nor any of the Company's directors,
officers, employees, agents or representatives will solicit, encourage or
entertain proposals from or enter into negotiations with or furnish any
nonpublic information to any other Person regarding the possible sale of a
minority interest in the Company's stock in connection with a financing
transaction (other than the sale of up to 10,000,000 shares of Common Stock
under the Company's existing registration statement on Form S-3). The Company
shall notify the Investors promptly of any proposals by third parties
15
with respect to the acquisition of a minority interest in the Company's stock.
The Company shall deal exclusively with the Investors notwithstanding any such
third party proposals.
6.7. Directors' and Officers' Insurance. The Company shall maintain
----------------------------------
directors' and officers' insurance in an amount not less than $15,000,000 and
with such other terms as are reasonably acceptable to the holders of a majority
in interest of the Series A Preferred Stock. The Company shall periodically
review such insurance and consult with the Investors regarding the adequacy
thereof.
6.8. Certain Preferred Stock Terms. The parties agree that, for
-----------------------------
purposes of the Certificate of Designation, (i) the "Series A Original Issue
Price" as defined and to be set forth therein shall equal the Purchase Price,
(ii) the "Series A Preferred Conversion Price" as defined and to be set forth
therein shall equal the quotient of (A) the Purchase Price, divided by (B) 10,
(iii) the number of shares of preferred stock of the Company that shall be
designated as Series A Preferred Stock shall equal the number of Shares, (iv)
the blank share amount in Section (b)(iii) shall be the number of Shares,
divided by three, (v) the blank dollar amount in Section (c)(i) shall be five
times the Purchase Price, divided by 10, (vi) the blank dollar amount in Section
(d)(x)(A) shall be three times the Purchase Price, divided by 10, and (vii) in
the event that it is determined by Nasdaq (after full process, including any
appeal process available to the Company) that the number of votes to which each
holder of shares of Series A Preferred Stock is entitled as currently provided
in the Certificate of Designation violates or is in conflict with Nasdaq
Marketplace Rule 4351, then the number of votes to which each holder of shares
of Series A Preferred is entitled shall be reduced, pro rata, to the extent
required to comply with such rule.
6.9. Company Stockholders Meeting. The Company shall call and hold a
----------------------------
meeting of its stockholders (including any adjournment thereof, the "Company
-------
Stockholders Meeting") for the purpose of voting upon proposals to issue and
--------------------
sell the Shares pursuant hereto and to issue the Conversion Shares upon
conversion of the Shares (the "Share Issuance"). The Company shall use its
--------------
reasonable efforts to schedule and hold the Company Stockholders Meeting as soon
as practicable after (a) if the Proxy Statement (as defined below) is not
reviewed by the SEC, the expiration of the 10 calendar day period set forth in
Rule 14a-6 under the Exchange Act or (b) if the Proxy Statement is reviewed by
the SEC, the date on which the SEC has cleared the Proxy Statement for
distribution. The Company, through its Board of Directors, shall recommend to
the Company's stockholders entitled to vote at the Company Stockholders Meeting
that they vote in favor of each of the proposals set forth in this Section 6.9,
provided, however, that the Company's Board of Directors may withdraw, modify or
change such recommendation to the extent that the Company's Board of Directors
determines to do so in the exercise of their fiduciary duties.
6.10. Proxy Statement. As soon as practicable following the date
---------------
hereof, the Company shall file with the SEC a proxy statement to be sent to
stockholders of the Company in connection with the Company Stockholders Meeting
(the "Proxy Statement"). The Company shall use reasonable efforts to cause the
---------------
Proxy Statement to be mailed to the Company's stockholders entitled to vote at
the Company Stockholders Meeting as promptly as practicable after (a) if the
Proxy Statement is not reviewed by the SEC, the expiration of the 10 calendar
day period set forth in Rule 14a-6 under the Exchange Act or (b) if the Proxy
Statement is reviewed
16
by the SEC, the date on which the SEC has cleared the Proxy Statement for
distribution. The Company shall not file the Proxy Statement or respond to any
comments from the SEC regarding the Proxy Statement, or amend or supplement the
Proxy Statement, without first consulting with the Investors regarding the terms
of such response, amendment or supplement and providing the Investors a
reasonable opportunity to provide their comments to the Company with respect
thereto.
6.11. Notification; Government Filings. Each party shall promptly
--------------------------------
advise the others orally and in writing if such party has knowledge of (i) any
of its representations or warranties as made herein becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply with or
satisfy in any material respect any covenant or agreement required to be
complied with or satisfied by it under this Agreement or (iii) any change, event
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect, or materially adversely affect its ability to consummate the
transactions contemplated hereby that are to be consummated by it, in the manner
and within the time periods specified herein; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. Each party agrees that, to the extent practicable, it will
consult with the other party with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and governmental
entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will use all reasonable efforts to keep the other
parties apprised of the status of matters relating to the completion of the
transactions contemplated hereby.
6.12. Access to Information; Confidentiality. From the date hereof
--------------------------------------
until the earlier of the Closing or the termination of this Agreement, upon
reasonable notice, the Company shall afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of Investors
reasonable access during normal business hours to all of its and its
subsidiaries' properties, books, contracts, commitments and records and its
officers, management employees and representatives (subject, however, to
existing confidentiality and similar non-disclosure obligations and the
preservation of attorney-client and work product privileges). Any requests for
access pursuant to this Section 6.12 shall be submitted to the Chief Financial
Officer of the Company (or such other officer of the Company as maybe designated
from time to time by the Company). The Investors shall, and shall cause their
respective representatives to, hold in strict confidence and not disclose to any
third party all non-public documents and information furnished to such Investors
or their representatives in connection with the transactions contemplated by
this Agreement, except that each of the Investors and their representatives may
disclose, after providing prior written notice and a reasonable opportunity to
object to and prevent such disclosure to the Company, any information that it is
advised by its counsel it is required by law or judicial or administrative order
to disclose.
7. Miscellaneous.
-------------
7.1. Termination.
-----------
(a) This Agreement may be terminated
17
(i) at any time prior to the Closing, by the mutual written consent
on Company and the Investors representing a majority of the Shares to be
purchased pursuant to this Agreement; or
(ii) by either the Investors representing a majority of the Shares to
be purchased pursuant to this Agreement or the Company, by providing the other
with written notice of such termination, if the Closing has not occurred by
March 15, 2002; or
(iii) by either the Investors representing a majority of the Shares to
be purchased pursuant to this Agreement or the Company if at the Company
Stockholders Meeting the stockholders have not approved the Share Issuance by
the Requisite Company Vote; or
(iv) by the Investors representing a majority of the Shares to be
purchased pursuant to this Agreement if the Board of Directors of the Company
shall have withdrawn, modified or changed its recommendation that the
stockholders of the Company vote in favor of the Share Issuance; or
(v) by either the Investors representing a majority of the Shares to
be purchased pursuant to this Agreement or the Company if the average of the
Daily Volume-Weighted Average Price on The Nasdaq Stock Market for any ten
consecutive trading days after the date hereof and prior to the Closing shall be
less than $0.443 (as adjusted for any stock dividends paid in common stock, and
any combinations, stock splits, recapitalizations and the like each with respect
to the Company's Common Stock).
(b) In the event of termination of this Agreement pursuant to
this Section 7.1, this Agreement shall become void and there shall be no further
obligation on the part of the Company or the Investors (except for Section 6.12,
this Section 7.1, Section 7.2 and Section 7.13). Nothing in this Section 7.1
shall relieve any party from liability which such party may have for any breach
of this Agreement by such party prior to such termination.
7.2. Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California without regard to choice of laws or
conflict of laws provisions thereof.
7.3. Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by any Investor and
shall survive to the second anniversary of the Closing, provided that the
covenants and agreements contained in Sections 6.3 and 6.6 shall survive
indefinitely. All statements of the Company as to factual matters contained in
any certificate or exhibit delivered by or on behalf of the Company pursuant
hereto shall be deemed to be the representations and warranties of the Company
hereunder as of such date of such certificate or exhibit.
7.4. Successors and Assigns. Except as otherwise provided herein,
----------------------
this Agreement and the rights and obligations of the parties hereunder shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto; provided, however, that prior to the Closing the
rights of an Investor to purchase Shares shall not be assignable without the
consent of the Company.
18
7.5. Entire Agreement; Amendment. This Agreement and the other
---------------------------
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Any prior agreements, understanding or representations with respect to the
subject matter hereof, including specifically the Letter of Intent, dated as of
November 20, 2001, between the Company and TCV IV, L.P., are superseded by this
Agreement shall have no further force or effect. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought. Notwithstanding the
foregoing, holders of a majority of the outstanding Shares may waive or amend,
on behalf of all Investors and other holders of Shares, any provisions hereof
benefiting the Investors so long as the effect thereof will be that all such
Investors and other holders of Shares will be treated equally.
7.6. Notices, Etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be (a) mailed by registered or
certified mail, postage prepaid, return receipt requested, (b) delivered by a
nationally recognized overnight courier, (c) sent by confirmed facsimile or (d)
otherwise delivered by hand or by messenger, addressed (i) if to an Investor, at
such Investor's address set forth on Exhibit A, or at such other address as such
---------
Investor shall have furnished to the Company in writing, (ii) if to any other
holder of any Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares who has so
furnished an address to the Company, or (iii) if to the Company, at its address
set forth on the signature page of this Agreement addressed to the attention of
the Corporate Secretary, or at such other address as the Company shall have
furnished to the Investors, with a copy to Fenwick & West LLP, 000 Xxxxxxx
Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx Xxxxxxxx, Fax: (415)
000-0000. If notice is provided by mail, notice shall be deemed to be given 48
hours after proper deposit in a mailbox; if by overnight courier, notice shall
be deemed to be given 24 hours after deposit; if by facsimile, upon completion
of such facsimile transmission as conclusively evidenced by the transmission
receipt; and if by hand or messenger, upon receipt.
7.7. Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of any Shares upon any breach or default
of the Company under this Agreement shall impair any such right, power or remedy
of such holder, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing or as provided in this Agreement. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
7.8. Finder's Fee. The Company shall indemnify and hold each of the
------------
Investors harmless and each Investor shall, severally and not jointly, indemnify
and hold the Company harmless from any liability for any commission or
compensation in the nature of a
19
finder's fee in connection with the sale of the Shares (including the costs,
expenses and legal fees of defending against such liability) for which the
Company or such Investor, or any of their respective partners, members,
employees, or representatives, as the case may be, is responsible.
7.9. Counterparts. This Agreement may be executed in any number of
------------
counterparts and signatures may be delivered by facsimile, each of which may be
executed by less than all Investors, each of which shall be enforceable against
the parties actually executing such counterparts, and all of which together
shall constitute one instrument.
7.10. Severability. If any provision of this Agreement becomes or is
------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, portions of such provision, or such provision in its entirety, to the
extent necessary, shall be severed from this Agreement and the balance of this
Agreement shall be enforceable in accordance with its terms.
7.11. 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.
7.12. Legal Fees. If any action at law or in equity (including
----------
arbitration) 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.
7.13. Expenses. Regardless of whether or not the transactions
--------
contemplated by this Agreement are completed, the Company shall reimburse the
Investors for the reasonable fees and expenses (including reasonable fees and
expenses of its legal counsel) incurred by the Investors in connection with the
transactions contemplated by this Agreement, unless (a) the Company has (i)
complied in all material respects with all of the provisions of this Agreement
and (ii) satisfied the conditions of Investor's obligations at Closing set forth
in Sections 4.1 through 4.12 and (b) the failure to complete the transactions
contemplated by this Agreement results from the failure by the Investors either
to comply in all material respects with all of the provisions of this Agreement
or to satisfy the conditions of the Company's obligations at Closing set forth
in Section 5.1, 5.2 or 5.4.
7.14. Publicity. Except as required by law, no party hereto shall
---------
issue any press release or make any public statement regarding the transactions
contemplated hereby without the prior approval of the other parties, and the
parties hereto shall issue a mutually acceptable press release as soon as
practicable after the date hereof and after the Closing Date. Notwithstanding
the foregoing, the Company shall be permitted to make a public statement without
obtaining the consent of the Investors if (a) the disclosure is required by the
continued listing requirements of the Nasdaq National Market and (b) the Company
has used its reasonable best efforts to consult with the Investors about the
form and substance of such disclosure.
7.15. Definitions. For purposes of this Agreement:
-----------
20
(a) "Material Adverse Effect" means a material adverse effect on
-----------------------
the business, assets, liabilities, condition (financial or otherwise), results
of operations or prospects of the Company and its Subsidiaries, taken as a
whole.
(b) "Person" means an individual, corporation, partnership,
------
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(c) "Subsidiary" of any Person means, with respect to such
----------
Person, any corporation, partnership, joint venture or other legal entity or
which such Person (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the Board of Directors or other governing body of such corporation
or other legal entity.
21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE COMPANY:
KANA SOFTWARE, INC.
By: /s/ Xxxxx X. Xxxxx
____________________________________
Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer
Address: 000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
22
THE INVESTORS:
TCV IV, L.P.
By: Technology Crossover Management IV, L.L.C.
Its: General Partner
By: /s/ Xxxxx X. Xxxxxx
___________________________________
Name: Xxxxx X. Xxxxxx
Title: Attorney in Fact
TCV IV STRATEGIC PARTNERS, L.P.
By: Technology Crossover Management IV, L.L.C.
Its: General Partner
By: /s/ Xxxxx X. Xxxxxx
___________________________________
Name: Xxxxx X. Xxxxxx
Title: Attorney in Fact
EXHIBIT A
---------
SCHEDULE OF INVESTORS
------------------------------------------------------------------------
Percentage of Shares to be
Investor Purchased
------------------------------------------------------------------------
TCV IV, L.P.
96.41%
Technology Crossover Ventures
000 Xxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
And
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
---------------------------------------- -----------------------------
TCV Strategic Partners, L.P.
3.59%
Technology Crossover Ventures
000 Xxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxxxx 00000
------------------------------------------------------------------------
------------------------------------------------------------------------
Phone: (000) 000-0000
Fax: (000) 000-0000
And
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
------------------------------------------------------------------------
Total 100.00%
------------------------------------------------------------------------
EXHIBIT B
---------
CERTIFICATE OF DESIGNATION
RESOLUTION OF THE BOARD OF DIRECTORS
APPROVING
THE DESIGNATION STATEMENT
RELATING TO
8% SERIES A CONVERTIBLE PREFERRED STOCK
WHEREAS, the Second Amended and Restated Certificate of Incorporation of
Kana Software, Inc., a Delaware corporation (the "Corporation"), authorizes the
-----------
Corporation to issue a total of 5,000,000 shares of preferred stock, par value
$0.001 per share ("Preferred Stock"), which may be divided into one or more
---------------
series as the Board of Directors may determine;
WHEREAS, the Second Amended and Restated Certificate of Incorporation of
the Corporation expressly vests in the Board of Directors the authority to fix
and determine the designations, powers, preferences, relative and other special
rights, and the qualifications, limitations and restrictions, of the Preferred
Stock; and
WHEREAS, the Board of Directors deems it advisable to designate a series of
the Preferred Stock consisting of [______] shares designated as 8% Series A
Convertible Preferred Stock;
NOW, THEREFORE, IT IS HEREBY RESOLVED, that pursuant to Article IV of the
Second Amended and Restated Certificate of Incorporation of the Corporation,
there be and hereby is authorized and created a series of Preferred Stock hereby
designated as 8% Series A Convertible Preferred Stock, to consist of [_______]
shares, having a par value of $0.001 per share, which series shall have the
voting rights, designations, powers, preferences, relative and other special
rights, and the qualifications, limitations and restrictions set forth below:
Series A Convertible Preferred Stock. [_______] of the authorized shares of
Preferred Stock are hereby designated "8% Series A Convertible Preferred Stock"
(the "Series A Preferred Stock"). The rights, preferences, privileges,
------------------------
restrictions and other matters relating to the Series A Preferred Stock are as
follows:
(a) Dividend Rights.
---------------
(i) Subject to the right of any other series of Preferred Stock that
may from time to time come into existence and which is expressly senior to
the rights of the Series A Preferred Stock, the holders of Series A
Preferred Stock, in preference to the payment of any dividends to the
holders of common stock, par value $0.001 per share, of the Corporation
(the "Common Stock"), and any other stock of the Corporation hereafter
------------
created which shall be junior to the Series A Preferred Stock (collectively
with the Common Stock, "Junior Stock"), shall be entitled to cumulative
------------
dividends at the rate of 8% of the Series A Compounded Amount (as defined
below) per annum (the "Series A Dividend Rate") on each outstanding share
----------------------
of Series A Preferred Stock. For any share of Series A Preferred Stock,
such dividends shall begin to accrue commencing upon the first date a share
of Series A Preferred Stock is issued and becomes outstanding (the "Series
------
A Original Issue Date"). Dividends shall not be declared or paid except as
---------------------
provided by Section (c) (through the payment of the Liquidation Preference)
or Section (d) (through the conversion of the Series A Preferred Stock into
shares of Common
27
Stock). "Dividend Accrual Date" shall mean January 1, April 1, July 1 and
---------------------
October 1 of each year. The "Series A Compounded Amount" shall, on any
--------------------------
particular date, be equal to the difference between (1) the Series A
Accreted Value as of such date, less (2) the dividend, as of such date,
which has accrued since the last Dividend Accrual Date. The "Series A
--------
Accreted Value" shall, on any particular date, be equal to the sum of the
--------------
Series A Original Issue Price plus the amount of all dividends on a share
of Series A Preferred Stock accrued and unpaid as of such date. The
original issue price of the Series A Preferred Stock shall be $[____] (as
adjusted for any stock dividends paid in Series A Preferred Stock, and
combinations, stock splits, recapitalizations and the like each with
respect to shares of Series A Preferred Stock) (the "Series A Original
-----------------
Issue Price").
-----------
(ii) In the event that the Corporation shall declare a dividend or
distribution on Junior Stock (other than (x) a dividend on Common Stock
paid solely in Common Stock or (y) a dividend on Common Stock paid solely
in options to purchase Junior Stock pursuant to the provisions of a
stockholder rights plan adopted by the Board of Directors), then the
holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such dividend or distribution as though the
holders of the Series A Preferred Stock were the holders of the number of
shares of Common Stock into which their respective shares of Series A
Preferred Stock are convertible as of the record date fixed for the
determination of the holders of the Junior Stock entitled to receive such
dividend or distribution.
(b) Voting Rights.
--------------
(i) General Rights. Except as otherwise provided herein or as required
---------------
by law, the Series A Preferred Stock shall vote with the shares of the
Common Stock of the Corporation and not as a separate class, at any annual
or special meeting of stockholders of the Corporation or the taking of any
stockholder action by written consent, upon the following basis: each
holder of shares of Series A Preferred Stock shall be entitled to such
number of votes as shall be equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Series A
Preferred Stock are convertible pursuant to Section (d) hereof immediately
after the close of business on the record date fixed for such meeting or
the effective date of such written consent.
(ii) Separate Vote of Series A Preferred Stock. In addition to any
------------------------------------------
other vote or consent required herein or by law, the approval of the
holders of at least a majority of the outstanding Series A Preferred Stock,
voting as a separate class, shall be necessary before taking or effecting
any of the following actions:
(A) any amendment or waiver of any provisions of the Amended and Restated
Certificate of Incorporation, as amended from time to time, or Bylaws, as
amended from time to time, of the Corporation, in each case that adversely
affects the rights, preferences or privileges of the Series A Preferred Stock;
(B) any action that authorizes, creates or results in the issuance of any
class or series of stock, or any other securities convertible into or
exercisable for equity securities of the Corporation, having rights, preferences
or privileges senior to or on a parity with the Series A Preferred Stock;
28
(C) any Sale Transaction (as defined below);
(D) any increase or decrease in the authorized number of shares of Series A
Preferred Stock or Common Stock;
(E) the payment or declaration of any dividend or distribution, whether in
cash, securities or other property, on any Junior Stock (other than (1) a
dividend on Common Stock paid solely in Common Stock or (2) a dividend on Common
Stock paid solely in options to purchase Junior Stock pursuant to the provisions
of a stockholder rights plan adopted by the Board of Directors); or
(F) the repurchase, redemption or other acquisition of Junior Stock by the
Corporation or any subsidiary, except (1) for acquisitions of Common Stock by
the Corporation or its subsidiaries pursuant to stock-based compensation
arrangements or agreements that permit the Corporation to repurchase such shares
upon termination of services to the Corporation or its subsidiaries for a price
not greater than the cost thereof to the applicable service provider and (2) for
acquisitions by the Company or its subsidiaries in whole or partial satisfaction
of the exercise price or applicable tax withholding requirements in respect of
any option, restricted stock or similar award made pursuant to any compensation
or benefit plan, agreement or arrangement maintained or assumed by, or any
warrants issued or assumed by, the Company or any of its subsidiaries.
(iii) Board of Directors. So long as at least _____ [1/3 of shares
-------------------
purchased by Investors] shares of Series A Preferred Stock remain outstanding
(as adjusted for any stock dividends paid in Series A Preferred Stock, and
combinations, stock splits, recapitalizations and the like each with respect to
shares of Series A Preferred Stock), one (1) member of the Board of Directors
shall be subject to election and removal by the holders of a majority in
interest of the outstanding Series A Preferred Stock voting as a separate class
(the "Series A Designee"). In the case of any vacancy in the office of a
-----------------
director elected by the holders of the Series A Preferred Stock, the holders of
a majority of the outstanding shares of Series A Preferred Stock may elect a
successor to hold office for the unexpired term of the director whose place
shall be vacant. Any director who shall have been elected by the holders of the
Series A Preferred Stock may be removed during the aforesaid term of office,
either with or without cause, by, and only by, the affirmative vote of a
majority of the holders of the outstanding shares of Series A Preferred Stock,
given either at a special meeting of such stockholders duly called for that
purpose or pursuant to a written consent of a majority of such stockholders. Any
such act shall become effective on the date fixed in the notice to the
Corporation thereof, or upon the delivery thereof to the Corporation, whichever
is later, without the need for any other corporate procedure or action. For
removal of any doubt, the appointment of a director as aforesaid, the dismissal
or replacement of any director so appointed, shall be by written notice given to
the Corporation by the party or parties designating the director pursuant to the
procedures set forth above.
(c) Liquidation Rights.
-------------------
(i) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, including a Sale Transaction
(as defined below) before any distribution or payment shall be made to the
holders of any Junior Stock, subject to the rights of
29
any series of Preferred Stock that may from time to time come into existence and
which is expressly senior to the rights of the Series A Preferred Stock, the
holders of Series A Preferred Stock shall be entitled to be paid in cash out of
the assets of the Corporation (or in the case of a Sale Transation in the form
of the consideration provided for by the terms thereof) an amount per share of
Series A Preferred Stock equal to 100% of the Series A Accreted Value (the
"Liquidation Preference") determined as of the day of payment of the Liquidation
----------------------
Preference, for each share of Series A Preferred Stock held by each such holder.
If, upon any such liquidation, dissolution or winding up, including a Sale
Transaction, the assets of the Corporation shall be insufficient to make payment
in full of the Liquidation Preference to all holders of Series A Preferred
Stock, then such assets shall be distributed among the holders of Series A
Preferred Stock at the time outstanding, ratably in proportion to the full
amounts to which they would otherwise be respectively entitled. After the
payment of the foregoing full Liquidation Preference of the Series A Preferred
Stock and any other distribution that may be required with respect to any series
of Preferred Stock that may from time to time come into existence and which is
expressly senior to the rights of the Common Stock, the assets of the
Corporation legally available for distribution, if any, shall be distributed
ratably to the holders of the Common Stock and the Series A Preferred Stock,
pro-rata based upon the number of shares of Common Stock held by such holders,
assuming conversion of the Series A Preferred Stock into Common Stock in
accordance with the provisions of section (d) below. Notwithstanding the
foregoing, if in connection with any such liquidation, dissolution or winding
up, whether voluntary or involuntary, including a Sale Transaction, the holders
of Common Stock (before giving effect to the payment of the Liquidation
Preference but after giving effect to the payment of the liquidation preference
of any other class of Preferred Stock and assuming conversion in full of the
outstanding shares of Series A Preferred Stock into Common Stock) would receive
consideration with a value of at least $____ [five times the initial Series A
Preferred Conversion Price] (as adjusted for stock splits, stock dividends of
Common Stock, combinations, recapitalizations and the like with respect to the
Common Stock) per share of Common Stock, then in lieu of the Liquidation
Preference plus participation with the Common Stock provided for above, the
holders of the Series A Preferred Stock shall receive the amount that they would
be entitled to receive if all shares of Series A Preferred Stock were converted
to Common Stock immediately prior to such liquidation, dissolution or winding
up, whether voluntary or involuntary, including a Sale Transaction. The
Corporation shall not enter into any Sale Transaction that does not provide for
the treatment of the holders of Series A Preferred Stock in a manner consistent
with the provisions of this Section (c) (including, without limitation, Section
(c)(iv)) (assuming in the case of a merger or consolidation that the assets of
the Corporation legally available for distribution equals the aggregate
consideration to be received by the Corporation's stockholders in such merger or
consolidation). In the event the requirements of the immediately preceding
sentence are not complied with in connection with a Sale Transaction, the
Corporation shall forthwith either (A) cause the closing of such Sale
Transaction to be postponed until such time as such requirements have been
complied with or (B) cancel such Sale Transaction, in which event the rights,
preferences and privileges of the holders of the Series A 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 Section (c)(v).
Upon receipt by any holder of the full amount of the distributions to such
holder as contemplated by this Section (c)(i) in respect of any share of Series
A Preferred Stock, such share of Series A Preferred Stock shall be deemed to be
retired and shall no longer be outstanding.
30
(ii) The following events (each a "Sale Transaction") shall be considered a
----------------
liquidation under this Section (c):
(A) any consolidation or merger of the Corporation with or into any
other corporation or other entity or person in which the stockholders of the
Corporation immediately prior to such consolidation or merger own less than 50%
of the Corporation's equity interest or voting power immediately after such
consolidation or merger, or any transaction or series of related transactions,
or any other corporate reorganization, to which the Corporation is a direct
contracting party in which in excess of 50% of the Corporation's equity interest
or voting power is transferred, excluding any consolidation or merger effected
exclusively to change the domicile of the Corporation (an "Acquisition"); or
-----------
(B) a sale, lease or other disposition of all or substantially all of
the assets of the Corporation (an "Asset Transfer").
--------------
(iii) In any of the events set forth in subparagraph (ii), if the
consideration received by the Corporation or its stockholders is other than
cash, its value will be deemed its fair market value as determined in good faith
by the Board of Directors and the holders of a majority of the outstanding
Series A Preferred Stock. Any securities shall be valued as follows:
(A) Securities not subject to restrictions on free marketability
covered by subparagraph (B) below:
(1) If traded on a securities exchange or through the Nasdaq
National Market (or a similar national quotation system), the value shall be
deemed to be the average of the closing prices of the securities on such
quotation system over the 20-day period ending three 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 20-day period ending three days prior to the closing; and
(3) If there is no active public market, the value shall be the
fair market value thereof, as determined in good faith by the Board of Directors
and the holders of a majority of the outstanding Series A Preferred Stock.
(B) The method of valuation of securities subject to restrictions on
free marketability (other than restrictions arising solely by virtue of a
stockholder's status as an affiliate or former affiliate) shall be to make an
appropriate discount from the market value determined as above in subparagraphs
(iii)(A)(1), (2) or (3) to reflect the approximate fair market value thereof, as
determined in good faith by the Board of Directors and the holders of a majority
of the outstanding Series A Preferred Stock.
(iv) Notwithstanding any other provision of this Section (c), if any
Acquisition is approved by both (A) the vote of the holders of at least a
majority of the Series A Preferred Stock, voting as a single class, and (B) a
vote sufficient under the Delaware General Corporation Law, this Certificate and
the Bylaws of the Corporation, then such Acquisition and the rights of
31
the holders of Common Stock and Preferred Stock in connection with such
Acquisition will be governed by the documents to be entered into in connection
with such Acquisition.
(v) Written notice of any such liquidation, dissolution or winding up,
including any Sale Transaction, of the Corporation within the meaning of this
Section (c), which states the payment date, the place where said payments shall
be made and the date as to such shares (which shall be not less than 10 days
after the date of such notice), shall be given by first class mail, postage
prepaid, or by telecopy or facsimile, not less than 20 days prior to the payment
date stated therein, to the then holders of record of Series A Preferred Stock,
such notice to be addressed to each such holder at its address as shown on the
records of the Corporation.
(d) Conversion Right. The holders of the Series A Preferred Stock shall
----------------
have the following rights with respect to the conversion of the Series A
Preferred Stock into shares of Common Stock (the "Conversion Rights"):
(i) Optional Conversion. Subject to and in compliance with the
-------------------
provisions of this Section (d), any share of Series A Preferred Stock may, at
the option of the holder, be converted at any time into fully-paid and
nonassessable shares of Common Stock. The number of shares of Common Stock to
which a holder of Series A Preferred Stock shall be entitled upon conversion
shall be the product obtained by multiplying the "Series A Preferred Conversion
Rate" then in effect (determined as provided in subsection (ii)) by the number
of shares of Series A Preferred Stock being converted.
(ii) Series A Preferred Conversion Rate. The conversion rate in effect
----------------------------------
at any time for conversion of the Series A Preferred Stock (the "Series A
--------
Preferred Conversion Rate") shall be the quotient obtained by dividing the
-------------------------
Series A Accreted Value by the "Series A Preferred Conversion Price," calculated
as provided in subsection (iii) below.
(iii) Series A Preferred Conversion Price. The conversion price for
-----------------------------------
the Series A Preferred Stock shall initially be $____ the "Series A Preferred
------------------
Conversion Price"). Such initial Series A Preferred Conversion Price shall be
----------------
adjusted from time to time in accordance with this Section (d). All references
to the Series A Preferred Conversion Price herein shall mean the Series A
Preferred Conversion Price as so adjusted.
(iv) Mechanics of Conversion. Each holder of Series A Preferred Stock
-----------------------
who desires to convert the same into shares of Common Stock pursuant to Section
(d)(i) shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or any transfer agent for the Series A
Preferred Stock, and shall give written notice to the Corporation at such office
that such holder elects to convert the same. Such notice shall state the number
of shares of Series A Preferred Stock being converted. Thereupon, the
Corporation shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder is entitled and shall promptly pay in cash the value of any
fractional share of Common Stock otherwise issuable to any holder of Series A
Preferred Stock. Such conversion shall be deemed to have been made at the close
of business on the date of such surrender of the certificates representing the
shares of Series A Preferred Stock to be converted, and the person entitled to
receive the shares of Common Stock
32
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date. If a conversion is in
connection with a bona fide public offering of the shares of Common Stock
pursuant to an effective registration statement under the Securities Act of
1933, as amended, or under similar laws of other jurisdictions (a "Public
------
Offering"), the conversion shall be conditioned upon the closing of the sale of
--------
securities pursuant to such Public Offering, and the conversion shall not be
deemed to have occurred until immediately prior to the closing of such sale of
securities.
(v) Adjustment Upon Common Stock Event. Upon the happening of a Common
----------------------------------
Stock Event (as hereinafter defined) at any time or from time to time after the
Series A Original Issue Date, the Series A Preferred Conversion Price shall,
simultaneously with the happening of such Common Stock Event, be adjusted by
multiplying the Series A Preferred Conversion Price in effect immediately prior
to such Common Stock Event by a fraction, (i) the numerator of which shall be
the number of shares of Common Stock issued and outstanding immediately prior to
such Common Stock Event and (ii) the denominator of which shall be the number of
shares of Common Stock issued and outstanding immediately after such Common
Stock Event, and the product so obtained shall thereafter be the Series A
Preferred Conversion Price. The Series A Preferred Conversion Price shall be
readjusted in the same manner upon the happening of each subsequent Common Stock
Event. As used in this Section (d), the term "Common Stock Event" shall mean (i)
------------------
the issue by the Corporation of additional shares of Common Stock as a dividend
or other distribution on outstanding Common Stock, (ii) a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise), or (iii) a combination or
consolidation, by reclassification or otherwise of the outstanding shares of
Common Stock into a smaller number of shares of Common Stock. Notwithstanding
the foregoing, the adjustment to the Series A Preferred Conversion Price
provided by this Section (d)(v) shall not be made with respect to a Common Stock
Event if the holders of Series A Preferred Stock shall have received, in
connection with such Common Stock Event, a proportionate share of such dividend
or distribution pursuant to Section (a)(ii).
(vi) Adjustment for Other Dividends and Distributions. If at any time
------------------------------------------------
or from time to time after the Series A Original Issue Date the Corporation pays
a dividend or makes another distribution to the holders of the Common Stock (or
fixes a record date for the determination of holders of Common Stock entitled to
receive such dividend or other distribution) payable in securities of the
Corporation or any of its subsidiaries, in each case other than shares of Common
Stock, then in each such event provision shall be made so that the holders of
Series A Preferred Stock shall receive upon conversion thereof, in addition to
the number of shares of Common Stock receivable upon conversion thereof, the
amount of securities of the Corporation or such subsidiary which they would have
received had their Series A Preferred Stock been converted into Common Stock on
the date of such event (or such record date, as applicable) and had they
thereafter, during the period from the date of such event (or such record date,
as applicable) to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments required during such period under this Section (d) with respect to
the rights of the holders of the Series A Preferred Stock or with respect to
such other securities by their terms. Notwithstanding the foregoing, the
adjustment provided by this Section (d)(vi) shall not be made if the holders of
the
33
Series A Preferred Stock shall have received a proportionate dividend as
provided in Section (a)(ii).
(vii) Adjustment for Reclassification, Recapitalization, Etc. If at
------------------------------------------------------
any time or from time to time after the Series A Original Issue Date, the Common
Stock issuable upon the conversion of the Series A Preferred Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than an
Acquisition as defined in Section (c), a Common Stock Event provided for in
Section (d)(v) above, or a reorganization, merger or consolidation provided for
elsewhere in this Section (d)), in any such event each holder of Series A
Preferred Stock shall have the right thereafter to convert such Series A
Preferred Stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other change
by a holder of the maximum number of shares of Common Stock into which such
shares of Series A Preferred Stock could have been converted immediately prior
to such recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities or
property by the terms thereof. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section (d)(vii) with respect
to the rights of the holders of Series A Preferred Stock after such
recapitalization, reclassification or other change (including adjustment of the
Series A Preferred Conversion Price then in effect and the number of shares
issuable upon conversion of the Series A Preferred Stock), to the end that the
provisions of this Section (d) shall be applicable after that event and be as
nearly equivalent as practicable.
(viii) Adjustment for Reorganizations, Mergers or Consolidations. If
---------------------------------------------------------
at any time or from time to time after the Series A Original Issue Date, there
is a reorganization, merger or consolidation of the Corporation with or into
another corporation or another entity or person (other than an Acquisition as
defined in Section (c)), as a part of such reorganization, merger or
consolidation, provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon conversion of each
share of Series A Preferred Stock the number of shares of stock or other
securities or property which a holder of the maximum number of shares of Common
Stock into which such share of Series A Preferred Stock could have been
converted immediately prior to such reorganization, merger or consolidation,
subject to adjustment in respect of such stock or securities by the terms
thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section (d)(viii) with respect to the
rights of the holders of Series A Preferred Stock after the reorganization,
merger or consolidation (including adjustment of the Series A Preferred
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series A Preferred Stock), to the end that the provisions of
this Section (d) shall be applicable after that event and be as nearly
equivalent as practicable.
(ix) Notices of Record Date. Upon (i) any taking by the Corporation of
----------------------
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition or other reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation with or into any
other entity, or any Asset Transfer, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series A Preferred Stock at least 10
34
days prior to the record date specified therein (or such shorter period approved
by a majority of the outstanding Series A Preferred Stock) a notice specifying
(A) the date on which any such record is to be taken for the purpose of such
dividend or distribution and a description of such dividend or distribution, (B)
the date on which any such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation, or
winding up is expected to become effective, and (C) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
(x) Automatic Conversion.
--------------------
(A) Each share of Series A Preferred Stock shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Rate if, at any time after the one-year anniversary of the
Series A Original Issue Date, (x) the Common Stock had a Daily Volume-Weighted
Average Price (as defined below) of at least $____ [three times the initial
Series A Preferred Conversion Price] (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to the shares
of Common Stock) for 90 consecutive trading days ending after such one-year
anniversary, which period may begin prior to such anniversary, and (y) the Shelf
Registration (as defined in and provided for in the Investor Rights Agreement,
dated as of November ___, 2001 (the "Investor Agreement"), among the Corporation
------------------
and the other persons listed on the signature pages thereto) has become
effective under the Securities Act of 1933, as amended, and is then available
for sales of Common Stock by the Investors (as defined in the Investor
Agreement) (to the extent the requirement to maintain such Shelf Registration
effective has not at such time lapsed pursuant to Section 5 of the Investor
Agreement). For purposes of this Section (d)(x)(A), the term "Daily
-----
Volume-Weighted Average Price" shall mean with respect to a trading day (1) if
-----------------------------
the Common Stock is traded on a securities exchange or through the Nasdaq
National Market (or a similar national quotation system), the volume-weighted
average sales price of the Common Stock on such exchange or quotation system
with respect to such trading day, and (2) if clause (1) is inapplicable, the
volume-weighted average sale price in the over-the-counter market with respect
to such trading day.
(B) Each share of Series A Preferred Stock shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Rate, upon the approval of holders of at least a majority
of the outstanding shares of Series A Preferred Stock.
(C) Upon the occurrence of the events specified in subparagraph
(A) or (B), subject to compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Act of 1976, as amended, the outstanding shares of Series A
Preferred Stock shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series A Preferred Stock are either
delivered to the Corporation or its transfer agent as provided
35
below, or the holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
reasonably satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. Upon the occurrence of
such automatic conversion of the Series A Preferred Stock, (x) the Corporation
shall notify (the "Automatic Conversion Notice") each holder of Series A
---------------------------
Preferred Stock who is shown to be such a holder on the books of the Corporation
as of the time immediately prior to such conversion and (y) the holders of
Series A Preferred Stock shall surrender the certificates representing such
shares at the office of the Corporation or any transfer agent for the Series A
Preferred Stock, which shall be designated in the Automatic Conversion Notice.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the shares of Series A Preferred Stock surrendered were convertible on the
date on which such automatic conversion occurred.
(xi) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon conversion of Series A Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred Stock represented by a single certificate shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of any fractional share, the Corporation
shall, in lieu of issuing any fractional share, pay cash equal to the product of
such fraction multiplied by the Common Stock's fair market value (as determined
by the Board of Directors) on the date of conversion.
(xii) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A 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. 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,
the Corporation will take such corporate action as may be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(xiii) Notices. Any notice required by the provisions of this Section
-------
(d) shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed electronic
mail or facsimile, on the next Business Day, (iii) five days after having been
sent by registered or certified U.S. mail, return receipt requested, postage
prepaid, or (iv) one Business Day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with verification of receipt.
All notices shall be addressed to each holder of record at the address of such
holder appearing on the books of the Corporation. The term "Business Day" means
------------
any day other than a Saturday, a Sunday or a day on which banking institutions
in the City of San Francisco, California are authorized or required by law to be
closed.
36
(xiv) Payment of Taxes. The Corporation will pay all taxes (other than
----------------
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series A Preferred Stock, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
Stock so converted were registered.
(xv) No Impairment. The Corporation shall not avoid or seek to avoid
-------------
the observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but shall at all times in good faith assist in
carrying out all such actions as may be reasonably necessary or appropriate in
order to protect the Conversion Rights of the holders of the Series A Preferred
Stock against impairment.
(e) Waiver. Any rights of the holders of Series A Preferred Stock set forth
------
herein, other than the voting rights set forth in Section (b)(iii), may be
waived by the affirmative vote or consent of the holders of a majority of the
shares of Series A Preferred Stock then outstanding.
(f) Limitation on Reissuance of Shares. No share or shares of Series A
----------------------------------
Preferred Stock acquired by the Corporation by reason of purchase, conversion or
otherwise shall be reissued, and all such shares shall be cancelled, retired and
eliminated from the shares of Series A Preferred Stock that the Corporation is
authorized to issue.
37
EXHIBIT D
---------
INVESTOR RIGHTS AGREEMENT
KANA SOFTWARE, INC.
INVESTOR RIGHTS AGREEMENT
__________, 2002
-i-
INVESTOR RIGHTS AGREEMENT
-------------------------
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of
, 2002, by and among KANA SOFTWARE, INC., a Delaware corporation (the
-----------
"Company"), and the persons set forth on the Schedule of Investors attached
---------
hereto as Exhibit A (the "Investors").
--------- ---------
RECITALS
1. The Company has entered into a Share Purchase Agreement, dated as of
November , 2001 (the "Share Purchase Agreement"), with each of the Investors
--- ------------------------
identified therein pursuant to which the Company has sold or desires to sell to
the Investors, and the Investors have purchased or desire to purchase from the
Company, shares of the Company's 8% Series A Convertible Preferred Stock, par
value $0.001 per share (the "Series A Preferred Stock").
------------------------
2. As a condition to each of the Investors' obligations under the Share
Purchase Agreement, the Company and the Investors will enter into this Agreement
for the purpose of granting certain registration and other rights to the
Investors.
NOW, THEREFORE, in consideration of the covenants and promises set forth
herein, and for other good and valuable consideration, intending to be legally
bound hereby the parties agree as follows:
SECTION 1 Certain Definitions. As used in this Agreement, the
-------------------
capitalized terms identified in the Preamble and the Recitals shall have the
meanings identified therein and the following terms shall have the following
respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, par value $0.001 per share,
------------
of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect from time to
time.
"Holder" shall mean (i) any Investor holding Registrable Securities and
------
(ii) any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 13 hereof.
The terms "register", "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company
---------------------
in complying with Sections 5 and 6 hereof, including, without limitation, all
registration, qualification, listing and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, provided that Registration Expenses shall not be deemed to
include any Selling Expenses.
"Registrable Securities" shall mean any Common Stock of the Company (i)
----------------------
issued or issuable upon conversion of the shares of Series A Preferred Stock
purchased by the Investors under the Share Purchase Agreement, (ii) issued or
issuable in respect of the Shares or other securities issued or issuable with
respect to the Shares upon any stock split, stock dividend, recapitalization or
similar event or (iii) otherwise issued or issuable with respect to the Shares;
provided, however, that shares of Common Stock or other securities shall only be
treated as Registrable Securities if and so long as they have not been (A) sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction or (B) transferred in a transaction pursuant to
which the registration rights are not also assigned in accordance with Section
13 hereof.
"Restricted Securities" shall mean the Shares required to bear the
---------------------
legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
--------------
the rules and regulations promulgated thereunder or any similar federal statute
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the securities registered by
the Holders.
"Shares" shall mean all shares of Series A Preferred Stock purchased by
------
the Investors pursuant to the Share Purchase Agreement and all shares of Common
Stock issued or issuable in respect thereof.
SECTION 2 Restrictions. The Shares shall not be sold, assigned, transferred
------------
or pledged except upon the conditions specified in Section 4, which conditions
are intended to ensure compliance with the provisions of the Securities Act.
SECTION 3 Restrictive Legend. Each certificate representing the Shares
------------------
(unless otherwise permitted by the provisions of Section 4 below) shall be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE
OF
41
SUCH REGISTRATION OR AN EXEMPTION FROM SUCH REGISTRATION."
Each Investor consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Restricted Securities
in order to implement the restrictions on transfer set forth in Section 4.
SECTION 4 Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied by either (i) an opinion of legal counsel reasonably satisfactory to
the Company to the effect that the proposed transfer of the Restricted
Securities may be effected without registration under the Securities Act, (ii) a
"no action" letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto or (iii) any other
evidence reasonably satisfactory to counsel to the Company, whereupon the holder
of such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder to
the Company. Notwithstanding the foregoing, the Company will not require such a
notice or legal opinion or "no action" letter (a) in any customary transaction
in compliance with Rule 144, (b) in any transaction in which a Holder that is a
corporation distributes Restricted Securities solely to its majority owned
subsidiaries or affiliates for no consideration or (c) in any transaction in
which a Holder that is a partnership or limited liability company distributes
Restricted Securities solely to its affiliates (including affiliated fund
partnerships), partners or members thereof for no consideration. Each
certificate evidencing the Restricted Securities transferred as above provided
shall bear the appropriate restrictive legend set forth in Section 3 above,
except that such certificate shall not bear such restrictive legend if, in the
opinion of counsel for such holder and the Company, such legend is not required
in order to establish compliance with any provisions of the Securities Act.
SECTION 5 Requested Registration. The Company shall use its best efforts to
----------------------
register the sale or distribution by the Holders, on a delayed or continuous
basis, of all of the Registrable Securities on a Form S-3 registration statement
(or any successor form to Form S-3) (the "Shelf Registration") within 90 days
------------------
after the initial issuance thereof (including, without limitation, the execution
of an undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act and any
other governmental requirements or regulations). Once declared effective, the
Company shall use its best efforts to cause (x) the Shelf Registration to be
effective until such time as Rule 144 or another similar exemption under the
Securities Act is available for the sale of all such Holder's shares to the
public in any and all three-month periods (other than pursuant to Rule 144(k))
and (y) subject to Section 9(h), the Shelf Registration to be useable by the
Holders during such entire period. The Company shall not be obligated to take
any action to effect the Shelf Registration in any particular jurisdiction in
42
which the Company would be required to qualify to do business, subject itself to
general taxation or execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is already
qualified to do business, subject to general taxation or subject to service, as
the case may be, in such jurisdiction, except as may be required by the
Securities Act.
SECTION 6 Company Registration.
--------------------
(a) Notice of Registration. If at any time or from time to time, the
----------------------
Company shall determine to register any of its equity securities, either for its
own account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Commission Rule 145 transaction or (iii) a registration on
any registration form that does not permit secondary sales (such as a "universal
shelf" Form S-3), the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) subject to Section 6(b) below, include in such registration
(and any related qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable Securities specified in a
written request or requests made within 15 days after receipt of such written
notice from the Company by any Holder.
(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. Each Holder proposing to
distribute its securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into and perform such Holder's obligations under an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 6, if the managing underwriter provides written notice to the
Holders that it has determined that market factors require a limitation on the
number of shares to be included in such registration, the managing underwriter
shall include in the offering the maximum number of shares that may be included
in the offering consistently with such market factors and shall allocate such
included shares as follows: (i) first, the shares requested to be sold by the
Company for its own account or the holder of securities initiating the
registration under demand registration rights granted by the Company; (ii)
second, on a pro rata basis among the holders thereof, the shares requested to
be included in the offering by the Holders and the shares requested to be
included in the offering pursuant to piggyback registration rights granted by
the Company; and (iii) third, any other shares requested or proposed by the
Company to be included for resale. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder or other holder to the nearest 100
shares. If any Holder or other holder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to the
Company and the managing
43
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
(c) Right to Terminate Registration. The Company shall have the right
-------------------------------
to terminate or withdraw any registration initiated by it under this Section 6
prior to the effectiveness of such registration, whether or not any Holder has
elected to include securities in such registration.
SECTION 7 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date hereof, the Company shall not enter into any agreement granting any holder
or prospective holder of any securities of the Company registration rights with
respect to such securities that are inconsistent with the rights granted to the
Holders herein, without the consent of Holders of at least a majority of the
Registrable Securities.
SECTION 8 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration pursuant to Sections 5 and 6 and the reasonable
cost of one special legal counsel to represent all of the Holders together in
any such registration shall be borne by the Company. All Selling Expenses
relating to securities registered on behalf of the Holders shall be borne by the
Holders of the registered securities included in such registration pro rata on
the basis of the number of shares so registered.
SECTION 9 Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to Sections 5 and
6, the Company will keep each Holder participating in such registration advised
in writing as to the initiation of each registration, qualification and
compliance and as to the completion thereof and, at its expense, the Company
will:
(a) prepare and file with the Commission a registration statement with
respect to such securities;
(b) furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statements as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(d) notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein
44
not misleading or incomplete in the light of the circumstances then existing,
and, subject to Section 9(h), at the request of any such seller, prepare
promptly and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchaser of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or incomplete in the light of the circumstances then existing;
(e) use 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;
(f) make available for inspection by any Holder of at least 500,000
Registrable Securities (as adjusted for any stock dividends paid in Registrable
Securities, and combinations, stock splits, recapitalization and the like each
with respect to shares of Registrable Securities) participating in such
registration, any underwriter participating in any disposition pursuant to such
registration, and any attorney or accountant retained by any such Holder or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers and directors to
supply all information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such registration statement; provided,
however, that such Holder, underwriter, attorney or accountant shall execute a
written agreement in favor of the Company obligating such person to hold in
confidence and trust all information so provided;
(g) use best efforts to furnish, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters; and
(h) notwithstanding any other provision of this Agreement, the Company
shall have the right to suspend the use of the prospectus and the registration
statement covering any Registrable Security in order to prevent pre-mature
disclosure of any material non-public information related to corporate
developments by delivering written notice of such suspension to all Holders
listed on the Company's records; provided, however, that the Company may
exercise the right to such suspension only once in any 12-month period and for a
period not to exceed 90 days. From and after the date of a notice of suspension
under this Section 9(h), each Holder agrees not to use the prospectus or
registration statement until the earlier of (1) notice from the Company that
such suspension has been lifted or (2) the 90th day following the giving of such
notice.
45
SECTION 10 Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its current and
former officers, directors, partners and members, and each person controlling
such Holder within the meaning of Section 15 of the Securities Act, with respect
to which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act, Exchange Act or state
securities laws applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse each
such Holder, each of its current and former officers, directors, partners and
members, and each person controlling such Holder, each such underwriter and each
person who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, as such expenses are incurred,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by such Holder, controlling person or underwriter and stated to be
specifically for use therein. The indemnity agreement contained in this section
shall not apply to amounts paid in settlement of any 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 to a Holder in any such case for any such loss, claim, damage,
liability or action (1) to the extent that it arises our of or is based upon a
violation of any state or federal law which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by or on behalf of such Holder or (2) in the case of a
sale directly by a Holder of Registrable Securities (including a sale of such
Registrable Securities through any underwriter retained by such Holder engaging
in a distribution solely on behalf of such Holder), such untrue statement or
alleged untrue statement or omission or alleged omission was contained in a
preliminary prospectus and corrected in a final or amended prospectus, and such
Holder failed to deliver a copy of the final or amended prospectus at or prior
to the confirmation of the sale of the Registrable Securities to the person
asserting any such loss, claim, damage or liability in any case in which such
delivery is required by the Securities Act.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners and members, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
46
Securities Act, and each other such Holder, each of its officers, directors,
partners and members and each person controlling such Holder within the meaning
of Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such directors,
officers, partners, members, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, as such expenses
are incurred, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
is made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein,
provided that in no event shall any indemnity under this subparagraph 10(b)
payable by a Holder exceed the net proceeds received by such Holder from the
sale of Registrable Securities included in such registration.
(c) Each party entitled to indemnification under this Section 10 (the
"Indemnified Party") shall give notice to the party required to provide
-----------------
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
------------------
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; 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 conflicting interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure of any Indemnified Party to give notice as provided
herein shall relieve the Indemnifying Party of its obligations under this
Section 10 only to the extent that the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party (which consent shall not be
unreasonably withheld), consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. The indemnity agreements
contained in this Section 10 shall not apply to amounts paid in settlement of
any loss, claim, damage, liability or action if such settlement is effected
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.
(d) If the indemnification provided for in this Section 10 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party,
other than pursuant to its terms, with respect to any claim, loss, damage,
liability or action referred to therein, then, subject to the
47
limitations contained in Section 10(e), 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 claim, loss,
damage, liability or action in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and the Indemnified
Party on the other in connection with the actions that resulted in such claims,
loss, damage, liability or action, 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 related 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. The Company and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 10(d) were based
solely upon the number of entities from whom contribution was requested or by
any other method of allocation which does not take account of the equitable
considerations referred to above in this Section 10(d). In no event shall any
Holder's contribution obligation under this Section 10(d) exceed the net
proceeds received by such Holder from the sale of Registrable Securities
included in such registration.
(e) The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to above in this Section 10
shall be deemed to include any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim, subject to the provisions of Section 10 hereof. Notwithstanding
the provisions of this Section 10, no Holder shall be required to contribute any
amount or make any other payments under this Agreement which in the aggregate
exceed the net proceeds (after selling expenses) received by such Holder. No
person guilty of fraudulent misrepresentation (within the meaning of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
SECTION 11 Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
SECTION 12 Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration,
Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) so long as a Holder owns any Restricted Securities, to furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the
48
reporting requirements of said Rule 144, the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as a Holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
a Holder to sell any such securities without registration.
SECTION 13 Transfer of Registration Rights. The rights to cause the Company
-------------------------------
to register securities granted to any party hereto under this Agreement may be
assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by such party; provided, however, that (a)
such transfer may otherwise be effected in accordance with applicable securities
laws, (b) notice of such assignment is given to the Company and (c) such
transferee or assignee (i) is a subsidiary, affiliated partnership, affiliate or
partner or limited liability company member (including limited partners, retired
partners, spouses and ancestors, lineal descendants and siblings of such
partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) of such party or (ii) acquires from such party at least
500,000 Registrable Securities (as adjusted for any stock dividends paid in
Registrable Securities, and combinations, stock splits, recapitalization and the
like each with respect to shares of Registrable Securities).
SECTION 14 Termination of Rights. The rights of any particular Holder to
---------------------
cause the Company to register securities under Section 5 shall terminate with
respect to such Holder at such time as such Holder may sell all its shares to
the public in a three-month period in accordance with Rule 144 (or another
similar exemption under the Securities Act) pursuant to (a) Rule 144(k) or (b)
the one percent of the shares of the class outstanding limitation set forth in
Rule 144(e)(1)(i), in each case under the Securities Act. The rights of any
particular Holder to cause the Company to register securities under Section 6
shall terminate with respect to such Holder at such time as such Holder,
together with all other persons required to be aggregated with such Holder for
purposes of the volume limitation under Rule 144, may sell all its shares to the
public in a three-month period in accordance with Rule 144 (or another similar
exemption under the Securities Act) (a) pursuant to Rule 144(k) under the
Securities Act and such Holder owns Registrable Securities representing less
than 5% of the outstanding Common Stock, assuming conversion of all such
Holder's Registrable Securities into Common Stock or (b) pursuant to the one
percent of the shares of the class outstanding limitation set forth in Rule
144(e)(1)(i) under the Securities Act.
SECTION 15 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
SECTION 16 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California without regard to choice of laws or
conflict of laws provisions thereof.
49
SECTION 17 Counterparts. This Agreement may be executed in two or more
------------
counterparts and signature pages may be delivered by facsimile, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
SECTION 18 Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be (A) mailed by registered or
certified mail, postage prepaid, return receipt requested, (B) delivered by a
nationally recognized overnight courier, (C) sent by confirmed telecopy or (D)
otherwise delivered by hand or by messenger, addressed (i) if to an Investor, at
such Investor's address set forth on Exhibit A, or at such other address as such
Investor shall have furnished to the Company in writing; or (ii) if to the
Company, at its address set forth on the signature page of this Agreement
addressed to the attention of the Corporate Secretary, with a copy to Fenwick &
West LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx
Xxxxxxxx, Fax: (000) 000-0000, or to such other address as the Company shall
have furnished to the Investors. If notice is provided by mail, notice shall be
deemed to be given two business days after proper deposit in a mailbox; if by
overnight courier, notice shall be deemed to be given on the next business day
after deposit; if by facsimile, on the next business day after completion of
such facsimile transmission as conclusively evidenced by the transmission
receipt; and if by hand or messenger, upon receipt by the addressee.
SECTION 19 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
SECTION 20 Amendment and Waiver. Any provision of this Agreement may be
--------------------
amended or waived with the written consent of the Company and the holders of at
least a majority of the outstanding Registrable Securities, provided that (i) no
such amendment shall impose or increase any liability or obligation on a holder
without the consent of such Holder and (ii) no such amendment having a
disproportionately adverse effect on any Holder in relation to the other Holders
may be made without consent of such Holder. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder and the
Company. In addition, the Company may waive performance of any obligation owing
to it, as to some or all of the Holders, or agree to accept alternatives to such
performance, without obtaining the consent of any holder. In the event that an
underwriting agreement is entered into between the Company and any Holder, and
such underwriting agreement contains terms differing from this Agreement, as to
any such Holder the terms of such underwriting agreement shall govern.
SECTION 21 Rights of Holders. Each party to this Agreement shall have the
-----------------
absolute right to exercise or refrain from exercising any right or rights that
such party may have by reason of this Agreement, including, without limitation,
the right to consent to the waiver or modification of any obligation under this
Agreement, and such party shall not incur any liability to any other party or
other Holder of any securities of the Company as a result of exercising or
refraining from exercising any such right or rights.
SECTION 22 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party to this Agreement, upon any breach or
default of any other
50
party, shall impair any such right, power or remedy of such non-breaching party
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
SECTION 23 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.
SECTION 24 Legal Fees. If any action at law or in equity (including
----------
arbitration) 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, including on appeal, in addition to any other relief to
which such party may be entitled.
51
IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement
as of the date first above written.
THE COMPANY:
KANA SOFTWARE, INC.
By:____________________________________
Name:
Title:
Address: 000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
THE INVESTORS:
TCV IV, L.P.
By: Technology Crossover Management IV, L.L.C.
Its: General Partner
By: __________________________________
Name: Xxxxx X. Xxxxxx
Title: Attorney in Fact
TCV IV STRATEGIC PARTNERS, L.P.
By: Technology Crossover Management IV, L.L.C.,
Its: General Partner
By: __________________________________
Name: Xxxxx X. Xxxxxx
Title: Attorney in Fact
EXHIBIT A
---------
SCHEDULE OF INVESTORS
TCV IV, L.P.
TCV IV STRATEGIC PARTNERS, L.P.
Mailing Address:
Technology Crossover Ventures
000 Xxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
and:
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
EXHIBIT E
---------
FORM OF LEGAL OPINION
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with the
requisite corporate power and authority to own or lease its properties
and assets and to conduct its business in the manner in which it is
presently conducted. Each Significant U.S. Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, with the requisite power and
authority to own or lease its properties and assets and to conduct its
business in the manner in which it is presently conducted. The
Certificate of Designations has been duly filed with the Secretary of
State of the State of Delaware. The Company and each of its Significant
U.S. Subsidiaries is qualified to do business and is in good standing
in all states in which the failure to be so qualified or in good
standing would have a Material Adverse Effect.
2. The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under each of the Transaction
Agreements and to issue the Purchased Shares and the Warrants in
accordance with the terms of the Purchase Agreement.
3. The execution, delivery and performance of each of the Transaction
Agreements have been duly authorized by the Company by all necessary
corporate action. Each of the Transaction Agreements has been duly
executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company
in accordance with its terms.
4. The authorized capital stock of the Company, as of the date hereof and
immediately prior to the Closing, consists of 1,000,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock, _______ shares of
which are designated 8% Series A Convertible Preferred Stock. There are
no other series of preferred stock designated. The rights, preferences
and privileges of the 8% Series A Convertible Preferred Stock are as
stated in the Certificate of Designations.
5. To our knowledge, all issued and outstanding shares of capital stock of
each Significant U.S. Subsidiary are held of record on the stock ledger
of such Significant U.S. Subsidiary by the Company and, to our
knowledge, are free of any liens. To our knowledge, there are no
outstanding rights of first refusal, preemptive rights or other rights,
options, warrants, conversion rights or other agreements for the
purchase or acquisition from any Significant U.S. Subsidiary of the
Company of any shares of its capital stock.
6. When issued and delivered to the applicable Investor pursuant to the
Purchase Agreement against payment of the consideration therefor as
provided therein, the Purchased Shares will be validly issued, fully
paid and nonassessable and free of any preemptive or similar rights
under Applicable Law, the Certificate of Incorporation or under any
Material Agreement. The shares of Common Stock issuable upon conversion
of the 8% Series A Convertible Preferred Stock have been duly
authorized and reserved and, assuming no change in Applicable Law or
Certificate of Incorporation, when issued and delivered to the holder
thereof pursuant to the provisions of the Certificate of Incorporation,
will be validly issued, fully paid and nonassessable and free of any
preemptive or similar rights under Applicable Law, the Certificate of
Incorporation or under any Material Agreement.
7. The shares issuable upon exercise of the Warrants (the "Warrant Stock")
have been duly and validly reserved for issuance upon exercise of the
Warrants and, when issued upon such exercise in accordance with the
terms of the Warrants (assuming no change in applicable law, the
Warrants or the Certificate of Incorporation and assuming no unlawful
distribution of the Warrants), the Warrant Stock will be duly
authorized, validly issued, fully paid and nonassessable and free of
any preemptive or similar rights under Applicable Law, the Certificate
of Incorporation or under any Material Agreement.
8. Neither the execution and delivery of the Transaction Agreements nor
performance of its obligations thereunder by the Company will (a)
result in any violation by the Company or any of its Significant U.S.
Subsidiaries of any Applicable Law, (b) conflict with or violate the
provisions of the Certificate of Incorporation or Bylaws, (c) to our
knowledge, result in the violation by the Company or any of its
Significant U.S. Subsidiaries of any order or decree of any
Governmental Entity to which the Company, any of its Significant U.S.
Subsidiaries or any of their properties are subject or (d) conflict
with or constitute a default under the provisions of any Material
Agreement.
9. The offer and sale of the 8% Series A Convertible Preferred Stock and
the Warrants to the Investors in the manner contemplated by the
Purchase Agreement do not require registration under the Securities Act
or the California Corporate Securities Law of 1968, as amended.
10. To our knowledge, there is no judgment, order, decree, writ or
injunction of any Governmental Entity outstanding against the Company
or any of its Significant U.S. Subsidiaries that would have a Material
Adverse Effect, nor, to our knowledge, is there any claim, action,
suit, litigation, labor controversy, investigation or proceeding,
including, without limitation, condemnation or similar proceedings,
pending or threatened against the Company or any of its Significant
U.S. Subsidiaries before any Governmental Entity that would have a
Material Adverse Effect if decided adversely to the Company or any of
its Significant U.S. Subsidiaries.
