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Exhibit 10.42
CONTRIBUTION AGREEMENT
This Contribution Agreement (the "Agreement") is made as of this 22nd
day of April, 1999, by and between Continuus Software Corporation, a California
corporation (the "Company"), and each of Norwest Equity Partners IV ("Norwest
IV"), Norwest Equity Partners V ("Norwest V"), Brentwood Associates VI, LP
("Brentwood"), Advanced Technology Ventures III ("ATV"), Accel Investors '95
L.P. ("Accel 95"), Accel IV L.P. ("Accel IV"), Accel Keiretsu L.P. ("Accel
Keiretsu") and Xxxxxxx X. Xxxxxxxxx Partners ("Xxxxxxxxx Partners")
(collectively, the "Guarantors" and individually, each a "Guarantor").
RECITALS:
A. WHEREAS, the Guarantors each own an equity interest in the Company;
B. WHEREAS, concurrently herewith, the Company and Silicon Valley Bank
(the "Bank") will enter into that certain Loan Agreement dated of even date
herewith (the "Loan Agreement"), pursuant to which the Bank agrees to advance
$2,000,000 to the Company (the "Loan");
C. WHEREAS, as a condition to entering the Loan Agreement and making the
Loan, the Bank is requiring that Norwest V and Brentwood (together, the "Named
Guarantors") guarantee in aggregate all $2,000,000 of the Company's obligations
under the Loan Agreement pursuant to that certain Unconditional Guaranty dated
April 22, 1999 between Norwest V and the Bank in the amount of $1,160,000 and
that certain Unconditional Guaranty dated April 22, 1999 between Brentwood and
the Bank in the amount of $840,000 (each a "Guaranty," collectively the
"Guaranties") substantially in the forms attached hereto as Exhibit A;
D. WHEREAS, each of Norwest IV, ATV, Accel 95, Accel IV, Accel Keiretsu
and Xxxxxxxxx Partners have agreed to participate in the guarantee of the
Company's obligations under the Loan but will not be a party to the Guaranties;
E. WHEREAS, the Named Guarantors are unwilling to sign the Guaranties
absent an agreement among the Guarantors that all risks and liabilities
associated with the Guaranties are to be borne by all of the Guarantors pursuant
to their pro rata equity ownership in the Company relative to the other
Guarantors; and
F. WHEREAS, as consideration for the execution of the Guaranties by the
Named Guarantors and this Agreement by the Guarantors and the obligations of the
Named Guarantors thereby and the Guarantors hereby, the Company has agreed to
issue to each Guarantor warrants to purchase Common Stock of the Company as set
forth below.
NOW THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
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1. Right to Contribution. If any Named Guarantor or Named Guarantors (a
"Paying Guarantor" or the "Paying Guarantors") from time to time makes any good
faith payment in connection with the Guaranties (the "Payment"), each other
Guarantor (each a "Contributing Guarantor") shall have an unconditional
obligation to pay to the Paying Guarantor(s) an amount (the "Required
Contribution Amount") so that after payment of the Required Contribution Amount
all risks and liabilities shall have been borne by all of the Guarantors
pursuant to their pro rata equity ownership in the Company relative to the other
Guarantors as of the date of this Agreement and as set forth in Exhibit B
hereto. The Contributing Guarantors shall pay their applicable Required
Contribution Amount to the Paying Guarantor(s) within five days of receipt of a
written demand for contribution of the Required Contribution Amount (the
"Contribution Demand Notice"). The Contribution Demand Notice shall set forth
the aggregate amount of the Payment and the Required Contribution Amount.
2. Default. If any Guarantor fails to pay a Required Contribution Amount
owed by such Guarantor within five days from the date of receipt of a
Contribution Demand Notice, such Guarantor shall be deemed to be a "Defaulting
Guarantor." The Defaulting Guarantor shall pay interest on the Required
Contribution Amount to the Paying Guarantor at a rate equal to the lesser of (i)
the Prime Rate [(as defined in the Loan Agreement)] plus two percent (2%), and
(ii) the highest rate permitted by law. The interest shall begin to accrue as of
the date of the Contribution Demand Notice.
3. Absolute Obligation. Each Guarantor specifically acknowledges that
such Guarantor is obligated to contribute such Guarantor's respective share to
the other Guarantors under this Agreement regardless of whether:
a. The amount of Payment is determined (i) in court or by
arbitration or by settlement of a disputed claim by any party, or (ii) by a good
faith agreement settling or establishing the amount of the Payment; or
b. The Contributing Guarantor has had the opportunity to defend
or in any way diminish or discharge the amounts paid by a Paying Guarantor
pursuant to the Guaranties; provided, however, that each of the Named Guarantors
will from time to time in good faith attempt to inform the other Guarantors of
the status of the Guaranties and any Payment or potential Payment therefrom.
4. Issuance of Initial Warrants. Upon execution of this Agreement, the
Company has agreed to issue to each Guarantor warrants to purchase the
Guarantor's pro rata share (as set forth on Exhibit C hereto) of 142,861 shares
of Common Stock of the Company (the "Initial Warrants") in substantially the
form attached hereto as Exhibit D.
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5. Payment Consequences. The Company agrees that on the first occasion,
if any, that the Named Guarantor(s) are required to make a Payment, the Company
will issue to each Paying Guarantor and Contributing Guarantor (but not
including any Defaulting Guarantor) (i) warrants to purchase such Guarantor's
pro rata share (based on the portion of the Payment paid or reimbursed by such
Guarantor) of an additional 95,242 shares of Common Stock of the Company (the
"Secondary Warrants") in substantially the form attached hereto as Exhibit D.
6. Amendment. This Agreement may be amended and any provision of this
Agreement waived only with the written agreement of the Company and Guarantors
who are the guarantees of a majority of the Loan under this Agreement; provided,
however, no such amendment or waiver is permitted which would increase the
amount for which any Guarantor could be held liable hereunder, without the prior
written consent of all the Guarantors.
7. Termination. This Agreement, as it may be modified or amended from
time to time, shall remain in effect, and shall not be terminated, until the
Guaranties and all Required Contribution Amounts have been discharged or
otherwise satisfied in accordance with their terms.
8. Attorneys' Fees. In the event one party brings an action to enforce
the provisions of this Agreement, the prevailing party in such action shall be
entitled to recover from the non-prevailing party the costs, expenses and
reasonable attorneys' fees associated with such action, which costs, expenses
and attorneys fees (including fees on appeal) may be made a part of any award of
judgment entered.
9. Governing Law; Miscellaneous. This Agreement shall be governed by and
construed in accordance with the internal laws of the state of California.
10. Assignment. This Agreement shall inure to the benefit of the parties
hereto, their successors and assigns, and shall be binding upon the Guarantors
and the Company and their respective successors and assigns. The obligations of
each Guarantor under this Agreement may only be assigned, including by operation
of law, to another Guarantor, unless otherwise agreed to by written consent of
the Company and all of the Guarantors.
11. No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and their respective successors and assigns.
Neither the Bank nor any other person shall be a beneficiary of or to any of the
provisions of this Agreement, and the parties hereto specifically deny any
intention to do so.
12. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same Agreement. Delivery of any
executed counterpart of a signature page to this Agreement by facsimile shall be
effective as delivery of an original executed counterpart of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
CONTINUUS SOFTWARE CORPORATION NORWEST EQUITY PARTNERS IV
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx Xxxx
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Its: Its:
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NORWEST EQUITY PARTNERS V
By: /s/ Xxxxx Xxxx
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Its:
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BRENTWOOD ASSOCIATES VI, LP
By: Brentwood VI Ventures, L.P.
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Its: General Partner
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By: /s/ G. Xxxxxxxx Xxxxx
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Its: General Partner
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ADVANCED TECHNOLOGY VENTURES III
By: /s/
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Its: General Partner
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ACCEL INVESTORS '95 L.P.
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Its:
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ACCEL IV L.P.
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Its:
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4.
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ACCEL KEIRETSU L.P.
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Its:
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XXXXXXX X. XXXXXXXXX PARTNERS
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Its:
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EXHIBIT A
UNCONDITIONAL GUARANTIES
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EXHIBIT B
Norwest Equity Partners IV 21.9 %
Norwest Equity Partners V 18.0 %
Brentwood Associates VI, LP 28.7 %
Advanced Technology Ventures III 18.6 %
Accel Investors '95 L.P. 0.5 %
Accel IV L.P. 11.6 %
Accel Keiretsu L.P. 0.2 %
Xxxxxxx X. Xxxxxxxxx Partners 0.3 %
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EXHIBIT C
NUMBER OF WARRANTS UNDER SECTION 4
Pro rata share of warrants to purchase 142,861 shares:
Norwest Equity Partners IV 31,311
Norwest Equity Partners V 25,766
Brentwood Associates VI, LP 41,055
Advanced Technology Ventures III 26,583
Accel Investors '95 L.P. 781
Accel IV L.P. 16,620
Accel Keiretsu L.P. 345
Xxxxxxx X. Xxxxxxxxx Partners 400
NUMBER OF WARRANTS UNDER SECTION 5
Pro rata share of warrants to purchase 95,242 shares:
Norwest Equity Partners IV 20,874
Norwest Equity Partners V 17,178
Brentwood Associates VI, LP 27,370
Advanced Technology Ventures III 17,722
Accel Investors '95 L.P. 521
Accel IV L.P. 11,080
Accel Keiretsu L.P. 230
Xxxxxxx X. Xxxxxxxxx Partners 267
