EXHIBIT 10.8(a)
PREVIEW SYSTEMS, INC.
---------------------
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
--------------------------------------------
This Second Amended and Restated Rights Agreement (the "Agreement") is made
---------
as of the 2nd day of July, 1999, by and among Preview Systems, Inc., a Delaware
corporation (the "Company") and certain purchasers of the Company's Preferred
-------
Stock (each, an "Investor," and collectively, the "Investors") set forth on
-------- ---------
Exhibit A hereto. This Agreement amends and restates in its entirety the First
Amended and Restated Rights Agreement (the "Prior Agreement") by and among the
---------------
Company and certain purchasers of the Company's Preferred Stock listed on
Exhibit A thereto dated as of September 15, 1998.
In consideration of the mutual promises and covenants hereinafter set
forth, the parties agree as follows:
SECTION 1
Restrictions on Transferability;
--------------------------------
Registration Rights
-------------------
1.1 Certain Definitions. As used in this Agreement, 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.
"Conversion Shares" means the Common Stock issued or issuable upon
-----------------
conversion of the Preferred Shares.
"Holder" shall mean any Investor holding Registrable Securities and
------
any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.
"Initiating Holders" shall mean any Investors or transferees of
------------------
Investors under Section 1.14 hereof who in the aggregate are Holders of not less
than thirty percent (30%) of the Registrable Securities.
"Preferred Shares" shall mean (i) the Company's Series A Preferred
----------------
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock and Series G Preferred
Stock and (ii) 5,400 shares of Series F Preferred Stock subject to a warrant
held by FirstCorp First Portland Corporation dated November 19, 1998.
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 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification 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 (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"Registrable Securities" means (i) the Conversion Shares and (ii)
----------------------
any Common Stock of the Company issued or issuable in respect of the Preferred
Shares or Conversion Shares or other securities issued or issuable with respect
to the Preferred Shares or Conversion Shares upon any stock split, stock
dividend, recapitalization, or similar event, or any Common Stock otherwise
issued or issuable with respect to the Conversion Shares or Preferred Shares;
provided, however, (x) that for the purposes of Section 1.5, 1.7 and 1.14 the
-------- -------
shares listed in the foregoing clauses (i) and (ii) related to the 5,400 shares
of Series F Preferred Stock subject to a warrant held by FirstCorp First
Portland Corporation dated November 19, 1998 shall not be deemed Registrable
Securities and FirstCorp First Portland Corporation shall not be deemed a Holder
and (y) 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) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale.
"Restricted Securities" shall mean the securities of the Company
---------------------
required to bear the legend set forth in Section 1.3 of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, 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 and all fees and disbursements of counsel for the Holders (except as
provided by Section 1.9).
1.2 Restrictions. The Preferred Shares and the Conversion Shares shall
------------
not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. The Investors will cause any
proposed purchaser, assignee, transferee or pledgee of the Preferred Shares and
the Conversion Shares to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
-2-
1.3 Restrictive Legend. Each certificate representing (i) the Preferred
------------------
Shares, (ii) the Conversion Shares and (iii) any other securities issued in
respect of the securities referenced in clauses (i) and (ii) upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 1.4 below) be
stamped or otherwise imprinted with legends 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.
SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH
MAY BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT
SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
Each Investor and Holder 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 established in
this Section 1.
1.4 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 1. 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 at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall, and whose legal opinion shall be, reasonably
satisfactory to the Company, addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (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, 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. The Company will not require such a legal opinion or "no action"
letter (a) in any transaction in compliance with Rule 144, (b) in any
transaction in which an Investor which is a corporation distributes Restricted
Securities after six (6) months after the purchase thereof solely to its
majority-owned subsidiaries or affiliates for no consideration, or (c) in any
transaction in
-3-
which an Investor which is a partnership distributes Restricted Securities after
six (6) months after the purchase thereof solely to partners thereof for no
consideration, provided that each transferee agrees in writing to be subject to
the terms of this Section 1.4. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144, the appropriate restrictive legend set forth in
Section 1.3 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.
1.5 Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Initiating Holders a written request that the Company effect any registration,
qualification or compliance with respect to the Registrable Securities, the
anticipated aggregate offering price, net of underwriting discounts and
commissions, which would equal or exceed $10,000,000, the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (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) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within thirty (30) days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to take
-------- -------
any action to effect any such registration, qualification or compliance pursuant
to this Section 1.5:
(1) In any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(2) Prior to June 30, 2001;
(3) During the one hundred eighty (180) day period commencing
on the effective date of the registration statement pertaining to the initial
public offering of securities of the Company;
-4-
(4) If the Company delivers notice to the Holders within
thirty (30) days of any registration request of its intent to file a
registration statement for an initial public offering of securities within
ninety (90) days;
(5) After the Company has effected two (2) such registrations
pursuant to this subparagraph 1.5(a), such registration has been declared or
ordered effective and the securities offered pursuant to such registration have
been sold; or
(6) If the Company shall furnish to such Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a period not to
exceed ninety (90) days from the date of receipt of written request from the
Initiating Holders; provided, however, that this right to delay any requested
registration statement shall not be utilized more than once in any twelve (12)
month period.
Subject to the foregoing clauses (1) through (6), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
------------
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders (which managing underwriter shall
be reasonably acceptable to the Company). Notwithstanding any other provision
of this Section 1.5, if the managing underwriter advises the Initiating Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. 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 to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing
-5-
underwriter and the Initiating Holders. The Registrable Securities and/or other
securities so withdrawn shall also be withdrawn from registration, and such
Registrable Securities shall not be transferred in a public distribution prior
to one hundred eighty (180) days after the effective date of such registration.
1.6 Company Registration.
--------------------
(a) Notice of Registration. If at any time or from time to time, the
----------------------
Company shall determine to register any of its 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, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved in
such registration, all the Registrable Securities specified in a written request
or requests received within thirty (30) days after receipt of such written
notice from the Company by any Holder, but only to the extent (subject to the
25% requirement set forth in paragraph 1.6(b)) that such inclusion will not
diminish the number of securities included by the Company or by holders of the
Company's securities who have demanded such registration.
(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 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 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. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the registrable securities to
be included in such registration to a minimum of 25% of the total shares to be
included in such underwriting or exclude them entirely in the case of the
Company's initial public offering (provided that only primary shares to be
issued by the Company are being registered in such initial public offering).
The Company shall so advise all Holders and the other holders distributing their
securities through such underwriting pursuant to piggyback registration rights
similar to this Section 1.6, and the number of shares of Registrable Securities
and other securities that may be included in the registration and underwriting
shall be first allocated among all Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement, and after satisfaction
of the requirements of the Holders, the remaining shares that may be included in
the registration and underwriting shall be allocated among the selling security
holders (other than
-6-
any such selling security holder that initiated the registration pursuant to
demand registration rights) in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such other security holders
at the time of filing of the registration statement. 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 underwriter. Any securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration, and shall not be transferred in a public distribution prior to one
hundred eighty (180) days (or such shorter period of time as the underwriters
may require) after the effective date of the registration statement relating
thereto (the "Lock-Up Period"); provided,however, that if such registration is
--------------
not the Company's initial public offering such Lock-Up Period shall be ninety
(90) days unless the managing underwriter determines that marketing factors
require a longer period in which case the Lock-Up period shall be specified by
the managing underwriter but shall not exceed one hundred eighty (180) days.
1.7 Registration on Form S-3.
------------------------
(a) If any Holder or Holders of the then outstanding Registrable
Securities request that the Company file a registration statement on Form S-3
(or any successor form to Form S-3) for a public offering of shares of the
Registrable Securities, the reasonably anticipated aggregate price to the public
of which, net of underwriting discounts and commissions, would exceed
$1,000,000, and the Company is a registrant entitled to use Form S-3 to register
the Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the offering
on such form; provided, however, that the Company shall not be required to
--------- --------
effect more than two registrations pursuant to this Section 1.7 in any twelve
(12) month period. The Company will (i) promptly give written notice of the
proposed registration to all other Holders, and (ii) as soon as practicable,
use its best efforts to effect such registration (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) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within thirty (30) days after receipt of such written notice from
the Company. The substantive provisions of Section 1.5(b) shall be applicable
to each registration initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 1.7: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act, (ii) during the period
starting with the date sixty (60) days prior to the filing of, and ending on a
date three (3) months
-7-
following the effective date of, a registration statement (other than with
respect to a registration statement relating to a Rule 145 transaction, an
offering solely to employees or any other registration which is not appropriate
for the registration of Registrable Securities), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective, or (iii) if the Company shall
furnish to such Holder a certificate signed by the president of the Company
stating that, in the good faith judgment of the Board of Directors, it would be
seriously detrimental to the Company or its stockholders for registration
statements to be filed in the near future, then the Company's obligation to use
its best efforts to file a registration statement shall be deferred for a period
not to exceed ninety (90) days from the receipt of the request to file such
registration by such Holder or Holders; provided, however, that this right to
delay any requested registration shall not be utilized more than once in any
twelve (12)-month period.
1.8 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement, unless approved by Holders of at least a majority of the
Registrable Securities issued or issuable upon conversion of the Preferred
Stock, 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 unless such new registration rights, including
standoff obligations, are subordinate to the registration rights granted Holders
under this Agreement.
1.9 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration pursuant to Sections 1.5, 1.6 and 1.7 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, provided that
the Company shall not be required to pay the Registration Expenses of any
registration proceeding begun pursuant to Section 1.5, the request of which has
been subsequently withdrawn by the Initiating Holders. In such case, the
Holders of Registrable Securities to have been registered shall bear all such
Registration Expenses pro rata on the basis of the number of shares to have been
registered. Notwithstanding the foregoing, however, if at the time of the
withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to the Holders
at the time of their request, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said
Registration Expenses. Unless otherwise stated, all other 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.
1.10 Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and
-8-
remain effective for at least one hundred eighty (180) days or until the
distribution described in the registration statement has been completed; and
(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.
1.11 Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, 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 Section 1, 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), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
brought by a third party, arising out of or based on any of the following
statements, omissions or violations (each, a "Violation"): (i) 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, (ii) 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 (iii) any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers and directors, 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, 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 an instrument duly executed by such
Holder, controlling person or underwriter and stated to be specifically for use
therein.
(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 and
officers, 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 Securities Act, and each
other such Holder, each of its officers and directors 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 Violation, and will reimburse the
Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating
-9-
or defending any such claim, loss, damage, liability or action, 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 an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided, however, that in no event (except in the case of gross negligence or
willful fraud) shall any indemnity under this Section 1.11(b) exceed the net
proceeds from the offering received by such Holder upon the sale of Registrable
Securities included in such registration.
(c) Each party entitled to indemnification under this Section 1.11
(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, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 1 unless 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, 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.
(d) The foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any Violation made in a
preliminary prospectus, but eliminated or remedied in the amended prospectus on
file with the Securities and Exchange Commission at the time the registration
statement in question becomes effective or the amended prospectus is filed with
the Securities and Exchange Commission pursuant to Rule 424(b) of the Securities
Act (the "Final Prospectus"), such indemnity agreement shall not inure to the
----------------
benefit of any person if a copy of the Final Prospectus was furnished to the
indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
1.12 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 Section 1.
1.13 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
-10-
Securities to the public without registration, after such time as a public
market exists for the Common Stock of the Company, the 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, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange 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
(at any time after it has become subject to such reporting requirements); and
(c) So long as an Investor owns any Restricted Securities, to furnish
to the Investor forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as an Investor may reasonably request in availing
itself of any rule or regulation of the Commission allowing an Investor to sell
any such securities without registration.
1.14 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Investors under Sections 1.5, 1.6 and 1.7 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by an
Investor (together with any affiliate); provided, 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 wholly-owned subsidiary or constituent partner (including limited
partners) or member of such Investor, (ii) is an immediate family member or
trust for the benefit of an individual Investor, or (iii) acquires from such
Investor the lesser of (x) 50,000 or more shares of Restricted Securities (as
appropriately adjusted for stock splits and the like) or (y) all of the
Restricted Securities then owned by such Investor, and (d) such transferee or
assignee assumes the obligations of the transferring Holder hereunder.
1.15 Standoff Agreement. Each Holder agrees in connection with the
------------------
Company's initial public offering that, upon request of the Company or the
underwriters managing such underwritten initial public offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days from the effective date of such
registration) as may be requested by the Company or such managing underwriters.
-11-
1.16 Termination of Rights. The rights of any particular Holder to cause
---------------------
the Company to register securities under Sections 1.5, 1.6 and 1.7 shall
terminate on the earlier of (i) with respect to such Holder following a bona
fide firm underwritten public offering (a "Qualifying Offering") of shares of
-------------------
the Company's Common Stock registered under the Securities Act (provided the
aggregate offering price, net of underwriting discounts and commissions, exceeds
ten million dollars ($10,000,000)) at such time as such Holder is able to
dispose of all its Registrable Securities in one three-month period pursuant to
the provisions of Rule 144; provided, that such Holder holds Registrable
--------
Securities constituting less than 1% of the outstanding voting stock of the
Company, or (ii) five (5) years following the effective date of a Qualifying
Offering.
SECTION 2
Right of Participation
----------------------
2.1 Investor's Right of Participation.
---------------------------------
(a) Right of Participation. Subject to the terms and conditions
----------------------
contained in this Section 2.1, the Company hereby grants to each Investor
holding at least 200,000 Preferred Shares (the "Major Investors") as of the
---------------
execution date of this Agreement the right of first refusal to purchase its Pro
Rata Portion of any New Securities (as defined in subsection 2.1(b)) which the
Company may, from time to time, propose to sell and issue. A Major Investor's
"Pro Rata Portion" for purposes of this Section 2.1 is the ratio that (x) the
-----------------
sum of shares of the Company's Common Stock issued or issuable upon conversion
of the Preferred Stock held by such Major Investor bears to (y) the sum of the
total number of shares of the Company's Common Stock then-outstanding and the
number of shares of the Company's Common Stock issuable upon conversion of the
then-outstanding Preferred Stock.
(b) Definition of New Securities. Except as set forth below, "New
---------------------------- ---
Securities" shall mean any shares of capital stock of the Company, including
----------
Common Stock and Preferred Stock, whether authorized or not, and rights, options
or warrants to purchase said shares of Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible into said
shares of Common Stock or Preferred Stock. Notwithstanding the foregoing, "New
---
Securities" does not include (i) the Preferred Shares or the Conversion Shares,
----------
(ii) securities offered to the public generally pursuant to a registration
statement under the Securities Act, (iii) securities issued pursuant to the
acquisition of patents or other intellectual property or assets of another
corporation, or the acquisition of another corporation by this corporation by
merger, purchase of all or substantially all of the assets or shares or other
reorganization or strategic transaction whereby this corporation or its
stockholders own not less than a majority of the voting power of the surviving
or successor corporation, (iv) shares of the Company's Common Stock or related
options convertible into or exercisable for such Common Stock issued to
employees, officers and directors of, and consultants, customers, and vendors
to, the Company, pursuant to any arrangement approved by the Board of Directors
of the Company, (v) shares of the Company's Common Stock or related options
convertible into or exercisable for such Common Stock issued to banks,
commercial lenders, lessors and other financial institutions
-12-
in connection with the borrowing of money or the leasing of equipment by the
Company, (vi) stock issued pursuant to any rights or agreements, including,
without limitation, convertible securities, options and warrants, provided that
the Company shall have complied with the rights of participation established by
this Section 2.1 with respect to the initial sale or grant by the Company of
such rights or agreements, or (vii) stock issued in connection with any stock
split, stock dividend or recapitalization by the Company.
(c) Notice of Right. In the event the Company proposes to undertake
---------------
an issuance of New Securities, it shall give each Major Investor written notice
of its intention, describing the type of New Securities and the price and terms
upon which the Company proposes to issue the same. The Major Investors shall
have ten (10) days from the date of receipt of any such notice to agree to
purchase shares of such New Securities (up to the amount referred to in
subsection 2.1(a)), for the price and upon the terms specified in the notice, by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(d) Exercise of Right. If any Major Investor exercises its right of
-----------------
participation under this Agreement, the closing of the purchase of the New
Securities with respect to which such right has been exercised shall take place
within ninety (90) calendar days after the Major Investor gives notice of such
exercise, which period of time shall be extended in order to comply with
applicable laws and regulations. Upon exercise of such right of first refusal,
the Company and the Major Investor shall be legally obligated to consummate the
purchase contemplated thereby and shall use their best efforts to secure any
approvals required in connection therewith.
(e) Lapse and Reinstatement of Right. In the event a Major Investor
--------------------------------
fails to exercise the right of participation provided in this Section 2.1 within
said ten (10) day period, the Company shall offer the securities subject to the
participation right to the Major Investors who have subscribed for their full
pro rata amounts, pro rata based upon such Major Investors' subscriptions for a
period of three (3) days. Thereafter the Company shall have sixty (60) days to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty (60) days from the date
of said agreement) to sell the New Securities not elected to be purchased by
such Major Investor at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the New Securities or entered into an agreement
to sell the New Securities within said sixty (60) day period (or sold and issued
New Securities in accordance with the foregoing within sixty (60) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities without first offering such securities to the Investors in the manner
provided above.
(f) Assignment. The right of the Major Investors to purchase any part
----------
of the New Securities may be assigned in whole or in part to any partner,
subsidiary, affiliate or stockholder of an Investor, or other persons or
organizations who acquire the lesser of (i) 100,000 or more shares of Restricted
Securities (as adjusted for stock splits and the like) or (ii) all of the
Restricted Securities then owned by such Investor.
-13-
2.2 Termination of Right of Participation; Waiver. The right of
---------------------------------------------
participation granted under Section 2.1 of this Agreement shall terminate on and
be of no further force or effect upon the earlier of (i) the consummation of the
Company's sale of its Common Stock in an underwritten public offering pursuant
to an effective registration statement filed under the Securities Act
immediately subsequent to which the Company shall be obligated to file annual
and quarterly reports with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act or (ii) the registration by the Company of a class of its equity
securities under Section 12(b) or 12(g) of the Exchange Act. The holders of a
majority in interest of the Major Investors, acting together as a separate
class, may waive, on behalf of holders of the Major Investors otherwise eligible
to participate, the foregoing right of participation.
2.3 Waiver of Prior Right of Participation. Pursuant to Section 2.2 of
--------------------------------------
the Prior Agreement, a majority in interest of the Major Investors under the
Prior Agreement hereby waive on behalf of all Major Investors any rights they
may have pursuant to Section 2.1 of the Prior Agreement, including the right to
receive notice of the sale by the Company of its Series G Preferred Stock and
notes convertible into its Series G Preferred Stock and to purchase shares of
its Series G Preferred Stock and notes convertible into its Series G Preferred
Stock.
SECTION 3
Miscellaneous; Covenant
-----------------------
3.1 Assignment. Except as otherwise provided in this Agreement, the terms
----------
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties to this Agreement.
3.2 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California without giving effect to applicable
principles of conflicts of law.
3.4 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
3.5 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be sent by prepaid registered or certified mail, return
receipt requested, or otherwise delivered by hand or by messenger addressed to
the other party at the address shown below or at such other address for which
such party gives notice under this Agreement. Such notice shall be deemed to
have been given when delivered if delivered personally, or, if sent by mail, at
the earlier of its receipt or three (3) days after deposit in the mail.
-14-
3.6 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.
3.7 Amendment and Waiver. Except as otherwise provided herein, any
--------------------
provision of this Agreement may be amended or waived with the written consent of
the Company and the holders of a majority of the Company's Preferred Stock,
acting together as a single class. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities and the Company. In addition, the Company may waive performance of
any obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. 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. Notwithstanding anything in this Agreement to the contrary, the Company
may amend this Agreement solely to add Investors who purchase shares of the
Company's Series F Preferred Stock.
3.8 Rights of Holders. Each holder of Registrable Securities shall have
-----------------
the absolute right to exercise or refrain from exercising any right or rights
that such holder 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 holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
3.9 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 the other 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.
-15-
3.10 Confidentiality. Each of the Holders agrees to keep confidential and
---------------
not to disclose to persons other than his, her or its employees, professional
consultants and advisors any information concerning the Company which is
confidential or proprietary, including, without limitation, the provisions of
this Agreement or any information disclosed pursuant to this Agreement
("Confidential Information"), except as otherwise required by law or as deemed
------------------------
necessary by a Holder to be disclosed to his, her or its own general or limited
partners. No Confidential Information shall be used or disclosed by a Holder
for any purpose except in connection with the transactions contemplated
hereunder and in the enforcement of rights hereunder. Each Holder shall use the
same level of care with the Confidential Information as he, she or it uses with
his, her or its own confidential information. Notwithstanding the foregoing,
the restrictions set forth in this Section 3.10 shall not be applicable to any
information that is publicly available, any information independently developed
by a Holder or his, her or its professional consultants or advisors, any
information known to a Holder or his, her or its professional consultants or
advisors before the disclosure thereof by the Company, or any information
disclosed to a Holder by a person without any confidentiality duty to the
Company.
(Signature Page Follows)
-16-
The parties hereto have executed this Second Amended and Restated Rights
Agreement as of the day and year first above written.
COMPANY:
PREVIEW SYSTEMS, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxxxxx
---------------------------------------
(print)
Title: President and Chief Executive Officer
--------------------------------------
Address:
0000 X. Xx Xxxx Xxxx., Xxxxx 000
Xxxxxxxxx, XX 00000
INVESTORS:
Each Investor listed on Exhibit A
--------------------------------------------
(Print Name of Investor)
By: /s/ Each Investor listed on Exhibit A
-----------------------------------------
(Signature)
Name: Each Investor listed on Exhibit A
---------------------------------------
(Name of Person Signing)
Title:______________________________________
(Print Title, If Applicable)
E-mail Address:_____________________________
Address:
PLEASE RETURN THIS SIGNATURE PAGE VIA FACSIMILE TO
THE ATTENTION OF XXXXX XXXXXXX AT VENTURE LAW GROUP AT 650/233-8386
SIGNATURE PAGE TO PREVIEW SYSTEMS,INC.SECOND AMENDED AND
RESTATED RIGHTS AGREEMENT
