EXHIBIT 10.10
TOPTIER SOFTWARE, INC.
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AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
October 27, 1999
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TOPTIER SOFTWARE, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (the
"Agreement") is made as of October 27, 1999 by and among TopTier Software, Inc.,
a Delaware corporation (the "Company"), and the persons and entities listed on
Exhibit A hereto (the "Investors").
RECITALS
WHEREAS, the Company and the Investors are parties to the Series A
Preferred Stock Purchase Agreement, the Series B Preferred Stock Purchase
Agreement, the Series C Preferred Stock Purchase Agreement or the Series D
Preferred Stock Purchase Agreement, whereby the Company has sold or will sell,
and those Investors have acquired or will acquire, that number of shares of the
Company's Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock set forth opposite each Investor's name on
EXHIBIT A hereto (the "Purchased Shares," which term shall also include any
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additional shares of Common Stock and/or Preferred Stock of the Company, or
securities convertible into or exchangeable for such shares, now owned or
hereafter acquired by the Investors).
WHEREAS, certain of the Investors hold securities of the Company and
possess certain registration rights with respect to such securities pursuant to
that certain Rights Agreement dated June 20, 1997 (the "1997 Rights Agreement")
and that certain Rights Agreement dated October 6, 1998 (the "1998 Rights
Agreement"); and
WHEREAS, the Investors who are parties to the 1997 Rights Agreement
and the 1998 Rights Agreement desire to terminate the 1997 Rights Agreement and
the 1998 Rights Agreement and to accept the rights created pursuant hereto in
lieu of such previously granted rights; and
WHEREAS, the execution of this Agreement by the Company is a condition
to the obligations of the Investors under the Series D Preferred Stock Purchase
Agreement and the Company wishes to execute this Agreement and grant to the
Investors the rights contained herein in order to fulfill such condition;
NOW THEREFORE, in consideration of the foregoing, and the mutual
consideration set forth herein, the parties agree as follows:
SECTION 1.
Restrictions on Transferability;
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Registration Rights
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1.1 Certain Definitions. As used in this Agreement, the following
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terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
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other federal agency at the time administering the Securities Act.
"Conversion Shares" means the Common Stock issued or issuable upon
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conversion of the Preferred Shares as defined herein.
"Preferred Shares" shall mean, collectively, the Company's outstanding
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Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock.
"Common Stock" shall mean the Company's Common Stock and shares of
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Common Stock issued or issuable upon conversion of the Company's outstanding
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock.
"Holder" shall mean any Investor holding Registrable Securities and
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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 Holders in the aggregate of not less
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than thirty percent (30%) of the Registrable Securities as defined for purposes
of that particular section.
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
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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
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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, 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(l) 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
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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
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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
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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
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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 or the
Conversion Shares to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
1.3. Restrictive Legend. Each certificate representing (i) the
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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
SHAREHOLDER, 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
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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, if requested by the Company, 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 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.
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(a) Request for Registration. In case the Company shall
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receive from Initiating Holders a written request that the Company effect any
qualification, compliance or registration the reasonably anticipated aggregate
price to the public of which net of underwriting discounts and commissions,
would exceed $10,000,000:
(i) within ten (10) days of the receipt thereof,
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 twenty (20) 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 the earlier of (i) six (6) months
following the Company's initial public offering or (ii) August 1, 2003;
(3) During the three (3) month period ending on the
date three (3) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan);
(4) After the Company has effected one (1) such
registration 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
(5) 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 shareholders 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 single period
not to exceed ninety (90) days from the date of receipt of written request from
the Initiating Holders; provided however, that the Company may not utilize this
right more than once in any twelve (12) month period.
Subject to the foregoing clauses (1) through (5), 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
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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 and perform its
obligations under 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, provided however, that the number of shares of Registrable Securities
to be included in such underwriting shall not be reduced unless all other
securities are first entirely excluded from the underwriting. 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 underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration.
1.6. Company Registration
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(a) Notice of Registration. If at any time or from time to
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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 twenty (20) days
after receipt of such written notice from the Company by any Holder, to the
extent provided for in subsection (b) hereof.
(b) Underwriting. If the registration of which the Company
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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.
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 by Holders 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 in which case the Registrable
Securities of the selling Holders may be excluded if the underwriters make the
determination described above and no other shareholders' securities are included
in such registration. The Company shall so advise all Holders and the number of
shares of Registrable Securities that
may be included in the registration and underwriting shall be 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. 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 of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, and the managing underwriter. The Registrable Securities and/or
other securities so withdrawn shall also be withdrawn from registration.
(c) Right to Terminate Registration. The Company shall have
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the right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7. Registration on Form S-3.
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(a) If Initiating Holders 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 three
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 twenty (20) 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 three (3) month period ending on a date three (3) months 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), (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 shareholders 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 single 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 the Company may not utilize this right more than once in
any twelve (12) month period, or (iv) the Company shall have already received,
within any twelve (12) month period, three (3) requests from Initiating Holders
that the Company file a registration statement on Form S-3.
1.8. Limitations on Subsequent Registration Rights. From and after
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the date of this Agreement, 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 the Company first
obtains the consent of the holders of at least a majority of the Registrable
Securities.
1.9. Expenses of Registration. All Registration Expenses incurred in
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connection with any registration pursuant to Sections 1.5, 1.6 or 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 unless the Holders of a majority of the Registrable Securities agree
to forfeit their right to one demand registration pursuant to Section 1.5.
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 or to
forfeit the right to one demand registration.
1.10. Registration Procedures. In the case of each registration,
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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 remain effective for at least one hundred
twenty (120) days; provided however, that such 120-day period shall be extended
for a period of time equal to the period of time the Holder refrains from
selling any securities included in such registration at the request of the
underwriter of such offering.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be reasonably necessary to comply with
the provisions of the Act with respect to the disposition of the securities
covered by such registration statement;
(c) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing
underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such agreement;
(d) Use its best efforts to cause all such Registrable
Securities registered pursuant to hereunder to be listed on each securities
exchange on which similar securities issued by the Company are then listed;
(e) Provide a transfer agent and registrar for all
Registrable Securities registered hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration; and
(f) 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.
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(a) To the extent permitted by law, the Company will
indemnify and hold harmless 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 joint or several) (or actions in respect thereof, including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
preliminary or final 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 or alleged violation by the Company of any rule
or regulation promulgated under the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange 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, as 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 an instrument
duly executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein or for any amounts paid in settlement of any such
claim, loss, damage and liability if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify and hold harmless 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 (joint or several) (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, preliminary or final 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, 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 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 an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided, however, that the liability of a Holder for indemnification under this
Section 1.11 (b) shall not exceed the gross proceeds from the offering received
by such Holder and shall not apply to amounts paid in settlement of any such
claim, loss, damage and liability if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld.
(c) Each party entitled to indemnification under this
Section 1.11 (the "Indemnified Party") shall give written 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 differing
interests between such Indemnified Party and any other party represented by such
counsel in such proceeding, 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) If the indemnification provided for in this Section
1.11 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any lass, liability, claim, damage, or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the damage or expense 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 statements or omissions that resulted in such loss, liability, claim, damage
or expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party or by the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge and access to information.
(e) The obligations of the Company and Holders under this
Section 1.11 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1.
1.12. Information by Holder. The Holder or Holders of Registrable
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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
reasonably 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 Securities to the public without
registration or pursuant to a registration statement on Form S-3 (or successor
form thereof), 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 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);
(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) or its eligibility to register securities pursuant to
Form S-3 (at any time after the end of the fiscal year in which the first
registration statement under the Act filed by the Company becomes effective),
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; and
(d) Beginning after the date on which the Company would
otherwise be a registrant entitled to use Form S-3 to register the Registrable
Securities, take such additional actions as are reasonably necessary to make the
Company eligible under the Securities Act and the Exchange Act to use Form S-3
to register Registrable Securities, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act.
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 such consent shall not be
required if (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) of such Investor, or (ii)
acquires from such Investor the lesser of (A) 100,000 or more shares of
Restricted Securities (as appropriately adjusted for stock splits and the like)
or (B) all of the Restricted Securities then owned by such Investor.
1.15. Standoff Agreement. Each Holder agrees in connection with the
------------------
initial registration of the Company's securities that, upon request of the
Company or the underwriters managing any underwritten initial public offering of
the Company's securities, not, to the extent requested by the Company or the
underwriters, 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;
provided, however, that the officers, directors and one percent (1%)
shareholders of the Company who own stock of the Company also agree to such
restrictions.
1.16. Termination Of Rights. No Holder shall be entitled to exercise
---------------------
any right provided for in this Section 1:
(a) after five (5) years following the consummation of the sale
of securities pursuant to a registration statement filed by the Company under
the Act in connection with the initial firm commitment underwritten offering of
its securities to the general public, or
(b) on or after the closing of a public offering of the Common
Stock of the Company, initiated by the Company, when all shares of the Holder's
Registrable Securities may be sold under Rule 144 during any 90-day period.
SECTION 2.
Right of Participation
----------------------
2.1 Purchasers' Right of Participation.
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(a) Right of Participation. Subject to the terms and
----------------------
conditions contained in this Section 2.1 of even date herewith, the Company
hereby grants to each Purchaser who holds at least 500,000 shares of Registrable
Securities the right of participation 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 Purchaser's "Pro Rata Portion" for
purposes of this Section 2.1 is the ratio that (x) the sum of the number of
shares of the Company's Common Stock then held by such Purchaser and the number
of shares of the Company's Common Stock issuable upon conversion of the
Preferred Stock then held by such Purchaser, bears to (y) the sum of the total
number of shares of the Company's Common Stock then outstanding, the number of
shares of the Company's Common Stock issuable upon the exercise of any issued
and outstanding rights, options or warrants, and the number of shares of the
Company's Common Stock issuable upon conversion of any 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
bona fide, firmly committed, underwritten public offering pursuant to an
effective registration statement under the Securities Act, (iii) securities
issued pursuant to the bona fide business acquisition of another corporation by
the Company by merger, purchase of substantially all of the assets or shares or
other reorganization whereby the Company or its shareholders own not less than a
majority of the voting power of the surviving or successor corporation, pursuant
to approval by the Board of Directors of the Company, including at least one
outside member, (iv) shares of the Company's Common Stock or related options or
warrants convertible into or exercisable for such Common Stock issued to
employees, officers and directors of, and consultants to, the Company, pursuant
to any arrangement approved by the Board of Directors of the Company, including
at least one outside member, (v) shares of the Company's Common Stock or related
options or warrants convertible into or exercisable for such Common Stock issued
to customers and vendors of the Company pursuant to any arrangement approved by
the Board of Directors of the Company, including at least one outside member;
(vi)'Shares of the Company's Common Stock or related options or warrants
convertible into or exercisable for such Common Stock issued to banks,
commercial lenders, lessors and other financial institutions in connection with
the borrowing of money or the leasing of equipment by the Company, (vii) 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 (viii) 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 Purchaser written
notice of its intention, describing the type of New Securities, the proposed
number of New Securities to be issued and the price and terms upon which the
Company proposes to issue the same. Each Purchaser shall have twenty (20) 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 Purchaser 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
ninety (90) calendar days after the Purchaser gives notice of such exercise,
which period of time may be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of participation, the Company and the
Purchaser 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) Regrant, Lapse and Reinstatement of Right. In the event a
-----------------------------------------
Purchaser fails to exercise the right of participation provided in this Section
2.1 within said twenty (20) day period, then in such event, the Company shall
give written notice of such event to each Purchaser exercising its rights under
Section 2.1 (a) (the "Exercising Purchasers"), and each such Exercising
Purchaser shall have the right to purchase, within five (5) days of receipt of
such notice, its Pro Rata Portion of any New Securities offered for purchase to
Purchasers other than Exercising Purchasers but not elected to be purchased
pursuant to Section 2.1 (a). The Company shall have sixty (60) days thereafter
to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within thirty (30) days from the
date of said agreement) to sell the New Securities not elected to be purchased
by such Purchaser at the price not less than 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 thirty
(30) 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
Purchasers in the manner provided above.
(f) Assignment. The right of the Purchasers to purchase any
----------
part of the New Securities may be assigned in whole or in part (i) to any
partner, subsidiary, affiliate, or shareholder of a Purchaser, or other persons
or organizations who acquire 100,000 or more shares of Restricted Securities (as
adjusted for stock splits and the like) and (ii) between and among any of the
Holders.
2.2. Termination of Participation Right. The rights 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 sale of
the Company's Common Stock in a firm commitment underwritten public offering
pursuant to a registration statement under the Securities Act of 1933, as
amended, at a public offering price per share not less than $14.94 and an
aggregate offering price of $20,000,000 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)
upon (a) the acquisition of all or substantially all the assets of the Company,
or (b) an acquisition of the Company by another corporation or entity by
consolidation or merger in which the holders of the Company's outstanding voting
stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than 50% or more of the voting power
of the corporation or other entity surviving such transaction.
SECTION 3.
MISCELLANEOUS
3.1. Successors and Assigns. Except as otherwise provided in this
----------------------
Agreement, the provisions 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 in all respects
-------------
by the laws of the State of California in the United States of America without
giving effect to the conflicts of laws principles thereof.
3.4. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
3.5. Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be personally delivered or sent by international express
courier (e.g. DHL or Federal Express) addressed to the other party at the
address shown below or at such other address for which such party gives notice
hereunder. Notices sent by courier shall be deemed to have been given three (3)
days after deposit with any such courier.
3.6. Severabilily. 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. 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 shares of the Registrable Securities. 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.
3.8. Effect of Amendment or Waiver. The Investors and their
-----------------------------
successors and assigns acknowledge that by the operation of Section 3.7 of this
Agreement the holders of a majority of the outstanding Registrable Securities,
acting in conjunction with the Company, will have the right and power to
diminish or eliminate any or all fights or increase any or all obligations
pursuant to this Agreement.
3.9. Rights of Holders. Each holder of Registrable Securities shall
-----------------
have the absolute right to exercise or refrain from exercising any fight 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 fight or rights.
3.10. 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 fight, 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.
3.11. Prior Agreement. Effective upon the execution and delivery of
---------------
this Agreement by all parties hereto, the 1997 Rights Agreement and the 1998
Rights Agreement are hereby terminated and shall be of no further force and
effect and are hereby superseded and replaced in their entirety by this
Agreement.
3.12. Entire Agreement. This Agreement constitutes the full and
----------------
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
[Remainder of Page Intentionally Left Blank]
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
TOPTIER SOFTWARE, INC.
a Delaware Corporation
By: /s/ Xxxx Xxxxxx
-------------------------------
Xxxx Xxxxxx
Chief Executive Officer
[Signature Page to Rights Agreement]
"PURCHASERS"
PRIME ASSET MANAGEMENT A.G.
By: /s/ Xxxxxxx Xxxx
-------------------------------------
Xxxxxxx Xxxx
Chief Executive Officer
By: /s/ Xxxxx Xxxxx
-------------------------------------
Xxxxx Xxxxx
By: /s/ Xxxxxx Xxxxxxxxxx
-------------------------------------
Xxxxxx Xxxxxxxxxx
By: /s/ Xxxx Xxxxxx
-------------------------------------
Xxxx Xxxxxx
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------------
Xxxxx Xxxxxxxxx
SPARTA BETEILIGUNGEN AG
By: /s/ Sparta Beteil
-------------------------------------
Sparta Beteil
PRE IPO AG
By: /s/ Xxxxx Xxxxxxxx
-------------------------------------
XXXXXX XX
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
[Signature Page to Rights Agreement]
QUICKSOFT, LTD.
By: /s/ Xxxx Xxxxxx
-------------------------------
VANENBURG GROUP
By: /s/ Jan Baan
-------------------------------
