EXHIBIT 4.2
KANA COMMUNICATIONS, INC.
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THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
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TABLE OF CONTENTS
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Page
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1. Registration Rights................................................ 1
1.1 Definitions.................................................. 1
1.2 Request for Registration..................................... 2
1.3 Company Registration......................................... 5
1.4 Obligations of the Company................................... 5
1.5 Furnish Information.......................................... 7
1.6 Expenses of Demand Registration.............................. 7
1.7 Expenses of Company Registration............................. 8
1.8 Underwriting Requirements.................................... 8
1.9 Delay of Registration........................................ 8
1.10 Indemnification.............................................. 8
1.11 Reports Under 1934 Act....................................... 10
1.12 Form S-3 Registration........................................ 11
1.13 Assignment of Registration Rights............................ 12
1.14 Limitations on Subsequent Registration Rights................ 12
1.15 "Market Stand-Off" Agreement................................. 13
1.16 Termination of Registration Rights........................... 13
2. Covenants of the Company .......................................... 14
2.1 Financial Statements and Other Information................... 14
2.2 Inspection of Property....................................... 15
2.3 Board Observation Rights..................................... 15
2.4 Board Actions................................................ 15
3. Miscellaneous ..................................................... 15
3.1 Successors and Assigns....................................... 15
3.2 Prior Agreement.............................................. 16
3.3 Governing Law................................................ 16
3.4 Counterparts................................................. 16
3.5 Titles and Subtitles......................................... 16
3.6 Notices...................................................... 16
3.7 Expenses..................................................... 16
3.8 Amendments and Waivers....................................... 16
3.9 Severability................................................. 16
3.10 Aggregation of Stock......................................... 17
3.11 Entire Agreement............................................. 17
3.12 Confidentiality.............................................. 17
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THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
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THIS THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as
of the ____ day of July 1999, by and among Kana Communications, Inc., a
California corporation (the "Company"), and the parties listed on Schedule A
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hereto (collectively, the "Investors").
RECITALS
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WHEREAS, certain of the Investors (the "Existing Investors") hold
shares of the Company's Series A Preferred Stock, Series B Preferred Stock
and/or Series C Preferred Stock and possess certain rights pursuant to a Second
Amended and Restated Investors' Rights Agreement dated as of August 20, 1998 and
September 3, 1998, as amended, by and among the Company and such Investors
(collectively, the "Prior Agreement"); and
WHEREAS, the Existing Investors desire to terminate the Prior
Agreement and to accept the rights created pursuant hereto in lieu of the rights
granted to them under the Prior Agreement; and
WHEREAS, certain Investors are parties to the Series D Preferred Stock
Purchase Agreement dated as of even date herewith among the Company and certain
of the Investors (the "Purchase Agreement"), and certain of the Company's and
such Investors' obligations under the Purchase Agreement are conditioned upon
the execution of this Agreement by such Investors, the Existing Investors and by
the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the Existing Investors who are parties to the Prior Agreement
hereby agree that the Prior Agreement shall be superseded and replaced in its
entirety by this Agreement, and the parties hereto hereby further agree as
follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) "Act" means the Securities Act of 1933, as amended.
(b) "Form S-3" means such form under the Act as in effect on the
date hereof or any registration form under the Act subsequently adopted by the
SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(c) "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(d) "New Holder" means any person owning or having the right to
acquire New Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(e) "1934 Act" shall mean the Securities Exchange Act of 1934,
as amended.
(f) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(g) "Registrable Securities" means (i) Common Stock issuable or
issued upon conversion of the Series A Preferred Stock, Series A1 Preferred
Stock, Series B Preferred Stock, Series B1 Preferred Stock, Series C Preferred
Stock, Series C1 Preferred Stock, Series D Preferred Stock and Series D1
Preferred Stock (ii) Common Stock issued to Xxxx Xxxxxx and Xxxxxxx Xxxxxxx (for
purposes only of Sections 1.3, 1.7, 1.8, 1.10 and 3.8 of this Agreement), (iii)
the Common Stock issuable or issued upon conversion of the Series A Preferred
Stock (including the Series A1 Preferred Stock) issued upon exercise of two
warrants held by Xxxxxxxx Xxxxxxx and the Xxxx X. Xxxxxxx Trust 1991 and (iv)
any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i), (ii) and (iii) above, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
such person's rights under this Section 1 are not assigned.
(h) "New Registrable Securities" means (i) Common Stock issuable
or issued upon conversion of the Series D Preferred Stock and Series D1
Preferred Stock and (ii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of the shares referenced in (i), excluding in all cases,
however, any New Registrable Securities sold by a person in a transaction in
which such person's rights under this Section 1 are not assigned.
(i) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(j) "SEC" shall mean the Securities and Exchange Commission.
1.2 Request for Registration.
(a) If the Company shall receive at any time after six (6)
months after the effective date of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction), a written request from the Holders of at least thirty-five percent
(35%) of the Registrable Securities then outstanding that the Company file a
registration statement under the Act covering the registration of at least
twenty percent (20%) of the Registrable Securities then
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held by such Holders (or any lesser percentage if the aggregate gross proceeds
from the offering exceed $10,000,000) then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) use its best efforts to effect as soon as practicable,
the registration under the Act of all Registrable Securities which the Holders
request to be registered, subject to the limitations of subsection 1.2(b),
within twenty (20) days of the mailing of such notice by the Company in
accordance hereof.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include such Holder's Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) If the Company shall receive at any time after six (6)
months after the effective date of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction), a written request from the New Holders of at least thirty-five
percent (35%) of the New Registrable Securities then outstanding that the
Company file a registration statement under the Act covering the registration of
at least twenty percent (20%) of the New Registrable Securities then held by
such New Holders (or any lesser percentage if the aggregate gross proceeds from
the offering exceed $10,000,000) then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
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(ii) use its best efforts to effect as soon as practicable,
the registration under the Act of all Registrable Securities which the Holders
request to be registered, subject to the limitations of subsection 1.2(d),
within twenty (20) days of the mailing of such notice by the Company in
accordance hereof.
(d) If the New Holders initiating the registration request
hereunder ("New Initiating Holders") intend to distribute the New Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to subsection 1.2(c)
and the Company shall include such information in the written notice referred to
in subsection 1.2(c). In the event of a registration of Company securities
solely by shareholders of the Company, the underwriter will be selected by the
New Initiating Holders holding a majority of the New Registrable Securities. In
the event of a registration of Company securities by the Company and such New
Holders, the underwriter will be selected by the mutual agreement of the Company
and the New Initiating Holders holding a majority of the New Registrable
Securities. In each such event, the right of any New Holder or Holders to
include such New Holder's or such Holder's Registrable Securities in such
registration shall be conditioned upon such New Holder's or such Holder's
participation in such underwriting and the inclusion of such New Holder's New
Registrable Securities or such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
New Initiating Holders and such New Holder) to the extent provided herein. All
New Holders and Holders proposing to distribute their securities through such
underwriting shall (together with the Company as provided in subsection 1.4(e))
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other provision
of this Section 1.2, if the underwriter advises the New Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the New Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating New Holders, in proportion (as nearly as practicable) to the amount
of Registrable Securities of the Company owned by each Holder; provided,
however, that the number of shares of Registered Securities to be included in
such underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting.
(e) Notwithstanding the foregoing, if the Company shall furnish
to Holders and/or New Holders requesting a registration statement pursuant to
this Section 1.2, a certificate signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer taking action with respect to such filing for a period of not
more than ninety (90) days after receipt of the request of the Initiating
Holders or New Initiating Holders; provided, however, that the Company may not
utilize this right more than once in any twelve-month period.
(f) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.2:
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(i) After the Company has effected two registrations
pursuant to Section 1.2(a) and one registration pursuant to Section 1.2(c) and
such registrations have been declared or ordered effective;
(ii) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred and eighty (180) days after the effective date of a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 1.12 below.
1.3 Company Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered or an SEC Rule 145 transaction), the Company shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing
of such notice by the Company in accordance with Section 3.6, the Company shall,
subject to the provisions of Section 1.8, use its best efforts to cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered. In no event, however, shall any holder of
registration rights be granted registration rights under this Section 1.3 that
are superior to the registration rights of the holders of Series A Preferred
Stock, Series A1 Preferred Stock, Series B Preferred Stock, Series B1 Preferred
Stock, Series C Preferred Stock, Series C1 Preferred Stock, Series D Preferred
Stock, Series D1 Preferred Stock and the Common Stock issuable upon conversion
thereon without the written consent of the holders of at least 51% of the Series
A Preferred Stock, Series A1 Preferred Stock, Series B Preferred Stock, Series
B1 Preferred Stock, Series C Preferred Stock, Series C1 Preferred Stock, Series
D Preferred Stock, Series D1 Preferred Stock and the Common Stock issued upon
conversion of the Series A Preferred Stock, Series A1 Preferred Stock, Series B
Preferred Stock, Series B1 Preferred Stock, Series C Preferred Stock, Series C1
Preferred Stock, Series D Preferred Stock, and Series D1 Preferred Stock.
1.4 Obligations of the Company. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities
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registered thereunder, keep such registration statement effective for a period
of up to one hundred twenty (120) days or until the distribution contemplated in
the Registration Statement has been completed; provided, however, that (i) such
120-day period shall be extended for a period of time equal to the period the
Holder refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 120-day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (i) includes any prospectus required by
Section 10(a)(3) of the Act or (ii) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (i) and (ii) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the 1934 Act in the registration statement;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement;
(c) furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;
(d) use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act;
(e) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
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(g) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(h) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;
(i) furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
1.6 Expenses of Demand Registration. All expenses (other than underwriting
discounts and commissions and fees and expenses in excess of $10,000 for one
counsel for the selling Holders) incurred in connection with registrations,
filings or qualifications pursuant to Section 1.2, including (without
limitation) all registration, filing and qualification fees, printers' and
accounting fees, and fees and disbursements of counsel for the Company and up to
$10,000 of the reasonable fees and disbursements of one counsel for the selling
Holders shall be borne by the Company, except that the expenses of any special
audit in excess of $15,000 required in connection with any demand registration
pursuant to either Section 1.2 or Section 1.12 shall be borne pro rata by the
selling Holders; provided, however, that the Company shall not be required to
pay for any expenses of any registration proceeding begun pursuant to Section
1.2 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all participating Holders shall bear such expenses), unless the Holders of
a majority of the Registrable Securities agree to forfeit their right to one
demand registration pursuant to Section 1.2; provided further, however, that if
at the time of such 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 and have withdrawn the request with
reasonable promptness following disclosure
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by the Company of such material adverse change, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.3 for each Holder (which right may be assigned as provided in Section 1.13),
including (without limitation) all registration, filing, and qualification fees,
and printers and accounting fees relating or apportionable thereto selected by
them, but excluding underwriting discounts and commissions relating to
Registrable Securities, and up to $10,000 of the reasonable fees and expenses of
one counsel for the Holders.
1.8 Underwriting Requirements. In connection with any offering involving
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 1.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders).
For purposes of the preceding parenthetical concerning apportionment, for any
selling shareholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling shareholder," and any pro rata reduction with
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder," as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may
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become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, the 1934 Act
or any state securities law; and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this subsection 1.10(b) exceed the net proceeds (defined as
gross proceeds less payment of the underwriting discounts and commissions
applicable to such securities) from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however,
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that an indemnified party (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under 1934 Act. With a view to making available to the Holders
the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize
10
Form S-3 for the sale of their Registrable Securities, such action to be taken
as soon as practicable after the end of the fiscal year in which the first
registration statement filed by the Company for the offering of its securities
to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders holding at least twenty percent (20%) of the Registrable
Securities or thirty percent (30%) of the New Registrable Securities then
outstanding a written request or requests that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) use its best efforts to effect, as soon as practicable, such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within fifteen (15) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance, pursuant
to this Section 1.12: (1) if Form S-3 is not available for such offering by the
Holders; (2) if the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public (net of any underwriters' discounts or commissions) of less than
$3,000,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than sixty (60)
days after receipt of the request of the Holder or Holders under this Section
1.12; provided, however, that the Company shall not utilize this right more than
once in any twelve (12) month period; (4) if the Company has, within the twelve
11
(12) month period preceding the date of such request, already effected two
registrations on Form S-3 for the Holders pursuant to this Section 1.12; or (5)
in any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
fees and disbursements of counsel for the Company and up to $10,000 of the
reasonable fees and disbursements of one counsel for the Holders associated with
the Registrable Securities, but excluding any underwriters' discounts or
commissions and fees and expenses in excess of such $10,000, expenses referred
to in Section 1.6, shall be borne by the Company. Registrations effected
pursuant to this Section 1.12 shall not be counted as demands for registration
or registrations effected pursuant to Section 1.2 or 1.3.
(d) The Company shall not be obligated to effect any registration
pursuant to this Section 1.12 if the Company delivers to the Holders requesting
registration under this Section 1.12 an opinion, in form and substance
acceptable to such Holders, of counsel satisfactory to such Holders, that the
Registrable Securities so requested to be registered may be sold or transferred
pursuant to Rule 144(k) under the Act.
1.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned by a Holder to a transferee or assignee of such securities provided
only (a) if the transfer involves not less than 100,000 shares of Registrable
Securities (as presently constituted and subject to subsequent adjustments for
stock splits, stock dividends, reverse stock splits and the like), (b) to a
transferee of all of the Registrable Securities held by the Holder, or (c) to
the constituent partners or shareholders of a Holder who agree to act through a
single representative provided that the Company is given a written notice at the
time of or within a reasonable time after such transfer or assignment, stating
the name and address of the transferee or assignee and identifying the
securities with respect to which such registration rights are being transferred
or assigned, and, provided further, that the transferee or assignee of such
rights assumes the obligations of such Holder under this Section 1.
1.14 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.2 hereof, unless under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such holder's securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of either of the dates set forth in subsection 1.2(a) or
12
within one hundred twenty (120) days of the effective date of any registration
effected pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock to be sold on
its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company, all one percent
(1%) or greater shareholders and all other persons with registration rights
(whether or not pursuant to this Agreement) enter into similar agreements;
(c) such market stand-off time period shall not exceed one
hundred eighty (180) days; and
(d) such agreement shall not be applicable to any shares acquired
in the initial public offering or acquired by an Investor in an open-market
transaction after the initial public offering.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-l or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms which may be promulgated in the future.
1.16 Termination of Registration Rights.
(a) No Holder shall be entitled to exercise any right provided
for in this Section 1 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 offering of its securities to the
general public.
(b) In addition, the right of any Holder to request registration
or inclusion in any registration pursuant to Section 1.3 shall terminate on the
closing of the first Company-initiated registered public offering of Common
Stock of the Company if all shares of
13
Registrable Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any ninety (90)-day period,
or on such date after the closing of the first Company-initiated registered
public offering of Common Stock of the Company as all shares of Registrable
Securities held or entitled to be held upon conversion by such Holder may
immediately be sold under Rule 144 during any ninety (90)-day period.
2. Covenants of the Company. Until the earlier of (i) the consummation
date of the Company's offering of its securities to the general public or (ii)
the acquisition of the Company by means of merger or other form of corporate
reorganization in which outstanding shares of the Company are exchanged for
securities or other consideration issued, or caused to be issued, by the
acquiring corporation or its subsidiary (other than a mere reincorporation
transaction) and pursuant to which the holders of the outstanding voting
securities of the Company immediately prior to such consolidation, merger or
other transaction fail to hold equity securities representing a majority of the
voting power of the Company or surviving entity immediately following such
consolidation, merger or other transaction or (iv) the sale of all or
substantially all of the assets of the Company, the Company shall comply with
the following covenants:
2.1 Financial Statements and Other Information. The Company shall
deliver to each Holder so long as such Holder beneficially owns at least 440,000
shares of Registrable Securities (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other recapitalizations) or 125,000
shares of Series D Preferred Stock (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other recapitalizations).
(a) as soon as available, but in any event within thirty (30)
days after the end of each month, monthly unaudited consolidated statements of
income and cash flows of the Company and its subsidiaries and monthly unaudited
consolidated balance sheets of the Company and its subsidiaries, and all such
statements shall be prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, except that they may not
contain full footnote disclosures and may be subject to normal year-end
adjustments for recurring accruals;
(b) within thirty (30) days after the end of each quarter,
quarterly unaudited consolidated statements of income and cash flows of the
Company and its subsidiaries and quarterly unaudited consolidated balance sheets
of the Company and its subsidiaries, and all such statements shall be prepared
in accordance with GAAP, consistently applied, except that they may not contain
full footnote disclosures and may be subject to normal year-end adjustments for
recurring accruals;
(c) as soon as available but in any event within one hundred
twenty (120) days after the end of each fiscal year, audited consolidated
statements of income and cash flows of the Company and its subsidiaries for such
fiscal year, and an audited consolidated balance sheet of the Company and its
subsidiaries as of the end of the fiscal year, all prepared in accordance with
GAAP, consistently applied; and
(d) at least thirty (30) days prior to the end of the Company's
fiscal year, an annual budget and operating plan prepared on a monthly basis for
the Company and its
14
subsidiaries for the following fiscal year requested (displaying anticipated
statements of income and cash flows and balance sheets), approved by the
Company's Board of Directors, and promptly upon preparation thereof any material
revisions of such annual or other budgets and operating plans.
2.2 Inspection of Property. The Company shall permit each Holder so
long as the Holder beneficially owns at least 440,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), upon reasonable notice and during
normal business hours and at such other times as any such person may reasonably
request, to (a) examine the corporate and financial records of the Company and
its subsidiaries and make copies thereof or extracts therefrom and (b) discuss
the affairs, finances and accounts of any such entities with the directors,
officers, key employees and independent accountants of the Company and its
subsidiaries; provided, however, that the Company shall not be obligated
pursuant to any requirement to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
2.3 Board Observation Rights. The Company shall permit a
representative of Amerindo Investment Advisors Inc. (the "Observer") to attend
all meetings of the Company's Board of Directors (the "Board") (whether in
person, telephonic or other) in a non-voting, observer capacity and shall
provide to the Observer, concurrently with the members of the Board, and in the
same manner, notice of such meeting and a copy of all materials provided to such
members; provided, however, that the Company reserves the right to withhold any
information and to exclude the Observer from any meeting or portion thereof if
the Company reasonably believes that access to such information or attendance at
such meeting would (a) involve a conflict of interest regarding the Observer,
(b) be necessary in order to meet or protect any fiduciary obligations of the
Board or (c) adversely affect the confidentiality or attorney-client privilege
between the Company and its counsel or would result in disclosure of trade
secrets to such Observer or its representative is a direct or indirect
competitor of the Company, as determined in good faith by the Board of
Directors.
2.4 Board Actions. The Company shall not take any of the following
actions without the approval of two-thirds of the members of the Board of
Directors:
(a) issue any equity securities to employees or lenders or
lessors; or
(b) issue any equity securities for strategic business
relationships or corporate partnership arrangements.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
15
3.2 Prior Agreement. Effective upon the execution and delivery of
this Agreement by all parties thereto, the Prior Agreement hereby shall be
terminated and shall be of no further force and effect and shall be superseded
and replaced in its entirety by this Agreement.
3.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California.
3.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
3.7 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.8 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding; provided however that no amendment or
waiver that materially adversely affects the rights of Xxxx Xxxxxx, Xxxxxxx
Xxxxxxx, Xxxxxxxx Xxxxxxx or the Xxxx X. Xxxxxxx Trust 1991 shall be made
without the consent of each of such persons or entity and provided however that
any amendment or waiver that materially adversely affects the rights of the
holders of Series C Preferred Stock in a manner different than any other holder
of Preferred Stock shall require the written consent of the holders of a
majority of the Series C Preferred Stock. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
3.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
16
3.10 Aggregation of Stock. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.11 Entire Agreement. This Agreement (including the Exhibits hereto,
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
3.12 Confidentiality. Each Investor not otherwise subject to a
fiduciary duty agrees that it will maintain the confidentiality of any
information obtained by it, pursuant to this Agreement or by virtue of its
relationship as a stockholder of the Company, which is not otherwise lawfully
available from other sources, subject to the disclosure of information of a non-
technical nature, including summary financial information, which such Investor
is obligated to disclose to its partners and/or stockholders.
17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
KANA COMMUNICATIONS, INC.
/s/ Xxxx X. Xxxxxx
By:------------------------------------
Xxxx X. Xxxxxx
President
INVESTORS:
/s/ Xxxx Xxxxxx
---------------------------------------
XXXX X. XXXXXX
ATGF II, a Panamanian corporation
/s/ Xxxx Xxxxxx
By:----------------------------------------
Its: Director
New Millennium Partners - Kana, L.P.
/s/ Xxxxxx Xxxxxx
---------------------------------------------
Xxxxxx Xxxxxx
Managing Member
New Millenium Venture Partners, LLC;
General Partner
for New Millenium Partners - Kana, L.P.
Benchmark Capital Partners, L.P.
By: Benchmark Capital Management Co., L.L.C.
Its General Partner
By: /s/ XXXXX XXXXXX
------------------------------------------
Name: XXXXX XXXXXX
-----------------------------------
Title: ___________________________________
Address: ___________________________________
___________________________________
Benchmark Founders' Fund, L.P.
By: Benchmark Capital Management Co., L.L.C.
Its General Partner
By: /s/ XXXXX XXXXXX
------------------------------------------
Name: XXXXX XXXXXX
-----------------------------------
Title: ___________________________________
Address: ___________________________________
___________________________________
Xxxxxx Xxxxxx Associates Fund IV, LP
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------
Title: ______________________________
Address:______________________________
______________________________
Xxxxxx Xxxxxx Partners IV, LLC
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------
Title: ______________________________
Address:______________________________
______________________________
Xxxxxx Xxxxxxxx X.X.
By: /s/ XXXXX X. XXXXXXX
---------------------------------
Title: VP
------------------------------
Address: __________________________
__________________________
/s/ Xxxx Xxxxxx
-------------------------------
Xxxxxx Master Trust
/s/ Xxxxxx X. XxXxxxxx
-------------------------------
Xxxxxx X. XxXxxxxx
/s/ Xxxxxxxxxxx Xxxx
-------------------------------
Pivotal Partners L.P.
/s/ Xxxxx X. Xxxxxxxxxx
-------------------------------
Xxxxx X. Xxxxxxxxxx 1995 Trust
/s/ Xxxxxxx X. Xxxxxxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxxxxxx
/s/ Xxxxxxx Xxxxxx
-------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx-Xxxxxxx
-------------------------------
Xxxxxxx Xxxxxx-Xxxxxxx
/s/ Xxxx Xxxxxxxx
-------------------------------
Xxxx Xxxxxxxx
/s/ Xxx Xxxxxx
-------------------------------
Xxx Xxxxxx
Convergys Corporation
By: /s/ Xxxxxx X. Rolls
---------------------------------
Its: CFO
---------------------------------
SCHEDULE A
----------
Benchmark Capital Partners, L.P.
Benchmark Founders' Fund, X.X.
Xxxxxx Xxxxxx Associates Fund IV, X.X.
Xxxxxx Xxxxxx Partners IV, LLC
Xxxxxx Xxxxxxxx, X.X.
Xxxx Xxxxxx
Xxxx X. Xxxx
High Street Partners, L.P.
Xxxxxxx Xxxxxxx
Xxxx X. Xxxxxxx Trust 1991
Xxxxxxxx Xxxxxxx
Stanford University
X.X. Xxxxxxx III, X.X.
Xxxxxxx Strategic Partners III, L.P.
ATGF II, a Panamanian corporation
Xxxxx Xxxxxxxxxx
Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxx XxXxxxxx
Aspect Telecommunications
Xxxxxx Master Trust
Xxxxxx X. XxXxxxxx
Pivotal Partners L.P.
Xxxxx X. Xxxxxxxxxx 1995 Trust
Xxxxxxx X. Xxxxxxxxxxx
Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx-Xxxxxxx
Xxxx Xxxxxxxx
Xxx Xxxxxx
New Millenium Venture Partners, LLC
