NEWGEN RESULTS CORPORATION
RESTATED INVESTORS' RIGHTS AGREEMENT
This Restated Investors' Rights Agreement (this "Agreement") is made and
entered into as of November 26, 1997 by and among Newgen Results Corporation, a
California corporation (the "Company"), Xxxxxxx Xxxxxx, an individual, Xxxxxx
Xxxxxx, an individual, K&S Imports, Inc., a California corporation, and Johari
Investment Company Ltd., a corporation organized under the laws of the province
of British Columbia, Canada (collectively the "Prior Investors"), and the
persons and entities listed on Exhibit A attached hereto (hereinafter
collectively the "Investors").
RECITALS
A. Certain of the Investors hold shares of the Company's Series A
Preferred Stock (the "Series A Stock") and such Investors and the Prior
Investors possess rights pursuant to that certain Investors' Rights Agreement
dated August 7, 1996 (the "Prior Agreement").
B. The undersigned Investors who hold Series A Stock and the Prior
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.
C. Certain of the Investors have agreed to purchase from the Company, and
the Company has agreed to sell to certain of the Investors, shares of the
Company's Series B Preferred Stock ("Series B Stock") on the terms and
conditions set forth in that certain Series B Preferred Stock Purchase
Agreement, dated of even date herewith by and among the Company and such
Investors (the "Series B Agreement").
D. In connection with their purchase of Series B Stock, such Investors
desire certain information and registration rights and rights of first refusal,
all as more fully set forth herein.
E. In connection with the consummation of the sale of the Series B Stock,
the Company, the Investors and the Prior Investors desire to provide for rights
to be granted to and covenants to be made with Investors acquiring Series B
Stock, and the Investors and the Prior 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Agreement hereby agree that the Prior Agreement shall be superseded and replaced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.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. INFORMATION RIGHTS AND CERTAIN COVENANTS.
1.1 FINANCIAL INFORMATION. The Company covenants and agrees that,
commencing on the date of this Agreement, for so long as any Investor holds in
any combination at least 45,000 shares of Series A Stock, Series B Stock
(collectively, "Preferred Stock") and/or shares of Common Stock of the Company
("Common Stock") issued upon the conversion of such shares of Preferred Stock
(collectively "Conversion Stock") the Company will:
(a) ANNUAL REPORTS. Furnish to such Investor, as soon as practicable
and in any event within 120 days after the end of each fiscal year of the
Company, a consolidated Balance Sheet as of the end of such fiscal year, a
consolidated Statement of Income and a consolidated Statement of Cash Flows of
the Company and its subsidiaries, if any, for such year, setting forth in each
case in comparative form the figures from the Company's previous fiscal year (if
any), all prepared in accordance with generally accepted accounting principles
and practices, consistently applied throughout all periods presented (except as
noted thereon), and audited by nationally recognized independent certified
public accountants;
(b) QUARTERLY REPORTS. Furnish to such Investor as soon as
practicable, and in any event within 45 days of the end of each fiscal quarter
of the Company (except the last quarter of the Company's fiscal year), an
unaudited consolidated Balance Sheet as of the end of such fiscal quarter, an
unaudited consolidated Statement of Income and an unaudited consolidated
Statement of Cash Flows of the Company and its subsidiaries, if any, for such
quarter, all prepared in accordance with generally accepted accounting
principles and practices, consistently applied throughout all periods presented
(except as noted thereon), subject to normal year-end audit adjustments and the
absence of footnotes from unaudited financial statements;
(c) MONTHLY REPORTS. Furnish to such Investor as soon as
practicable, and in any event within 45 days of the end of each calendar month
(except the last month of the Company's fiscal year), an unaudited consolidated
Balance Sheet as of the end of such calendar month, an unaudited consolidated
Statement of Income and an unaudited consolidated Statement of Cash Flows of the
Company and its subsidiaries, if any, for such month, setting forth in each case
in comparative form the actual figures for such period and the budgeted figures
for such period, all prepared in accordance with generally accepted accounting
principles and practices, consistently applied throughout all periods presented
(except as noted thereon), subject to normal year-end audit adjustments and the
absence of footnotes from unaudited financial statements; and
2.
(d) ANNUAL BUDGET. Furnish to such Investor as soon as practicable
and in any event no later than 30 days prior to the close of each fiscal year of
the Company, an annual operating plan for the next immediate fiscal year.
(e) CONFIDENTIALITY. Each Investor agrees to hold all information
received pursuant to this Section in confidence, and not to use or disclose any
of such information to any third party, except to the extent such information
may be made publicly available by the Company and except as required by law;
provided however, that Investors may make such disclosures on a confidential
basis as are reasonably necessary to their limited partners, affiliates, agents,
attorneys or accountants to monitor and protect their investment in the Company.
1.2 INSPECTION RIGHTS. The Company shall permit each Investor holding at
least 45,000 shares of Preferred Stock, Conversion Stock, or any combination
thereof, at such Investor's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers and accountants, all
at such reasonable times as may be requested by such Investor. Each Investor
agrees to hold all information obtained from such inspections in confidence
pursuant to the terms of Section 1.1(e).
1.3 ATTENDANCE AT BOARD MEETINGS. The Company shall use reasonable, good
faith efforts to provide each of Trident Capital Management, L.L.C., BankAmerica
Ventures and BA Venture Partners II (collectively "Observer Investors"), for so
long as each such entity together with its affiliates owns at least 100,000
shares of Preferred Stock, Conversion Stock, or any combination thereof, with
notice, either in writing or by telephone, of all meetings of the Board of
Directors (the "Board") or Board Committees at the same time and in the same
manner that Board members receive notice. The Company will also provide
Observer Investors with a copy of any written consents of the Board or any Board
Committee ("Consents"). Observer Investors shall, at such Observer Investors'
own expense, be permitted to attend all meetings of the Board or Board
Committees as observers; provided however, that the members of the Board (or
Board Committee as applicable) may, without prior notice exclude Observer
Investors from attending any part of the meeting that the Board (or Board
Committee as applicable) determines in good faith is of such a sensitive,
confidential or privileged nature that Observer Investors should not be present.
In the event that Observer Investors attend any meeting of the Board or Board
Committee or receive any Consents, they agree to hold all information obtained
from such meetings or Consents in confidence pursuant to the terms of Section
1.1(e). In no event shall the failure to give Observer Investors notice of a
meeting of the Board or Board Committee, Consent or the exclusion of Observer
Investors from any part of any meeting pursuant to this Section be deemed to
invalidate any actions taken at such meetings or in such Consents.
3.
1.4 VCOC RIGHTS. The organizational documents of Capstone Ventures, a
Delaware limited partnership, Information Associates, L.P., a Delaware limited
partnership, Information Associates, C.V., a Netherlands Antilles limited
partnership, Information Associates - II, L.P., a Delaware limited partnership,
and IA - II Affiliates Fund, L.L.C., a Delaware limited liability company
(individually, a "Fund" and collectively, the "Funds"), require that each of the
Funds have and maintain the status of a "venture capital operating company" as
defined in the Department of Labor Regulations, Section 25101.3-101(d) (the
"Regulations"). The Regulations require that a venture capital operating
company must have direct contractual rights to participate substantially in or
substantially influence the conduct of management of its portfolio companies.
Accordingly, in addition to the other rights provided under this Agreement and
any other written agreement with each of the Funds, each Fund shall have the
separate and individual right to consult with management concerning the
Company's finances, operations and strategy. In addition, if any of the Funds
are not represented on the Board, the Company shall invite a representative of
such Fund(s) to attend (at such Fund(s) expense) all meetings of the Board (and
committees of the Board) in a nonvoting observer capacity and, in this respect,
shall give such representative(s) copies of all notices, minutes, consents, and
other materials that it provides to its directors; provided however, that the
members of the Board (or Board Committee as applicable) may, without prior
notice, exclude any of the Funds from attending any part of any meeting or
delete any written materials provided to members of the Board (or Board
Committee as applicable) that the Board (or Board Committee as applicable)
determines in good faith is of such a sensitive, confidential or privileged
nature that the representative(s) of the Funds should not be present or, in the
case of written materials, should not review. Any information provided to any
of the Funds under this Section 1.4 shall be held in confidence pursuant to the
terms of Section 1.1(e). In no event shall the failure to give the Funds any
written materials, notice of any meeting of the Board or Board Committee, or the
exclusion of the Funds from any meeting of the Board or Board Committee pursuant
to this Section be deemed to invalidate any actions taken at such meetings or by
written consent.
1.5 TERMINATION OF CERTAIN RIGHTS. The Company's obligations under
Sections 1.1, 1.2, 1.3 and 1.4 above will terminate upon the closing of a public
offering by the Company that meets the criteria for automatic conversion of the
Preferred Stock set forth in Article VI, Section E.2.(a) of the Company's
Amended and Restated Articles of Incorporation, as they may be further amended
or restated from time to time (the "Articles of Incorporation").
1.6 SMALL BUSINESS ADMINISTRATION MATTERS.
(a) The proceeds from the purchase of the Series B Stock pursuant to
the Series B Agreement by BankAmerica Ventures (the "Proceeds") shall be used by
the Company for working capital, repayment of loans, and other general corporate
purposes.
4.
The Company shall provide to representatives of BankAmerica Ventures and the
Small Business Administration (the "SBA") reasonable access to its books and
records for the purpose of confirming such use of the Proceeds or for other
purposes related to the qualification of the financing provided by BankAmerica
Ventures to the Company.
(b) For a period of one year following the Initial Closing (as
defined in the Series B Agreement), the Company shall not change the nature of
its business activity if such change would render the Company ineligible, within
the meaning of 13 C.F.R. Section 107.720.
(c) So long as BankAmerica Ventures holds any securities of the
Company, the Company will comply at all times with the non-discrimination
requirements of 13 C.F.R. Parts 112, 113 and 117.
(d) Within 45 days after the end of each fiscal year, and at any
other time reasonably requested by BankAmerica Ventures, the Company shall
deliver to BankAmerica Ventures a written assessment in form and substance
satisfactory to BankAmerica Ventures, of the economic impact of BankAmerica
Ventures' investment in the Company, specifying (a) the full-time equivalent
jobs created or retained in connection with the investment, and (b) the impact
of the investment on the Company's business, in terms of revenue and profits,
and on taxes paid by the Company and its employees. In the event that the
Company reasonably incurs out-of-pocket expenses in excess of $1,000 in
preparing such written assessment at BankAmerica Ventures' request, BankAmerica
Ventures shall reimburse the Company for all such reasonable expenses. Upon
request the Company promptly (and in any event within 20 days of such request)
shall furnish to BankAmerica Ventures all information (i) reasonably requested
by BankAmerica Ventures in order for BankAmerica Ventures to comply with the
requirements of 13 C.F.R. Section 107.620 or to prepare and file SBA Form 468
and (ii) reasonably requested or required by any governmental agency asserting
jurisdiction over BankAmerica Ventures. Any submission of financial information
pursuant to this Section 1.6 and Section 1.1 shall be under cover of a
certificate executed by the Company's president, chief executive officer, chief
financial officer or treasurer certifying that such information (i) relates to
the Company, (ii) to the best of the Company's knowledge is accurate and (iii)
if applicable, has been audited by the Company's independent auditors.
(e) In the event that BankAmerica Ventures determines that it has a
Regulatory Problem (as defined below), it shall have the right to transfer its
Preferred Stock to an affiliate of BankAmerica Ventures (or an entity reasonably
acceptable to the Company) without regard to any restrictions on transfer set
forth in the Series A Preferred Stock Purchase Agreement dated August 7, 1996,
the Series B Agreement or any agreement executed and delivered in connection
therewith, provided that the transferee agrees to become a party to each such
agreement, and provided further, that such transfer
5.
complies with applicable federal and state securities laws. The Company shall
take all actions as may be reasonably requested by BankAmerica Ventures in order
to (i) effectuate and facilitate any transfer by BankAmerica Ventures of its
Preferred Stock then held by it to any such affiliate (or an entity reasonably
acceptable to the Company) designated by BankAmerica Ventures, (ii) permit
BankAmerica Ventures (or any of its affiliates) to exchange all or any portion
of any voting securities of the Company then held by BankAmerica Ventures (or
any affiliate), on a share-for-share basis, into non-voting securities of the
Company, which non-voting securities shall be identical in all respects to the
voting securities exchanged therefor (except for voting rights and that the
non-voting securities shall be convertible or exchangeable for voting securities
on such terms as may be necessary in light of regulatory requirements then
prevailing), and (iii) amend this Agreement and any other agreements as may be
necessary to effectuate and reflect the foregoing. The parties to this
Agreement agree to vote all of the Company's securities held by them in favor of
such amendments and actions. For purposes of this Section 1.6, a "Regulatory
Problem" means any set of circumstances wherein it has been asserted by any
governmental regulatory agency with jurisdiction over BankAmerica Ventures that
BankAmerica Ventures is not entitled to hold, or exercise any significant right
with respect to, the Preferred Stock or the currently unissued Common Stock of
the Company into which the shares of Preferred Stock are convertible.
1.7 KEY-PERSON INSURANCE. Subject to the approval of the Board of
Directors, the Company will use its best efforts to obtain and maintain in full
force and effect term life insurance in the amount of $2,000,000 on the life of
Xxxxxx Xxxxxxxx naming the Company as beneficiary.
2. REGISTRATION RIGHTS.
2.1 DEFINITIONS. For purposes of this Section 2:
(a) REGISTRATION. 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 effectiveness of such registration statement.
(b) REGISTRABLE SECURITIES. The term "Registrable Securities" means:
(1) all the shares of Common Stock of the Company issued or issuable upon the
conversion of any shares of Preferred Stock, (2) any shares of 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, all such
shares of Common Stock described in clause (1) of this subsection (b), (3) for
purposes of piggyback registration rights under Section 2.3 only, all shares of
Common Stock of the Company issued to the Prior
6.
Investors prior to August 7, 1996 or issuable upon conversion, if any, of such
shares of Common Stock, and (4) for purposes of piggyback registration rights
under Section 2.3 only, any shares of 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, all such shares of Common Stock described in
clause (3) of this subsection (b); excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which rights under
this Section 2 are not assigned in accordance with this Agreement, any
Registrable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act ("Rule 144") or shares of Common Stock held
by all of any Holder of less than 1% of the outstanding Common Stock of the
Company if all of such shares are available for sale pursuant to Rule 144 in any
ninety (90) day period.
(c) REGISTRABLE SECURITIES THEN OUTSTANDING. The number of shares of
"Registrable Securities then outstanding" shall mean the number of shares of
Common Stock which are Registrable Securities and are then (1) issued and
outstanding and (2) issuable pursuant to the exercise or conversion of then
outstanding and then exercisable options, warrants or convertible securities.
(d) HOLDER. For purposes of this Section 2 and Sections 3 and 4
hereof, the term "Holder" means any person owning of record Registrable
Securities that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any assignee of record of such
Registrable Securities to whom rights under this Section 2 have been duly
assigned in accordance with this Agreement; PROVIDED HOWEVER, that for purposes
of this Agreement, a record holder of shares of Preferred Stock convertible into
such Registrable Securities shall be deemed to be the Holder of such Registrable
Securities; and PROVIDED FURTHER, that the Company shall in no event be
obligated to register shares of Preferred Stock and that Holders of Registrable
Securities will not be required to convert their shares of Preferred Stock into
Common Stock in order to exercise the registration rights granted hereunder,
until immediately before the closing of the offering to which the registration
relates; and provided, further, that the definition of "Holder" as used in
Sections 2.2 and 2.4 of this Agreement shall not include the Prior Investors.
(e) FORM S-3. The term "Form S-3" means such form under the
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities 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.
(f) SEC. The term "SEC" or "Commission" means the U.S. Securities
and Exchange Commission.
7.
(g) SECURITIES ACT. The term "Securities Act" shall mean the
Securities Act of 1933, as amended, or any similar federal statute and the rules
and regulations of the SEC thereunder, all as shall be in effect at the time.
2.2 DEMAND REGISTRATION.
(a) REQUEST BY HOLDERS. If the Company shall receive at any time
after August 6, 1998 a written request from the Holders of at least thirty-five
percent (35%) the Registrable Securities then outstanding that the Company file
a registration statement under the Securities Act covering the registration of
Registrable Securities pursuant to this Section 2.2, then the Company shall,
within 10 business days of the receipt of such written request, give written
notice of such request ("Request Notice") to all Holders, and use its best
efforts to effect, as soon as practicable, the registration under the Securities
Act of all Registrable Securities which Holders request to be registered and
included in such registration by written notice given by such Holders to the
Company within 20 days after receipt of the Request Notice, subject only to the
limitations of this Section 2.2; PROVIDED that the Registrable Securities
requested by all Holders to be registered pursuant to such request must have an
anticipated aggregate public offering price (before any underwriting discounts
and commissions) of not less than $7,500,000 (or $15,000,000 if such requested
registration is the initial public offering of the Company's stock registered
under the Securities Act).
(b) UNDERWRITING. If the Holders initiating the registration request
under this Section 2.2 ("Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
then they shall so advise the Company as a part of their request made pursuant
to this Section 2.2 and the Company shall include such information in the
written notice referred to in subsection 2.2(a). In such event, the right of
any Holder to include his 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 enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by a majority in interest of the
Holders, but subject to the Company's reasonable approval. Notwithstanding any
other provision of this Section 2.2, if the managing underwriter(s) advise(s)
the Company in writing that marketing factors require a limitation of the number
of securities to be underwritten then the Company shall so advise all Holders of
Registrable Securities which would otherwise be registered and underwritten
pursuant hereto, and the number of Registrable Securities that may be included
in the underwriting shall be reduced as required by the underwriter(s) and
allocated among the Holders of Registrable
8.
Securities on a pro rata basis according to the number of Registrable Securities
then outstanding held by each Holder requesting registration (including the
Initiating Holders); PROVIDED HOWEVER, that the number of shares of Registrable
Securities to be included in such underwriting and registration shall not be
reduced unless all other securities of the Company are first entirely excluded
from the underwriting and registration. Any Registrable Securities excluded and
withdrawn from such underwriting shall be withdrawn from the registration.
(c) MAXIMUM NUMBER OF DEMAND REGISTRATIONS. The Company is obligated
to effect only two (2) such registrations pursuant to this Section 2.2.
(d) DEFERRAL. Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting the filing of a registration statement pursuant to
this Section 2.2, a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board, 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, then the Company shall have the right to
defer such filing for a period of not more than 120 days after receipt of the
request of the Initiating Holders; PROVIDED HOWEVER, that the Company may not
utilize this right more than once in any twelve (12) month period.
(e) EXPENSES. All expenses incurred in connection with a
registration pursuant to this Section 2.2, including without limitation all
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders (but excluding
underwriters' discounts and commissions), shall be borne by the Company. Each
Holder participating in a registration pursuant to this Section 2.2 shall bear
such Holder's proportionate share (based on the total number of shares sold in
such registration other than for the account of the Company) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering. Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to this Section 2.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered, unless the Holders of a majority of the Registrable Securities then
outstanding agree to forfeit their right to one (1) demand registration pursuant
to this Section 2.2 (in which case such right shall be forfeited by all Holders
of Registrable Securities); 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 not known to the Holders at the
time of their request for such registration and have withdrawn their request for
registration with reasonable promptness after learning 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 this Section 2.2.
9.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least 30 days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to any registration
under Section 2.2 or Section 2.4 of this Agreement or to any employee benefit
plan or a corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by such Holder shall, within 20 days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Registrable Securities
such Holder wishes to include in such registration statement. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) UNDERWRITING. If a registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities. In
such event the right of any such Holder's Registrable Securities to be
included in a registration pursuant to this Section 2.3 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter(s) selected for
such underwriting. Notwithstanding any other provision of this Agreement if
the managing underwriter(s) determine(s) in good faith that marketing factors
require a limitation of the number of shares to be underwritten, then the
managing underwriter(s) may exclude shares (including Registrable Securities)
from the registration and the underwriting. The number of shares that may be
included in the registration and the underwriting shall be allocated first to
the Company. After shares have been allocated to the Company, the remaining
shares that may be included in the registration and underwriting shall be
allocated on a one-for-one basis as between two groups. These two groups are
(i) the Prior Investors, and (ii) the holders of Registrable Securities to
the extent their Registrable Securities are derived from Preferred Stock.
Among the Holders requesting inclusion of their Registrable Securities in
such registration statement within these two groups, shares shall be
allocated on a pro rata basis based on the total number of Registrable
Securities held by each such Holder in that group. The right of the
underwriters to exclude shares (including Registrable Securities) from the
registration and the underwriting. The number of shares that may bei ncluded
in the registration and the underwriting shall be allocated first to the
Company. After shares have been allocated to the Company, the remaining
shares that may be included in the registration and underwriting shall be
allocated on a one-for-one basis as between two groups. These two groups are
(i) the Prior Investors, and (ii) the holders of Registrable Securities to
the extent their Registrable Securities are derived from Preferred Stock.
Among the Holders requesting inclusion of their Registrable Securities in
such registration statement within these two groups, shares shall be
allocated on a pro rata basis based on the total number of Registrsble
securities held by each such HOlder in that group. The right of the
underwriters to exclude shares (including Registrable Securities)
10.
from the registration and underwriting as described above shall be restricted
so that the number of Registrable Securities included in any such
registration is not reduced below twenty-five percent (25%) of the shares
included in the registration, except for a registration relating to the
Company's initial public offering from which all Registrable Securities may
be excluded. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice
to the Company and the underwriter, delivered at least seven (7) business
days prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder 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 "Holder", and any pro rata reduction
with respect to such "Holder" shall be based upon the aggregate amount of
shares carrying registration rights owned by all entities and individuals
included in such "Holder", as defined in this sentence.
(b) EXPENSES. All expenses incurred in connection with a
registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities 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, then the Company will:
(a) NOTICE. Promptly give written notice of the proposed
registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders of Registrable Securities; and
(b) REGISTRATION. As soon as practicable, effect 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 20 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 2.4:
11.
(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 of less than $500,000;
(3) if the Company shall furnish to the Holders a certificate
signed by the President or Chief Executive Officer of the Company stating that
in the good faith judgment of the Board, it would be seriously detrimental to
the Company and its shareholders for such Form S-3 Registration to be filed and
it is therefore essential to defer the filing of such Form S-3 Registration
Statement, then the Company shall have the right to defer the filing of the Form
S-3 registration statement for a period of not more than 120 days after receipt
of the request of the Holder or Holders under this Section 2.4; PROVIDED
HOWEVER, that the Company may not utilize this right more than once in any
twelve (12) month period; or
(4) 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) EXPENSES. The Company shall pay all expenses incurred in
connection with each registration requested pursuant to this Section 2.4,
(excluding underwriters' or brokers' discounts and commissions), including
without limitation all filing, registration and qualification, printers' and
accounting fees and the reasonable fees and disbursements of one counsel for the
selling Holder or Holders and counsel for the Company.
(d) NOT DEMAND REGISTRATION. Form S-3 registrations shall not be
deemed to be demand registrations as described in Section 2.2 above.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities under this Agreement, 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 registered thereunder, keep such
registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with
such registration
12.
statement as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by them that
are included in such registration.
(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.
(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(s) 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 Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities, on the date that such Registrable Securities are
delivered to the underwriters for sale, 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 as of such date of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a "comfort"
letter dated as of such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the
13.
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
2.6 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2.2, 2.3 or
2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be reasonably required to
timely effect the registration of their Registrable Securities.
2.7 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 2.
2.8 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Section 2.2, 2.3 or 2.4:
(a) BY THE COMPANY. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the shareholders, partners, officers
and directors of each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended, (the "1934 Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities 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
Securities Act, the 1934 Act, any federal or state securities law or
any rule or regulation promulgated under the Securities Act, the 1934
Act or any federal or state securities law in connection with the
offering covered by such registration statement;
14.
and the Company will reimburse each such Holder, shareholder, partner, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating or
defending any such loss, claim, damage, liability or action: PROVIDED HOWEVER,
that the indemnity agreement contained in this subsection 2.8(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 such Holder, shareholder, partner,
officer, director, underwriter or controlling person of such Holder.
(b) BY SELLING HOLDERS. 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 have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, and any other
Holder selling securities under such registration statement or any of such other
Holder's shareholders, partners, directors or officers or any person who
controls such Holder within the meaning of the Securities Act or the 1934 Act,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, or other such
Holder, shareholder, partner or director, officer or controlling person of such
other Holder may become subject under the Securities 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 reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, or other Holder,
shareholder, partner, officer, director or controlling person of such other
Holder in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED HOWEVER, that the indemnity agreement
contained in this subsection 2.8(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; and PROVIDED FURTHER, that the total amounts
payable in indemnity by a Holder under this Section 2.8(b) in respect of any
Violation shall not exceed the net proceeds received by such Holder in the
registered offering out of which such Violation arises.
(c) NOTICE. Promptly after receipt by an indemnified party under
this Section 2.8 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
15.
indemnifying party under this Section 2.8, 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, that an indemnified party shall have the right to retain its own
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 conflict of
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
2.8, 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 2.8.
(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing indemnity
agreements of the Company and Holders are subject to the condition that insofar
as they relate to any Violation made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act; PROVIDED
HOWEVER, that this condition shall only apply where the indemnified party had an
obligation to provide the Final Prospectus to such person.
(e) CONTRIBUTION. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 2.8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 2.8 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
2.8; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable
16.
Securities offered by and sold under the registration statement bears to the
public offering price of all securities offered by and sold under such
registration statement, and the Company and other selling Holders are
responsible for the remaining portion; provided, however, that, in any such
case, (A) no such Holder will be required to contribute any amount in excess of
the net proceeds received from the Registrable Securities offered and sold by
such Holder pursuant to such registration statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
(f) SURVIVAL. The obligations of the Company and Holders under this
Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
2.9 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that it shall
not, to the extent requested by the Company or an underwriter of securities of
the Company, sell or otherwise transfer or dispose of any Registrable Securities
or other shares of stock of the Company then owned by such Holder (other than to
donees or partners of the Holder who agree to be similarly bound) for up to 180
days following the effective date of the first registration statement of the
Company filed under the Securities Act and for up to 90 days following the
effective date of all subsequent registration statements of the Company filed
under the Securities Act; PROVIDED HOWEVER, that:
(a) such agreement shall be applicable only to registration
statements which cover securities to be sold on behalf of the Company in an
underwritten public offering; and
(b) all executive officers and directors enter into similar
agreements and the Company uses all reasonable efforts to obtain similar
agreements from all other holders of at least one percent (1%) of the Company's
then outstanding voting agreements.
In order to enforce the foregoing covenant, the Company shall have the
right to place restrictive legends on the certificates representing the shares
subject to this Section and to impose stop transfer instructions with respect to
the Registrable Securities and such other shares of stock of each Holder (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
2.10 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 Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to:
17.
(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 of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the 1934 Act (at any time after it has become subject to such
reporting requirements); and
(c) So long as a Holder owns any Registrable Securities, to furnish
to the Holder 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 90 days after the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public), and of
the Securities Act and the 1934 Act (at any time after it has become subject to
the reporting requirements of the 1934 Act), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration (at any time after the Company has become subject to the
reporting requirements of the 1934 Act).
2.11 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have no
obligations pursuant to Sections 2.2 through 2.4 with respect to: (i) any
request or requests for registration made by any Holder on a date more than five
(5) years after the closing date of the Company's initial public offering; or
(ii) any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to Section 2.2, 2.3 or 2.4 if, (A) the Company has
completed an initial public offering of its Common Stock and is subject to the
provisions of the 1934 Act and (B) in the opinion of counsel to the Company, all
such Registrable Securities proposed to be sold by a Holder may be sold in a
three-month period without registration under the Securities Act pursuant to
Rule 144 under the Securities Act.
2.12 NO FUTURE REGISTRATION RIGHTS. The Company shall not grant future
registration rights without the consent of the holders of at least
three-quarters (3/4) of the Conversion Stock issued or issuable upon conversion
of the Preferred Stock voting together as a class, unless subordinate to the
registration rights granted in connection herewith.
3. RIGHT OF FIRST REFUSAL.
3.1 GENERAL. Each Holder (as defined in Section 2.1(d) (which term shall
include the Prior Investors for purposes of this Section 3)) of at least 45,000
shares of
18.
Preferred Stock, Conversion Stock, Common Stock, or any combination thereof, any
party to whom such Holder's rights under this Section 3 have been duly assigned
in accordance with Section 4.1(c), each Prior Investor and any party to whom
such Prior Investor's rights under this Section 3 have been duly assigned in
accordance with Section 4.1(c) (each such Holder or assignee and each Prior
Investor or assignee being hereinafter referred to as a "Rights Holder") has the
right of first refusal to purchase such Rights Holder's Pro Rata Share (as
defined below), of all (or any part) of any "New Securities" (as defined in
Section 3.2) that the Company may from time to time issue after the date of this
Agreement. A Rights Holder's "Pro Rata Share" for purposes of this right of
first refusal is the ratio of (a) the number of shares of Common Stock of the
Company equal to the sum of (i) the total number of shares of Common Stock of
the Company then held by the Rights Holder plus (ii) the total number of shares
of Common Stock of the Company into which the shares of Preferred Stock then
held by the Rights Holder are then convertible plus (iii) the number of shares
of Common Stock of the Company subject to all options and warrants then held by
the Rights Holder, to (b) a number of shares of Common Stock of the Company
equal to the sum of (i) the total number of shares of Common Stock of the
Company then outstanding plus (ii) the total number of shares of Common Stock of
the Company into which all then outstanding shares of Preferred Stock are then
convertible plus (iii) the number of shares of Common Stock of the Company
reserved for issuance under stock purchase and stock option plans of the Company
and outstanding warrants up to 700,000; PROVIDED HOWEVER, that if at least one
member of the Board elected by the holders of Series A Stock voting as a
separate class and at least one member of the Board elected by holders of
Series B Stock voting as a separate class, has approved an increase of such
reserved number beyond 700,000, then the limitation of 700,000 set forth herein
shall be increased to such larger number.
3.2 NEW SECURITIES. "New Securities" shall mean any Common Stock or
Preferred Stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred Stock and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock; provided, however, that
the term "New Securities" does not include:
(i) shares of the Company's Common Stock (and/or options or
warrants therefor) issued to employees, officers, directors, contractors,
advisors or consultants of the Company pursuant to incentive agreements or plans
approved by the Board; PROVIDED HOWEVER, that if such shares and/or options or
warrants therefor are issued to any of the Prior Investors or any affiliate or
family member thereof (excluding Xxx Xxxxxx for so long as he is an employee of
the Company), Board approval of such incentive agreements or plans includes at
least one member elected by the holders of Series A Preferred Stock voting as a
separate class and at least one member elected by the holders of Series B Stock
voting as a separate class;
19.
(ii) shares of Series B Preferred Stock issued under the Series
B Agreement, as such agreement may be amended;
(iii) any securities issuable upon conversion of or with respect
to any then outstanding shares of Series A Stock or Series B Stock of the
Company or Common Stock or other securities issuable upon conversion thereof;
(iv) 106,024 shares of Common Stock of the Company issuable
upon exercise of options to purchase securities outstanding on the date of this
Agreement ("Warrant Securities"):
(v) shares of the Company's Common Stock or Preferred Stock
issued in connection with any stock split or stock dividend;
(vi) securities offered by the Company to the public pursuant
to a registration statement filed under the Securities Act;
(vii) shares of the Company's Common Stock (and/or options or
warrants therefor) issued or issuable to parties providing the Company with
equipment leases, real property leases, loans, credit lines, guaranties of
indebtedness, cash price reductions or similar financing pursuant to agreements
or other arrangements approved by the Board; provided however, that if such
shares and/or options or warrants are issued to any of the Prior Investors or
any affiliate or family member thereof, Board approval of such agreements or
other arrangements includes at least one member elected by the holders of Series
A Stock voting as a separate class and at least one member elected by the
holders of Series B Stock voting as a separate class;
(viii) securities issued pursuant to the acquisition of
another corporation or entity by the Company by consolidation, merger, purchase
of all or substantially all of the assets, or other reorganization in which the
Company acquires, in a single transaction or series of related transactions, all
or substantially all of the assets of such other corporation or entity or fifty
percent (50%) or more of the voting power of such other corporation or entity or
fifty percent (50%) or more of the equity ownership of such other entity; or
(ix) securities issued pursuant to any plans or agreements
approved by the Board, including at least one member elected by the holders of
the Series A Stock voting as a separate class and at least one member elected by
the holders of Series B Stock voting as a separate class.
3.3 PROCEDURES. In the event that the Company proposes to undertake an
issuance of New Securities, it shall give to each Rights Holder written notice
of its intent to issue New Securities (the "Notice"), describing the type of New
Securities and the
20.
price and the general terms upon which the Company proposes to issue such New
Securities. Each Rights Holder shall have 10 days from the receipt of any such
Notice to agree in writing to purchase such Rights Holder's Pro Rata Share of
such New Securities for the price and upon the general terms specified in the
Notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased (not to exceed such Rights Holder's Pro Rata
Share). If any Rights Holder fails to so agree in writing within such 10 day
period to purchase such Rights Holder's full Pro Rata Share of an offering of
New Securities (a "Nonpurchasing Holder"), then such Nonpurchasing Holder shall
forfeit the right hereunder to purchase that part of his Pro Rata Share of such
New Securities that he did not so agree to purchase and the Company shall
promptly give each Rights Holder who has timely agreed to purchase his full Pro
Rata Share of such offering of New Securities (a "Purchasing Holder") written
notice of the failure of any Nonpurchasing Holder to purchase such Nonpurchasing
Rights Holder's full Pro Rata Share of such offering of New Securities (the
"Overallotment Notice"). Each Purchasing Holder shall have a right of
overallotment such that such Purchasing Holder may agree to purchase a portion
of the Nonpurchasing Holders' unpurchased Pro Rata Shares of such offering on a
pro rata basis according to the relative Pro Rata Shares of the Purchasing
Rights Holders, at any time within 5 days after receiving the Overallotment
Notice.
3.4 FAILURE TO EXERCISE. In the event that the Rights Holders fail to
exercise in full the right of first refusal within such 10 plus 5 day period,
then the Company shall have 120 days thereafter to sell the New Securities with
respect to which the Rights Holders' rights of first refusal hereunder were not
exercised, at a price and upon general terms specified in the Company's Notice
to the Rights Holders. In the event that the Company has not issued and sold
the New Securities within such 120 day period, then the Company shall not
thereafter issue or sell any New Securities without again first offering such
New Securities to the Rights Holders pursuant to this Section 3.
3.5 TERMINATION. This right of first refusal shall terminate (i)
immediately before the closing of a public offering by the Company that meets
the criteria for automatic conversion of the Preferred Stock set forth in
Article VI, Section E.2.(a) of the Articles of Incorporation, or (ii) upon (a)
the sale of all or substantially all the assets of the Company or (b) an
acquisition of the Company by another corporation or entity by consolidation,
merger or other reorganization 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 fifty percent (50%) or more of
the voting power of the corporation or other entity surviving such transaction.
4. ASSIGNMENT AND AMENDMENT.
4.1 ASSIGNMENT. Notwithstanding anything herein to the contrary:
21.
(a) INFORMATION RIGHTS. The rights of an Investor under Section 1.1
or 1.2 hereof may be assigned to a party who acquires from an Investor (or an
Investor's permitted assigns) at least 45,000 shares of Preferred Stock,
Conversion Stock, or any combination thereof.
(b) REGISTRATION RIGHTS. The registration rights of a Holder under
Section 2 hereof may be assigned only to (i) a party who acquires at least
45,000 shares of Preferred Stock, Conversion Stock, Common Stock, or any
combination thereof, (ii) a partner or retired partner of any Holder, where such
Holder is a partnership or a member or retired member of any Holder where such
Holder is a limited liability corporation, (iii) a member of the "immediate
family" (as defined below) of any Holder that is an individual, (iv) a trust
established for the benefit of any Holder that is an individual, or (v) an
affiliated fund of any Holder that is a venture capital fund; or (vi) an
affiliate of a Holder that is a corporation; provided, however that no party may
be assigned any of the foregoing rights unless the Company is given written
notice by the assigning party at the time of such assignment stating the name
and address of the assignee and identifying the securities of the Company as to
which the rights in question are being assigned: and provided further that any
such assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of
this Section 4, by agreeing in writing to be bound by the terms hereof. As used
herein, the term "immediate family" will mean the Holder's spouse, lineal
descendant or antecedent, father, mother, brother or sister, adopted child or
grandchild, or the spouse of any child, adopted child, grandchild, or adopted
grandchild of the Holder.
(c) REFUSAL RIGHTS. The rights of first refusal of a Rights Holder
under Section 3 hereof may be assigned only to a party who acquires from a
Holder at least 45,000 shares of Preferred Stock, Conversion Stock, Common
Stock, or any combination thereof; PROVIDED HOWEVER that no party may be
assigned any of the foregoing rights unless the Company is given written notice
by the assigning party at the time of such assignment stating the name and
address of the assignee and identifying the securities of the Company as to
which the rights in question are being assigned; and PROVIDED FURTHER that any
such assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of
this Section 4, by agreeing in writing to be bound by the terms hereof.
4.2 AMENDMENT OF RIGHTS. Subject to Section 4.3, any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company, the Investors
(and/or any of their permitted successors or assigns) holding more than
three-quarters (3/4) of the then outstanding shares of Preferred Stock and
Conversion Stock, and the Prior Investors (and/or any of their permitted
successors or assigns) holding more than a majority of the Registrable
Securities then
22.
held or beneficially owned by such Prior Investors (and/or any of their
permitted successors or assigns). Any amendment or waiver effected in
accordance with this Section 4.2 shall be binding upon each Investor, each
Holder, each Prior Investor, each permitted successor or assign of such
Investor, Holder or Prior Investor and the Company.
4.3 NEW INVESTORS. Notwithstanding anything herein to the contrary, if
pursuant to Section 2.2 of the Series B Agreement, additional parties purchase
shares of Series B Stock as "New Investors" thereunder, then each such New
Investor shall become a party to this Agreement as an "Investor" hereunder,
without the need for any consent, approval or signature of any Investor when
such New Investor has both: (i) purchased shares of Series B Stock under the
Series B Agreement and paid the Company all consideration payable for such
shares and (ii) executed one or more counterpart signature pages to this
Agreement as an "Investor", with the Company's consent.
5. GENERAL PROVISIONS.
5.1 NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if deposited in the U.S. mail by registered or
certified mail, return receipt requested, postage prepaid, as follows:
(a) if to an Investor, at such Investor's respective address as set
forth on Exhibit A hereto and if to a Prior Investor, at such Prior Investor's
respective address as also set forth on Exhibit A hereto.
(b) if to the Company, at Newgen Results Corporation, 00000 Xxxx
Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx, 00000.
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the manner set forth above.
5.2 ENTIRE AGREEMENT. This Agreement, together with all the Exhibits
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
5.3 GOVERNING LAW. This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the State of California as
applied to
23.
agreements among California residents entered into and to be performed entirely
within California, excluding that body of law relating to conflict of laws and
choice of law.
5.4 SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, then such provision(s) shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision(s) were so excluded and shall be enforceable in accordance with
its terms.
5.5 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
5.6 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 4.1, the
provisions of this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and permitted assigns of the parties hereto.
5.7 CAPTIONS. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
5.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5.9 COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action suit or
other proceeding, including any and all appeals or petitions therefrom.
5.10 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this Agreement there
is a reference to a specific number of shares of Common Stock or Preferred Stock
of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the affect on the outstanding shares of such
class or series of stock by such subdivision, combination or stock dividend.
5.11 AGGREGATION OF STOCK. All shares 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.
24.
[THIS SPACE INTENTIONALLY LEFT BLANK]
25.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
COMPANY: NEWGEN RESULTS CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------------------
Xxxxxx Xxxxxxxx,
President and Chief Executive Officer
INVESTORS AND
PRIOR INVESTORS:
K&S IMPORTS, INC.
By: /s/ Xxx Xxxxxx
--------------------------------------------
Xxx Xxxxxx, President
JOHARI INVESTMENT COMPANY LTD.
By: /s/ Xxxx Xxxxxx
--------------------------------------------
Xxxx Xxxxxx, President
/s/ Xxxxxxx Xxxxxx
--------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
--------------------------------------------
Xxxxxx Xxxxxx
RESTATED INVESTORS' RIGHTS AGREEMENT
INFORMATION ASSOCIATES, L.P.
By: Trident Capital Management, L.L.C.,
its general partner
By: /s/ Xxxx Xxxxxxx
--------------------------------------------
Title: Managing Director
------------------------------------------
INFORMATION ASSOCIATES, C.V.
By: Trident Capital Management, L.L.C.,
its investment general partner
By: /s/ Xxxx Xxxxxxx
--------------------------------------------
Title: Managing Director
------------------------------------------
INFORMATION ASSOCIATES - II, L.P.
By: Trident Capital Management - II, L.L.C.,
its general partner
By: /s/ Xxxx Xxxxxxx
--------------------------------------------
Title: Managing Direcotr
------------------------------------------
IA - II AFFILIATES FUND, L.L.C.
By: /s/ Xxxx Xxxxxxx
--------------------------------------------
Title: Managing Director
------------------------------------------
RESTATED INVESTORS' RIGHTS AGREEMENT
CAPSTONE VENTURES
By: Capstone Management L.L.C.,
its General Partner
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxx, Managing Member
BANKAMERICA VENTURES
By: /s/ Xxxx X. Xxxxxx
-------------------------------------------
Xxxx X. Xxxxxx, Managing Director
BA VENTURE PARTNERS II
By: /s/ Xxxx X. Xxxxxx
-------------------------------------------
Xxxx X. Xxxxxx, General Partner
BANCAMERICA XXXXXXXXX XXXXXXXX
By: /s/ Xxxx X. Xxxxx
-------------------------------------------
Print Name: Xxxx X. Xxxxx
------------------------------------
Title: Dir. of Research
-----------------------------------------
GC&H INVESTMENTS
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------------
Xxxx X. Xxxxxxx, Executive Partner
RESTATED INVESTORS' RIGHTS AGREEMENT
SILICON VALLEY BANK
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------------
Print Name: Xxxx X. Xxxxxxxx
------------------------------------
Title: SVP
-----------------------------------------
SF GROWTH FUND
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Print Name: Xxxxx X. Xxxxxx
------------------------------------
Title: President
-----------------------------------------
/s/ Xxxxxx Xxxxxx
------------------------------------------------
Xxxxxx Xxxxxx
XXXXXX XXXXX REVOCABLE TRUST
By: /s/ Xxxxxx XxXxx
-------------------------------------------
Print Name: Xxxxxx XxXxx
------------------------------------
Title: co-Trustee
-----------------------------------------
RESTATED INVESTORS' RIGHTS AGREEMENT
BAYVIEW INVESTORS, LTD.
By: /s/ Xxxxx X. Xxxxx
------------------------------------------
Print Name:
-----------------------------------
Title:
----------------------------------------
RESTATED INVESTORS' RIGHTS AGREEMENT
EXHIBIT A
SCHEDULE OF INVESTORS
Name and Address
-------------------------------
K&S Imports, Inc.
0000 Xxx Xxxxxx Xxxx
Xxx Xxx, XX 00000
Johari Investment Co.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, X.X.
Xxxxxx X0X0X0
Attn: Xxxx Xxxxxx, President
Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx Xxxxx Xx, XX 00000
Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx Xxxxx Xx, XX 00000
Information Associates, L.P.
c/o Trident Capital Management, L.L.C.
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
Information Associates, C.V.
c/o Trident Capital Management, L.L.C.
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
Name and Address
-------------------------------
Information Associates - II, L.P.
x/x Xxxxxxx Xxxxxxx Xxxxxxxxxx - XX, X.X.X.
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
IA - II Affiliates Fund, L.L.C.
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
Capstone Ventures
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
BancAmerica Xxxxxxxxx Xxxxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
BankAmerica Ventures
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
BA Venture Partners II
c/o BankAmerica Ventures
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
GC&H Investments
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxx
Name and Address
-------------------------------
Silicon Valley Bank
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
SF Growth Fund
c/o Xxxxx X. Xxxxxx
Saint Xxxxxxx High School
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Xxxxxx Xxxxxx
0000 Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Xxxxxx XxXxx Revocable Trust
c/o Xxxxxx XxXxx
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
NEWGEN RESULTS CORPORATION
RESTATED INVESTORS' RIGHTS AGREEMENT
NOVEMBER __, 1997
TABLE OF CONTENTS
PAGE
1. Information Rights and Certain Covenants. . . . . . . . . . . . . . . . . . . .2
1.1 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Inspection Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.3 Attendance at Board Meetings . . . . . . . . . . . . . . . . . . . . . .3
1.4 VCOC Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.5 Termination of Certain Rights. . . . . . . . . . . . . . . . . . . . . .4
1.6 Small Business Administration Matters. . . . . . . . . . . . . . . . . .4
1.7 Key-Person Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .6
2. Registration Rights.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.2 Demand Registration. . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.3 Piggyback Registrations. . . . . . . . . . . . . . . . . . . . . . . . 10
2.4 Form S-3 Registration. . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . 12
2.6 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.7 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . . . 14
2.8 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.9 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . . . 17
2.10 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.11 Termination of the Company's Obligations . . . . . . . . . . . . . . . 18
2.12 No Future Registration Rights. . . . . . . . . . . . . . . . . . . . . 18
3. Right of First Refusal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 New Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.4 Failure to Exercise. . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.5 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4. Assignment and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Amendment of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 New Investors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5. General Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Entire Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Third Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . . . . . 24
5.7 Captions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.8 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.9 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . 24
5.10 Adjustments for Stock Splits, etc. . . . . . . . . . . . . . . . . . . 24
5.11 Aggregation of Stock.. . . . . . . . . . . . . . . . . . . . . . . . . 24
ii.
