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EXHIBIT 10.3
ADKNOWLEDGE INC.
SERIES D PREFERRED
STOCK PURCHASE AGREEMENT
March 4, 1998
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TABLE OF CONTENTS
Page
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1. Purchase and Sale of Stock ....................................... 1
1.1 Sale and Issuance of Series D Preferred Stock .............. 1
1.2 Closings ................................................... 1
2. Representations and Warranties of the Company .................... 2
2.1 Organization, Good Standing and Qualification .............. 2
2.2 Capitalization and Voting Rights ........................... 2
2.3 Subsidiaries ............................................... 3
2.4 Authorization .............................................. 3
2.5 Valid Issuance of Series D Preferred Stock ................. 3
2.6 Governmental Consents ...................................... 4
2.7 Offering ................................................... 4
2.8 Litigation ................................................. 4
2.9 Proprietary Information .................................... 5
2.10 Patents and Trademarks ..................................... 5
2.11 Compliance with Other Instruments .......................... 5
2.12 Agreements ................................................. 5
2.13 Related-Party Transactions ................................. 6
2.14 Registration Rights ........................................ 6
2.15 Corporate Documents ........................................ 7
2.16 Title to Property and Assets ............................... 7
2.17 Employee Benefit Plans ..................................... 7
2.18 Insurance .................................................. 7
2.19 Employment Matters ......................................... 7
2.20 Small Business Concern ..................................... 7
2.21 Disclosure ................................................. 7
2.22 Taxes ...................................................... 8
2.23 Stock Issuances to Founders and Employees .................. 8
2.24 Financial Statement ........................................ 8
2.25 Changes in Conditions ...................................... 8
2.26 Environmental and Safety Laws .............................. 9
3. Representations and Warranties of the Investors .................. 9
3.1 Authorization .............................................. 9
3.2 Purchase Entirely for Own Account .......................... 9
3.3 Disclosure of Information .................................. 9
3.4 Investment Experience ...................................... 9
3.5 Restricted Securities ...................................... 10
3.6 Further Limitations on Disposition ......................... 10
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3.7 Legends .................................................... 10
3.8 Further Representations by Foreign Investors ............... 11
4. California Commissioner of Corporations .......................... 11
4.1 Corporate Securities Law ................................... 11
5. Conditions of Investors' Obligations at each Closing ............. 11
5.1 Representations and Warranties ............................. 11
5.2 Performance ................................................ 11
5.3 Compliance Certificate ..................................... 12
5.4 Qualifications ............................................. 12
5.5 Board of Directors ......................................... 12
5.6 Restated Articles .......................................... 12
5.7 Amended and Restated Investor Rights Agreement ............. 12
5.8 Co-Sale Agreement .......................................... 12
5.9 Opinion of Company Counsel ................................. 12
5.10 Consent and Waivers ........................................ 12
5.11 Proceedings and Documents .................................. 12
6. Conditions of the Company's Obligations at each Closing ............. 13
6.1 Representations and Warranties ............................. 13
6.2 Payment of Purchase Price .................................. 13
6.3 Performance ................................................ 13
6.4 Qualifications ............................................. 13
6.5 Restated Articles .......................................... 13
6.6 Amended and Restated Investor Rights Agreement ............. 13
6.7 Co-Sale Agreement .......................................... 13
7. Miscellaneous .................................................... 13
7.1 Survival of Warranties ..................................... 13
7.2 Successors and Assigns ..................................... 13
7.3 Governing Law .............................................. 14
7.4 Counterparts ............................................... 14
7.5 Titles and Subtitles ....................................... 14
7.6 Notices .................................................... 14
7.7 Finder's Fee ............................................... 14
7.8 Expenses ................................................... 14
7.9 Amendments and Waivers ..................................... 15
7.10 Severability ............................................... 15
7.11 Aggregation of Stock ....................................... 15
7.12 Entire Agreement ........................................... 15
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List of Schedules
Schedule A Schedule of Investors
Schedule B Schedule of Exceptions
List of Exhibits
Exhibit A Amended and Restated Articles of Incorporation
Exhibit B Amended and Restated Investor Rights Agreements
Exhibit C Co-Sale Agreement
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SERIES D PREFERRED
STOCK PURCHASE AGREEMENT
This Series D Preferred Stock Purchase Agreement (the "Agreement") is made
this 4th day of March 1998, by and among AdKnowledge Inc., a California
corporation (the "Company"), and the investors listed on the Schedule of
Investors attached hereto as Schedule A, each of which is herein referred to as
an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 Sale and Issuance of Series D Preferred Stock.
(a) The Company shall adopt and file with the
Secretary of State of the State of California on or before the First Closing (as
defined below) the Amended and Restated Articles of Incorporation in the form
attached hereto as Exhibit A (the "Restated Articles").
(b) Subject to the terms and conditions of this
Agreement, each Investor agrees, severally and not jointly, to purchase at each
Closing (as defined below) and the Company agrees to sell and issue to each
Investor, severally and not jointly, at each Closing that number of shares of
the Company's Series D Preferred Stock set forth opposite each Investor's name
on Schedule A hereto under the headings "First Closing" and "Second Closing,"
respectively, for the purchase price set forth thereon.
1.2 Closings.
(a) The first purchase and sale of the Series D
Preferred Stock will take place at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx,
Two Embarcadero Place, 2200 Geng Road, Palo Alto, California, at 10:00 a.m. on
March 4, 1998, or at such other time and place as the Company and Investors
acquiring in the aggregate more than half the shares of Series D Preferred Stock
sold pursuant hereto shall mutually agree in writing (the "First Closing").
(b) The second purchase and sale of the Series D
Preferred Stock will take place at the offices of Xxxxxxx, Phleger & Xxxxxxxx,
Two Embarcadero Place, 2200 Geng Road, Palo Alto, California, at 10:00 a.m. on
March 4, 1998, or at such other time and place as the Company and Investors
acquiring in the aggregate more than half the shares of Series D Preferred Stock
sold pursuant hereto shall mutually agree in writing (the "Second Closing" and
collectively with the First Closing, a "Closing").
(c) At each Closing, the Company shall deliver to each
Investor a certificate representing the shares of Series D Preferred Stock that
such Investor is purchasing against payment of the purchase price therefor by
check, wire transfer, cancellation
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of indebtedness or such other form of payment as shall be mutually agreed upon
by such Investor and the Company. In the event that payment by an Investor is
made, in whole or in part, by cancellation of indebtedness, then such Investor
shall surrender to the Company for cancellation at such Closing any evidence of
such indebtedness or shall execute an instrument of cancellation in form and
substance reasonably acceptable to the Company.
2. Representations and Warranties of the Company. The Company
hereby represents and warrants to each investor, except as set forth on a
Schedule of Exceptions (the "Schedule of Exceptions") attached hereto as
Schedule B, which exceptions shall be deemed to be representations and
warranties as if made hereunder, the following:
2.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business or properties. The Company has the requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted and possesses all governmental and
other permits, licenses and other authorizations to own its properties as now
owned and to carry on its business as presently conducted and as proposed to be
conducted. The Company has made available to each Investor or its special
counsel true, correct and complete copies of the Company's Articles of
Incorporation and Bylaws, each as amended to date.
2.2 Capitalization and Voting Rights. Assuming the filing of
the Restated Articles and the consummation of the transactions contemplated
herein, the authorized capital of the Company consists, or will consist as of
the First Closing, of:
(a) Preferred Stock. 24,103,192 shares of Preferred
Stock (the "Preferred Stock"), of which 525,000 shares have been designated
Series A Preferred Stock (the "Series A Preferred Stock"), all of which shall be
issued and outstanding, 5,512,000 shares have been designated Series B Preferred
Stock (the "Series B Preferred Stock"), all of which shall be issued and
outstanding, 576,192 shares have been designated Series C-1 Preferred Stock (the
"Series C-1 Preferred Stock"), 569,525 of which shall be issued and outstanding,
615,016 shares have been designated Series C-2 Preferred Stock (the "Series C-2
Preferred Stock"), 605,122 of which shall be issued and outstanding, 2,442,366
shares have been designated Series C-3 Preferred Stock (the "Series C-3
Preferred Stock"), 2,282,730 of which shall be issued and outstanding, and
14,432,618 shares have been designated Series D Preferred Stock (the "Series D
Preferred Stock"), all of which may be sold pursuant to this Agreement. The
rights, privileges and preferences of the Series A, Series B, Series C-1, Series
C-2, Series C-3 and Series D Preferred Stock will be as stated in the Company's
Restated Articles.
(b) Common Stock. 37,396,808 shares of common stock
("Common Stock"), of which 6,079,945 shares shall be issued and outstanding.
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(c) Except for (A) the conversion privileges of the
Series A, Series B, Series C-1, Series C-2, Series C-3 and Series D Preferred
Stock, (B) the rights of first offer provided in Paragraph 2.6 of the Amended
and Restated Investor Rights Agreement of even date herewith in the form
attached hereto as Exhibit B, by and among the Company and certain investors
(the "Amended and Restated Investor Rights Agreement"), (C) a total of 6,890,049
shares of Common Stock (including 40,049 shares which were repurchased after the
sale of the Series B Preferred Stock) have been reserved for issuance, either
directly or through options, to employees, directors and consultants to the
Company, of which 1,008,084 shares of Common Stock have been issued upon
exercise of options and 1,872,442 shares of Common Stock are currently committed
to employees of the Company pursuant to outstanding options, (D) warrants to
purchase 6,667 shares of Series C-1 Preferred Stock, (E) warrants to purchase
9,894 shares of Series C-2 Preferred Stock, and (F) warrants to purchase 159,636
shares of Series C-3 Preferred Stock, there are not outstanding any options,
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from the Company of any shares of its capital stock.
Except as provided in the Restated Articles, the Company is not a party or
subject to any agreement or understanding, and, to the Company's knowledge,
there is no agreement or understanding between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security or by a director of the Company.
2.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in any
joint venture, partnership or similar arrangement.
2.4 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Amended and
Restated Investor Rights Agreement, the Co-Sale Agreement (attached hereto as
Exhibit C) and any other agreement to which the Company is a party the execution
and delivery of which is contemplated hereby (collectively referred to hereafter
as the "Ancillary Agreements"), the performance of all obligations of the
Company hereunder and thereunder, and the authorization, issuance (or
reservation for issuance), sale and delivery of the Series D Preferred Stock
being sold hereunder and the Common Stock issuable upon any conversion of the
Series D Preferred Stock as provided in the Restated Articles has been taken or
will be taken prior to the First Closing, and this Agreement and all of the
Ancillary Agreements constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Amended and Restated
Investor Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 Valid Issuance of Series D Preferred Stock. The Series D
Preferred Stock that is being purchased by the Investors hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed
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herein, will be duly and validly issued, fully paid and nonassessable, and will
be free of restrictions on transfer other than restrictions on transfer under
this Agreement, the Amended and Restated Investor Rights Agreement and under
applicable state and federal securities laws. The Common Stock issuable upon
conversion of the Series D Preferred Stock purchased under this Agreement has
been duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Restated Articles, will be duly and validly issued, fully
paid and nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Amended and Restated Investor
Rights Agreement and under applicable state and federal securities laws. No
shareholder of the Company has any right of first refusal or any preemptive
rights in connection with the issuance and sale of the Series D Preferred Stock.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing pursuant to Section
25102(f) of the California Corporate Securities Law of 1968, as amended, and the
rules thereunder, which filing will be effected within fifteen (15) days of the
sale of the Series D Preferred Stock hereunder.
2.7 Offering. Subject in part to the truth and accuracy of
each Investor's representations set forth in Section 3 of this Agreement, (i)
the offer, sale and issuance of the Series D Preferred Stock as contemplated by
this Agreement are exempt from the registration requirements of the Act, and
neither the Company nor any authorized agent acting on its behalf will take any
action hereafter that would cause the loss of such exemption and (ii) the Series
D Preferred Stock that is being purchased by the Investors hereunder will be
issued in compliance with all applicable federal and state securities laws.
2.8 Litigation. There is no action, suit, proceeding or
investigation pending or, to the best of the Company's knowledge, currently
threatened against the Company that questions the validity of this Agreement,
the Ancillary Agreement or the right of the Company to enter into such
agreements, or to consummate the transactions contemplated hereby or thereby, or
that might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing. The
foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened (on any basis known to the Company)
involving the prior employment of any employees of the Company, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or that the Company
intends to initiate.
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2.9 Proprietary Information. Each current and former
employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Agreement in substantially the form provided to the
Investors. The Company is not aware that any of its employees, officers or
consultants are in violation of such agreements.
2.10 Patents and Trademarks. The Company has sufficient
license, title or ownership of all trademarks, service marks, trade names and
copyrights, and to its knowledge, the Company has sufficient license, title or
ownership of all patents necessary for its business as now conducted without any
conflict with or infringement of the rights of others. The Company is not aware
of and has not received any communications alleging that the Company has
violated any of the patents, trademarks, service marks, trade names or
copyrights of any other person or entity. The Company is not aware that any of
its employees is obligated under or in violation of any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employees' best efforts to promote the
interests of the Company or that would conflict with the business of the Company
as now conducted. Except for inventions that may be licensed by the Company
without charge, the Company does not believe that it is or will be necessary to
utilize any inventions of any of its employees (or people it currently intends
to hire) made prior to their employment by the Company.
2.11 Compliance with Other Instruments. The Company is not in
violation or default in any material respect of any provision of its Restated
Articles or Bylaws, or in any material respect of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound
or, to its knowledge, of any provision of any federal or state statute, rule or
regulation applicable to the Company. The execution, delivery and performance of
this Agreement, the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event that results
in the creation of any material lien, charge or encumbrance upon any assets of
the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal
of any material permit, license, authorization, or approval applicable to the
Company, its business or operations or any of its assets or properties, which
would have a material adverse effect on the Company.
2.12 Agreements.
(a) There are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound that may involve
(i) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company, (ii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services,
or (iii) indemnification by the Company with respect to infringement of
proprietary rights.
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(b) Except for agreements explicitly contemplated
hereby and by the Ancillary Agreements, there are no agreements, understandings
or proposed transactions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof.
(c) The Schedule of Exceptions contains a list of all
agreements of the Company that involves current obligations of the Company or
any other party thereto in excess of $50,000 and the loss of which would have a
material adverse effect on the business of the Company.
(d) The Company has not (i) declared or paid any
dividends or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $50,000 or, in the
case of indebtedness and/or liabilities individually less than $50,000, in
excess of $100,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
(e) For the purposes of subsection (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company or the Subsidiaries have reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
(f) The Company is not a party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Restated Articles or Bylaws that adversely affects its business, its properties
or its financial condition as now conducted or as proposed to be conducted.
2.13 Related-Party Transactions. No employee, officer or
director of the Company, or member of his or her immediate family, is indebted
to the Company, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any of them. To the best of the Company's
knowledge, none of such persons has any direct or indirect ownership interest in
any firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation that competes
with the Company, except that employees, officers, or directors of the Company
and members of their immediate families may own stock in publicly traded
companies that may compete with the Company. No member of the immediate family
of any officer or director of the Company is directly or indirectly interested
in any material contract with the Company.
2.14 Registration Rights. Except as provided in the Amended
and Restated Investor Rights Agreement, the Company has not granted or agreed to
grant any registration rights, including piggyback rights, to any person or
entity.
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2.15 Corporate Documents. The Restated Articles and Bylaws of
the Company are in the form provided to the Investors.
2.16 Title to Property and Assets. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens that arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the best of the Company's
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
2.17 Employee Benefit Plans. The Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974.
2.18 Insurance. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.19 Employment Matters. The Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. Subject to
general principles related to wrongful termination of employees, the employment
of each officer and employee of the Company is terminable at the will of the
Company.
2.20 Small Business Concern. The Company, together with its
"affiliates" (as that term is defined in 13 C.F.R. Section 121.401), is a "small
business concern" within the meaning of the Small Business Investment Act of
1958, as amended, and the regulations promulgated thereunder, including 13
C.F.R. Section 121.301(c)(1). The information set forth in SBA Forms 480, 652
and Part A of 1031 prepared or furnished or to be furnished by the Company is
accurate and complete in all material respects. The Company is not an owner of
five percent (5%) or more of any lender which is a "Licensee" under the Small
Business Investment Act of 1958, as amended. No portion of the proceeds from the
sale of the Series D Preferred Stock has been or will be used for any purpose in
contravention of any of the provisions of Part 107 of Title 13 of the Code of
Federal Regulations.
2.21 Disclosure. To the Company's knowledge, neither this
Agreement, the Ancillary Agreements, nor any other statements or certificates
made or delivered in connection herewith or therewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading in light of the circumstances
under which they were made. The Company has fully provided each Investor with
all the information that such Investor has requested for deciding whether to
purchase the Series D Preferred Stock. To the Company's knowledge, there are no
facts which (individually or in the aggregate) materially adversely affect the
business, assets, liabilities, financial condition, prospects or operations of
the Company that
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have not been set forth in this Agreement, the Exhibits hereto, the Restated
Investor Rights Agreement or the Co-Sale Agreement.
2.22 Taxes. The Company has paid, or made provision for
payment of, all taxes which have or may have become due pursuant to income tax
returns required to be filed by it or pursuant to any assessment which has been
received by it. No federal or state income or sales tax return of the Company
has been audited, no deficiency assessment or proposed adjustment of the
Company's United States income tax, state or municipal taxes or sales taxes is
pending and the Company has no knowledge of any proposed liability for any tax
to be imposed on its property or assets. To the best of the Company's knowledge,
all individuals who have purchased shares of the Company's Common Stock have
timely filed elections under Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws.
2.23 Stock Issuances to Founders and Employees. Prior
issuances of securities to the Company to founders and employees have been made
pursuant to stock purchase or stock option agreements that have been approved by
the Company's Board of Directors which provide for (i) vesting over a period of
at least forty-eight (48) months, (ii) no acceleration of vesting upon an
initial public offering or acquisition of the Company, and (iii) a right of
first refusal in favor of the Company in the event of certain transfers of
shares to third parties, and including a "market stand-off" provision
substantially similar to that set forth in Section 1.13 of the Restated
Investment Rights Agreement.
2.24 Financial Statement. The Company has provided to the
Investors or to their special counsel the unaudited balance sheets as of
December 31, 1997 for AdKnowledge Inc. (formerly named ClickOver, Inc.) and
Focalink Communications, Inc. (such balance sheets being collectively referred
to herein as the "Balance Sheets"). The Balance Sheets (A) have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis (except that the unaudited Balance Sheets do not contain
footnotes and certain other statements required by GAAP), (B) are in accordance
with the books and records of the Company, and (C) present fairly the financial
condition of the Company at the date or dates therein indicated and the results
of operations for the periods therein specified. Except as set forth in the
Balance Sheets, the Company has no material known liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 1997 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under GAAP to be reflected in the Balance Sheets, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company. Except as disclosed in the Balance Sheets, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to maintain
a standard system of accounting established and administered in accordance with
GAAP.
2.25 Changes in Conditions. Since December 31, 1997, there
has not been any change in the assets or liabilities of the Company from that
reflected in the Balance
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Sheets except changes in the ordinary course of business which have not been in
the aggregate materially adverse to the Company.
2.26 Environmental and Safety Laws. To the best of the
Company's knowledge, the Company is not in violation of any applicable statute,
law or regulation relating to the environment or occupational health and safety,
the violation of which would materially adversely affect the Company, and to the
best of the Company's knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
3. Representations and Warranties of the Investors. Each
Investor, severally and not jointly, hereby represents and warrants that:
3.1 Authorization. The Investor has full power and authority
to enter into this Agreement and the Ancillary Agreements, and each such
Agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Amended and Restated Investor Rights Agreement may be limited
by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is
made with such Investor in reliance upon such Investor's representation to the
Company, which by such Investor's execution of this Agreement such Investor
hereby confirms, that the Series D Preferred Stock to be received by such
Investor and the Common Stock issuable upon conversion thereof (collectively,
the "Securities") will be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Investor has no present
intention of selling, granting any participation in, or otherwise distributing
or disposing of the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
3.3 Disclosure of Information. Such Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Series D Preferred Stock. Such Investor further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Series D Preferred Stock and the business, properties, prospects and financial
condition of the Company. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 hereto or the right
of the Investors to rely thereon.
3.4 Investment Experience. Such Investor acknowledges that
it is an investor in securities of companies in the development stage and that
it is able to fend for
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itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series D Preferred Stock. If other
than an individual, Investor also represents it has not been organized for the
purpose of acquiring the Series D Preferred Stock.
3.5 Restricted Securities. Such Investor understands that
the securities it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act, only in certain limited circumstances. In this
connection, such Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
3.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, such Investor further agrees not
to make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 3 and Section 7 of this Agreement and the Amended and Restated
Investor Rights Agreement, and:
(a) There is then in effect a Registration Statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. The
Company, however, will not require opinions of counsel for transactions made
pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a)
and (b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor that is a partnership to a partner of
such partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner or the
transfer by gift, will or intestate succession of any partner to his or her
spouse or to the siblings, lineal descendants or ancestors of such partner or
his or her spouse if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if he or she were an original Investor hereunder.
3.7 Legends. It is understood that the certificates
evidencing the Securities may bear one or all of the following legends:
(a) "These securities have not been registered under
the Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities
10
15
under such Act or an opinion of counsel satisfactory to the Company that such
registration is not required or unless sold pursuant to Rule 144 of such Act."
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the California Corporations Code, and
any other legend required by applicable state securities and blue sky laws.
3.8 Further Representations by Foreign Investors. If an
Investor is not a United States person, such Investor hereby represents that he
or she has satisfied himself or herself as to the full observance of the laws of
his or her jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including (i) the legal requirements
within his jurisdiction for the purchase of the Securities, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any governmental or
other consents that may need to be obtained, and (iv) the income tax and other
tax consequences, if any, that may be relevant to the purchase, holding,
redemption, sale, or transfer of the Securities. Such Investor's subscription
and payment for, and his or her continued beneficial ownership of the
Securities, will not violate any applicable securities or other laws of his or
her jurisdiction.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES
THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
5. Conditions of Investors' Obligations at each Closing. The
obligations of each Investor under subsection 1.1(b) of this Agreement are
subject to the fulfillment on or before the First Closing of each of the
following conditions:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
First Closing with the same effect as though such representations and warranties
had been made on and as of the date of such First Closing.
5.2 Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the First Closing. The Company's business and assets shall not have been
adversely affected in any material way prior to the First Closing.
11
16
5.3 Compliance Certificate. The President of the Company
shall deliver to each Investor at the First Closing a certificate stating that
the conditions specified in Sections 5.1, 5.2 and 5.10 have been fulfilled.
5.4 Qualifications. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the securities pursuant to this Agreement shall be duly obtained and
effective as of the First Closing.
5.5 Board of Directors. The directors of the Company shall
be Xxxxx Xxxxx, Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxxxxx, and Xxxxx Xxxxxxxx.
5.6 Restated Articles. The Restated Articles shall have been
duly adopted by the Company by all necessary corporate action of its Board of
Directors and shareholders, and shall have been duly filed with the Secretary of
State of the State of California and become legally effective.
5.7 Amended and Restated Investor Rights Agreement. The
Company, each other Investor and the holders of a majority in interest of the
Company's Series A, Series B, Series C-1, Series C-2 and Series C-3 Preferred
Stock, voting together as a class, shall have entered into the Amended and
Restated Investor Rights Agreement in the form attached hereto as Exhibit B.
5.8 Co-Sale Agreement. The Company, each other Investor and
each Shareholder (as defined therein) shall have entered into the Co-Sale
Agreement in the form attached hereto as Exhibit C.
5.9 Opinion of Company Counsel. Each Investor shall have
received from Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel for the Company, an
opinion, dated as of the First Closing of form and content satisfactory to
special counsel for the Investors.
5.10 Consent and Waivers. The Company shall have obtained any
and all consents (including all governmental or regulatory consents, approvals
or authorizations required in connection with the valid execution and delivery
of this Agreement, the Restated Investor Rights Agreement or the Co-Sale
Agreement), permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement, the Restated Investor Rights
Agreement or the Co-Sale Agreement.
5.11 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the First
Closing hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the Investors and
their special counsel, and the Investors and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
12
17
6. Conditions of the Company's Obligations at each Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the First Closing of each of the following
conditions by that Investor:
6.1 Representations and Warranties. The representations and
warranties of the Investors contained in Section 3 shall be true on and as of
the First Closing with the same effect as though such representations and
warranties had been made on and as of the First Closing.
6.2 Payment of Purchase Price. Each Investor shall have
delivered the purchase price specified in Section 1.1(b).
6.3 Performance. Each Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by the Investors on
or before the First Closing.
6.4 Qualifications. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the First Closing.
6.5 Restated Articles. The Restated Articles shall have been
duly adopted by the Company by all necessary corporate action of its Board of
Directors and shareholders, and shall have been duly filed with the Secretary of
State of the State of California and become legally effective.
6.6 Amended and Restated Investor Rights Agreement. Each
Investor and the holders of a majority in interest of the Company's Series A,
Series B, Series C-1, Series C-2 and Series C-3 Preferred Stock, voting together
as a class, shall have entered into the Investor Rights Agreement in the form
attached hereto as Exhibit B.
6.7 Co-Sale Agreement. Each Investor and Shareholder (as
defined therein) shall have entered into the Co-Sale Agreement in the form
attached hereto as Exhibit C.
7. MISCELLANEOUS.
7.1 Survival of Warranties. The warranties, representations
and covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closings and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
7.2 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 Securities).
13
18
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.
7.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
7.4 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.
7.5 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.
7.6 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given to the party so notified in
writing and shall be deemed effectively given upon personal delivery, upon
delivery by confirmed facsimile or electronic transmission (with duplicate
original sent by United States mail) or three business days after 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.
7.7 Finder's Fee. Each party represents that it neither is
nor will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.8 Expenses. Irrespective of whether the Closings are
effected, the Company and each Investor shall each pay their respective costs
and expenses incurred with respect to the negotiation, execution, delivery and
performance of this Agreement. If the First Closing is effected, the Company
shall reimburse the reasonable fees and expenses of special counsel for the
Investors, such reimbursement not to exceed $10,000. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, the
Ancillary Agreements or the Restated Articles, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
14
19
7.9 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 Common Stock issued or issuable upon conversion of the Series
D Preferred Stock. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and the
Company.
7.10 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.
7.11 Aggregation of Stock. All shares of the Preferred Stock
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.
7.12 Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
[Remainder of This Page Intentionally Left Blank]
15
20
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By: /s/ XXXXX XXXXXXXX
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS:
---------------------------------------
By:
-----------------------------------
Title:
--------------------------------
Address:
---------------------------------------
---------------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
21
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: XXXXXX-SBIC, L.P.
---------------------------------------
By: /s/ XXXXXX XXXXX
-----------------------------------
Title: XXXXXX XXXXX, GENERAL PARTNER
--------------------------------
Address: 000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
22
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: XXXXXX TECHNOLOGY VENTURES II, L.P.
---------------------------------------
By: /s/ XXXXXX XXXXX
-----------------------------------
Title: XXXXXX XXXXX, GENERAL PARTNER
--------------------------------
Address: 000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
23
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: XXXXXX EDB PARTNERS, L.P.
---------------------------------------
By: /s/ XXXXXX XXXXX
-----------------------------------
Title: XXXXXX XXXXX, GENERAL PARTNER
--------------------------------
Address: 000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
24
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: XXXXXX JAPAN PARTNERS, L.P.
---------------------------------------
By: /s/ XXXXXX XXXXX
-----------------------------------
Title: XXXXXX XXXXX, GENERAL PARTNER
--------------------------------
Address: 000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
25
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: XXXXXX MEDIA & INFORMATION
TECHNOLOGY , L.P.
---------------------------------------
By: /s/ XXXXXX XXXXX
-----------------------------------
Title: XXXXXX XXXXX, GENERAL PARTNER
--------------------------------
Address: 000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
26
XXXXXXX XXXXXXX XXXXXXXX & XXXXX VIII
By: KPCB VIII Associates, Its General Partner
By: /s/ XXXXX XXXXX
-------------------------------------------
Name: Xxxxx Xxxxx
-----------------------------------------
Title: General Partner
----------------------------------------
KPCB INFORMATION SCIENCES ZAIBATSU FUND II
By: KPCB VII Associates, Its General Partner
By: /s/ XXXXX XXXXX
-------------------------------------------
Name: Xxxxx Xxxxx
-----------------------------------------
Title: General Partner
----------------------------------------
KPCB JAVA FUND
By: KPCB VIII Associates, Its General Partner
By: /s/ XXXXX XXXXX
-------------------------------------------
Name: Xxxxx Xxxxx
-----------------------------------------
Title: General Partner
----------------------------------------
Address: c/o Kleiner Xxxxxxx Xxxxxxxx & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000-0000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
27
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: PARTECH U.S. PARTNERS III C.V.
---------------------------------------
By: Philippe Cases
-----------------------------------
Title: General Partner
--------------------------------
Address: c/o Partech International
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
28
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: PARVEST U.S. PARTNERS II C.V.
---------------------------------------
By: Xxxxxxx Worms
-----------------------------------
Title: General Partner
--------------------------------
Address: c/o Partech International
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
29
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: DOUBLE BLACK DIAMOND II LLC
---------------------------------------
By: Xxxxxxx Worms
-----------------------------------
Title: Managing Member
--------------------------------
Address: c/o Partech International
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
30
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: ALMANORI LIMITED
---------------------------------------
By: Xxxxxxx Worms
-----------------------------------
Title: Director
--------------------------------
Address: c/o Partech International
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
31
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: MULTINVEST LIMITED
---------------------------------------
By: Xxxxxxx Worms
-----------------------------------
Title: General Partner
--------------------------------
Address: c/o Partech International
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
32
XXXXXXXX VII
By: [Signature Illegible]
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
XXXXXXXX ASSOCIATES FUND II
By: [Signature Illegible]
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: c/x Xxxxxxxx Funds
0000 Xxxx Xxxx Xxxx, #000
Xxxxx Xxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
33
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: Asian Venture Capital Investment Corp.
---------------------------------------
By: [Signature Illegible]
-----------------------------------
Title: President
--------------------------------
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
34
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: InfoTech Ventures Ltd.
O, W & W Investments Ltd.
---------------------------------------
By: [Signature Illegible]
-----------------------------------
Title: Managing Director
--------------------------------
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
35
IN WITNESS WHEREOF, the parties have executed this Series D
Preferred Stock Purchase Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
-----------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS: TWG Investment LDC
---------------------------------------
By: [Signature Illegible]
-----------------------------------
Title: Director
--------------------------------
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
[SIGNATURE PAGE TO SERIES D PREFERRED
STOCK PURCHASE AGREEMENT]
36
SCHEDULE A
SCHEDULE OF INVESTORS
NUMBER OF SHARES AGGREGATE
OF SERIES D PURCHASE
INVESTORS PREFERRED STOCK PRICE
--------- --------------- -------------
FIRST CLOSING
Xxxxxx-SBIC, L.P. 1,226,773 $ 680,000.27
Xxxxxx Technology Ventures II, L.P. 306,693 $ 169,999.93
Xxxxxx EDB Partners, L.P. 451,020 $ 250,000.39
Xxxxxx Japan Partners, L.P. 451,020 $ 250,000.39
Xxxxxx Media & Information Technology 3,608,154 $1,999,999.77
KPCB Java Fund 1,658,712 $ 919,424.06
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx VIII 651,637 $ 361,202.39
KPCB Information Sciences Zaibatsu Fund II 59,240 $ 32,836.73
Partech U.S. Partners III C.V 2,706,116 $1,500,000.10
Parvest U.S. Partners II C.V 721,631 $ 400,000.06
Double Black Diamond II LLC 180,408 $ 100,000.15
Almanori Limited 90,204 $ 50,000.08
Multinvest Limited 45,102 $ 25,000.04
Xxxxxxxx VII 705,322 $ 390,959.98
Xxxxxxxx Associates Fund II 37,122 $ 20,576.72
Subtotal: 12,899,154 $7,150,001.06
SECOND CLOSING
InfoTech Ventures Ltd. 541,223 $ 299,999.91
Asian Venture Capital Investment Corp. 375,248 $ 207,999.97
TWG Investment LDC 346,382 $ 191,999.54
O, W & W Investments Ltd. 270,611 $ 149,999.68
Subtotal: 1,533,464 $ 849,999.10
TOTALS: 14,432,618 $8,000,000.16
37
EXHIBIT A
Amended and Restated Articles of Incorporation
38
EXHIBIT B
Amended and Restated Investor Rights Agreements
39
EXHIBIT C
Co-Sale Agreement
40
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF ADKNOWLEDGE INC
A CALIFORNIA CORPORATION
The undersigned Xxxxx Xxxxxxxx and Thi Thumasathit hereby certify
that:
ONE: They are the President and Assistant Secretary, respectively,
of AdKnowledge Inc., a California corporation.
TWO: The Articles of Incorporation of this corporation are hereby
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is AdKnowledge Inc.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
A. Classes of Stock. This corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares of all classes of stock which the corporation
shall have authority to issue is 61,500,000 shares. The total number of shares
of Common Stock which the corporation is authorized to issue is 37,396,808. The
total number of shares of Preferred Stock which the corporation is authorized to
issue is 24,103,192, of which 525,000 shares shall be Series A Preferred Stock,
5,512,000 shares shall be Series B Preferred Stock, 576,192 shares shall be
Series C-1 Preferred Stock, 615,016 shares shall be Series C-2 Preferred Stock,
2,442,366 shares shall be Series C-3 Preferred Stock, and 14,432,618 shares
shall be Series D Preferred Stock.
B. Rights, Preferences and Restrictions of the Preferred Stock. The
rights, preferences, privileges and restrictions granted to and imposed on the
Preferred Stock are as set forth below in this Article III(B).
1. Dividend Provisions.
(a) The holders of outstanding shares of Preferred Stock
shall be entitled to receive dividends at the rate of $0.01 per share per annum
for the Series A Preferred Stock, $0.03 per share per annum for the Series B
Preferred Stock, $0.05 per share per annum for the Series C-1 Preferred Stock,
$0.21 per share per annum for the Series C-2 Preferred Stock, $0.12 per share
per annum for the Series C-3 Preferred Stock and $0.04 per share per annum for
41
the Series D Preferred Stock, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this corporation) on the Common Stock of this
corporation payable when, as and if declared by the Board of Directors (the
"Board"). Such dividends shall not be cumulative. Declared but unpaid dividends
with respect to an outstanding share of Preferred Stock shall, upon conversion
of such share to Common Stock, be paid to the extent assets are legally
available therefor either in cash or in Common Stock (valued at the fair market
value on the date of payment as determined by the Board). Any amounts for which
such assets are not legally available shall be paid promptly as assets become
legally available therefor.
(b) After payment of any such dividends, any additional
dividends or distributions shall be distributed among all holders of Common
Stock and all holders of Preferred Stock in proportion to the number of shares
of Common Stock which would be held by each such holder if all outstanding
shares of Preferred Stock were converted to Common Stock at the then effective
conversion rate.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding
up of this corporation, either voluntary or involuntary, the holders of the
outstanding shares of Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the corporation to the
holders of Common Stock by reason of their ownership thereof, (i) for the Series
A Preferred Stock, an amount per share equal to $0.20 for each outstanding share
of Series A Preferred Stock, (ii) for the Series B Preferred Stock, an amount
per share equal to $0.4717 for each outstanding share of Series B Preferred
Stock, (iii) for the Series C-1 Preferred Stock, an amount per share equal to
$0.8451 for each outstanding share of Series C-1 Preferred Stock (the "Series
C-1 Liquidation Price"), (iv) for the Series C-2 Preferred Stock, an amount per
share equal to $3.2981 for each outstanding share of Series C-2 Preferred Stock
(the "Series C-2 Liquidation Price"), (v) for the Series C-3 Preferred Stock, an
amount per share equal to $1.9129 for each outstanding share of Series C-3
Preferred Stock (the "Series C-3 Liquidation Price") and (vi) for the Series D
Preferred Stock, an amount per share equal to $0.5543 for each outstanding share
of Series D Preferred Stock (the "Series D Liquidation Price"). If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the outstanding shares of Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then, the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the outstanding
shares of Preferred Stock in proportion to the preferential amount each such
holder is otherwise entitled to receive.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2, the remaining assets of the corporation
available for distribution to shareholders shall be distributed among the
holders of Preferred Stock and Common Stock pro rata based on the number of
shares of Common Stock held by each (assuming conversion of all such outstanding
shares of Preferred Stock) until, (i) with respect to the holders of Series A
Preferred Stock, such holders shall have received an aggregate of $0.80 per
share (including amounts paid pursuant to subsection (a) of this Section 2),
(ii) with respect to the holders of Series B Preferred Stock, such holders shall
have received an aggregate of $1.8868 per share
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(including amounts paid pursuant to subsection (a) of this Section 2), (iii)
with respect to the holders of Series C-1 Preferred Stock, such holders shall
have received an aggregate of $3.3804 per share (including amounts paid pursuant
to subsection (a) of this Section 2), (iv) with respect to the holders of Series
C-2 Preferred Stock, such holders shall have received an aggregate of $13.1924
per share (including amounts paid pursuant to subsection (a) of this Section 2),
(v) with respect to the holders of Series C-3 Preferred Stock, such holders
shall have received an aggregate of $7.6516 per share (including amounts paid
pursuant to subsection (a) of this Section 2) and (vi) with respect to the
holders of Series D Preferred Stock, such holders shall have received an
aggregate of $2.2172 per share (including amounts paid pursuant to subsection
(a) of this Section 2); thereafter, if assets remain in this corporation, the
holders of the Common Stock of this corporation shall receive all of the
remaining assets of this corporation pro rata based on the number of shares of
Common Stock held by each.
(c) (i) For purposes of this Section 2, a liquidation,
dissolution or winding up of this corporation shall be deemed to be occasioned
by, or to include, (A) the acquisition of the corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but, excluding any
merger effected exclusively for the purpose of changing the domicile of the
corporation); or (B) a sale of all or substantially all of the assets of the
corporation; unless the corporation's shareholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
corporation's acquisition or sale or otherwise) hold at least 50% of the voting
power of the surviving or acquiring entity.
(ii) In any of such events, if the consideration
received by the corporation is other than cash, its value will be deemed its
fair market value. Any securities shall be valued as follows:
(A) Securities not subject to an investment
letter or other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or
through NASDAQ-NMS, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty-day period ending
three (3) days prior to the closing;
(2) If actively traded over-the-counter,
the value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty-day period ending three (3) days prior
to the closing; and
(3) If there is no active public market,
the value shall be the fair market value thereof, as mutually determined by the
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock, voting together as a single class.
(B) The method of valuation of securities
subject to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a shareholder's status as an
affiliate or former affiliate) shall be to make an
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43
appropriate discount from the market value determined as above in (A) (1), (2)
or (3) to reflect the approximate fair market value thereof, as mutually
determined by the corporation and the holders of at least a majority of the
voting power of all then outstanding shares of Preferred Stock, voting together
as a single class.
(iii) In the event the requirements of this subsection
2(c) are not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until
such time as the requirements of this subsection 2(c) have been complied with;
or
(B) cancel such transaction, in which event the
rights, preferences and privileges of the holders of outstanding shares of
Preferred Stock shall revert to and be the same as such rights, preferences and
privileges existing immediately prior to the date of the first notice referred
to in subsection 2(c)(iv) hereof.
(iv) The corporation shall give each holder of record
of Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the shareholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 2, and the corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after the corporation has given the first notice
provided for herein or sooner than ten (10) days after the corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of a majority
of the voting power of all then outstanding shares of Preferred Stock that are
entitled to such notice rights or similar notice rights, voting together as a
single class.
(v) The rights granted pursuant to this subsection
2(c) are in addition to the rights granted pursuant to Section 5 herein.
3. Redemption. The Preferred Stock is not redeemable.
4. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Effective Issue Price (as defined
below) for such series of Preferred Stock by the Conversion Price applicable to
such series, determined as hereafter provided, in effect on the date the
certificate is surrendered for conversion. The Effective Issue Price for the
Series A Preferred Stock shall be $0.20 per share; the Effective Issue Price for
the Series B Preferred Stock shall be $0.4717 per share; the Effective Issue
Price for the Series C-1 Preferred Stock and Series C-2 Preferred Stock shall be
$0.8451 per share; the Effective Issue Price for the Series C-3 Preferred Stock
shall be
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$1.9129 per share; and the Effective Issue Price for the Series D Preferred
Stock shall be $0.5543 per share. The initial Conversion Price per share for
each series shall be the Effective Issue Price for such series; provided,
however, that the Conversion Price shall be subject to adjustment as set forth
in subsection 4(d).
(b) Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for the respective series of Preferred Stock
immediately upon the earlier of (A) except as provided below in subsection 4(c),
the corporation's sale of its Common Stock in a firm commitment underwritten
public offering pursuant to a registration statement under the Securities Act of
1933, as amended, the public offering price of which was not less than $1.6629
per share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations) and $10 million in the aggregate or (B) the date specified by
written consent or agreement of the holders of at least a majority of the then
outstanding shares of Preferred Stock, voting together as a single class.
(c) Mechanics of Conversion. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of this corporation or of any transfer agent for such Preferred
Stock, and shall give written notice to this corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock,
or to the nominee or nominees of such holder, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of such Preferred Stock shall not be
deemed to have converted such Preferred Stock until immediately prior to the
closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for
Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of the
Series A, Series B, Series C-1, Series C-2, Series C-3 and Series D Preferred
Stock shall be subject to adjustment from time to time as follows:
(i) (A) (1) With respect to the issuance of any
shares of the Series D Preferred Stock only, if the corporation shall issue any
shares of Series D Preferred Stock without consideration or for a consideration
per share less than the Conversion Price for the Series A, Series B, Series C-1
and/or Series C-2 Preferred Stock in effect
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immediately prior to the issuance of such shares of Series D Preferred Stock,
the Conversion Price of the Series A, Series B, Series C-1 and/or Series C-2
Preferred Stock in effect immediately prior to each such issuance shall
forthwith (except as otherwise provided in this clause d(i)) be adjusted to a
price determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Common Stock
that the aggregate consideration received by the corporation for such issuance
would purchase at such Conversion Price and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of such Series D Preferred Stock.
(2) With respect to the issuance of any
shares of the Series D Preferred Stock only, if the corporation shall issue any
shares of Series D Preferred Stock without consideration or for a consideration
per share less than the Conversion Price for the Series C-3 Preferred Stock in
effect immediately prior to the issuance of such shares of Series D Preferred
Stock, the Conversion Price for the Series C-3 Preferred Stock in effect
immediately prior to the each such issuance shall forthwith (except as otherwise
provided in this clause d(i)) be adjusted to a price determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issuance plus
the number of shares of Common Stock that the aggregate consideration received
by the corporation for such issuance would purchase at such Conversion Price and
the denominator of which shall be the lesser of, or, if both such clauses are
equal, then the denominator shall be equal to, (I) the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of such Series D Preferred Stock or (II) the number of shares of Common
Stock outstanding immediately prior to such issuance plus the number of shares
of Common Stock that the aggregate consideration received by the corporation for
such issuance would purchase at twenty-five thirty-seconds (25/32) of the
Effective Issue Price for the Series C-3 Preferred Stock (adjusted solely for
calculations under this clause (d)(i)(A)(2) to reflect subsequent stock
dividends, stock splits or recapitalizations).
(3) Except with respect to the issuance of
any shares of the Series D Preferred Stock (which is provided for in the
immediately preceding clauses d(i)(A)(1) and d(i)(A)(2)), if the corporation
shall issue, after the date upon which any shares of the Series D Preferred
Stock were first issued (the "Purchase Date"), any Additional Stock (as defined
below) without consideration or for a consideration per share less than the
Conversion Price for the Series A, Series B, Series C-1, Series C-2 Preferred
Stock, Series C-3 Preferred Stock and/or Series D Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
of the Series A, Series B, Series C-1, Series C-2 Preferred Stock, Series C-3
Preferred Stock and/or Series D Preferred Stock in effect immediately prior to
each such issuance shall forthwith (except as otherwise provided in this clause
d(i)) be adjusted to a price determined by multiplying such Conversion Price by
a fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of shares of
Common Stock that the aggregate consideration received by the corporation for
such issuance would purchase at such Conversion Price and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of such Additional Stock.
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46
(B) No adjustment of the Conversion Price for
any series of Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections (E)(3)
and (E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(d)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by this corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board irrespective of any accounting treatment.
(E) In the case of the issuance (whether before,
on or after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of shares
of Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
subsections 4(d)(i)(C) and (d)(i)(D)), if any, received by the corporation upon
the issuance of such options or rights plus the minimum exercise price provided
in such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange for (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by the corporation for any such
securities and related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be
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received by the corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to be
determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the
number of shares of Common Stock deliverable or in the consideration payable to
this corporation upon exercise of such options or rights or upon conversion of
or in exchange for such convertible or exchangeable securities, including, but
not limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of each series of Preferred Stock to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of each series of Preferred Stock,
to the extent in any way affected by or computed using such options, rights or
securities or options or rights related to such securities, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities which remain in effect) actually issued
upon the exercise of such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant to subsections
4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subsection
4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock, or any obligation to issue any share of stock or other security of the
corporation convertible into or exchangeable for Common Stock, issued (or deemed
to have been issued pursuant to subsection 4(d)(i)(E)) by this corporation after
the Purchase Date other than:
(A) Common Stock issued pursuant to a
transaction described in subsection 4(d)(iii) hereof;
(B) shares of Common Stock issuable or issued to
employees, consultants, directors or vendors (if in transactions with primarily
non-financing purposes) of this corporation directly or pursuant to a stock
option plan or restricted stock plan approved by the Board at any time when the
total number of shares of Common Stock so issuable or issued (and not
repurchased at cost by the corporation in connection with the termination of
employment) does not exceed 6,850,000;
(C) Common Stock issued upon conversion of
shares of Preferred Stock;
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(D) up to 100,000 shares of Common Stock issued
to banks or equipment lessors, provided such issuances are for other than
primarily equity financing purposes and approval by the Board;
(E) up to 250,000 shares of Common Stock issued
in connection with business combinations or corporate partnering agreements
approved by the Board; and
(F) 14,432,618 shares of Series D Preferred
Stock issued pursuant to that certain Series D Preferred Stock Purchase
Agreement dated on or about February 27, 1998.
(iii) In the event the corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend,
distribution, split or subdivision if no record date is fixed), the Conversion
Price of each series of Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be increased in proportion to such increase in the aggregate
number of shares of Common Stock outstanding and those issuable with respect to
such Common Stock Equivalents.
(iv) If the number of shares of Common Stock
outstanding at any time after the Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for each series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in the aggregate number of shares of Common Stock outstanding.
(e) Other Distributions. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provision shall be
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made so that the holders of Preferred Stock shall thereafter be entitled to
receive upon conversion of such series of Preferred Stock the number of shares
of stock or other securities or property of the corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion of the Preferred
Stock would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of Preferred Stock
after the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number of
shares issuable upon conversion of the Preferred Stock) shall be applicable
after that event as nearly equivalent as may be practicable.
(g) No Impairment. This corporation will not, by amendment
of its Articles of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Preferred Stock and against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of Preferred Stock, and the number of shares
of Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of a series of Preferred Stock pursuant to
this Section 4, this corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price for such series of Preferred Stock at
the time in effect, and (C) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of such series of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by
this corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Preferred Stock, at least 20 days prior
to the date specified therein, a notice
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specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Preferred Stock, this corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to these Articles of
Incorporation.
(k) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his or her address appearing on the books
of this corporation.
5. Voting Rights.
(a) The holder of each outstanding share of Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Preferred Stock could then be converted, and with respect to such vote, such
holder shall have full voting rights and powers equal to the voting rights and
powers of the holders of Common Stock and shall be entitled, notwithstanding any
provision hereof, to notice of any shareholders' meeting in accordance with the
bylaws of this corporation, and shall be entitled to vote, together with holders
of Common Stock, with respect to any question upon which holders of Common Stock
have the right to vote. Fractional votes shall not, however, be permitted and
any fractional voting rights available on an as-converted basis (after
aggregating all shares into which such outstanding shares of Preferred Stock
held by each holder could be converted) shall be rounded to the nearest whole
number (with one-half being rounded upward).
(b) Notwithstanding the provisions of Section 5(a) above, so
long as 2,650,000 shares of Series B Preferred Stock remain outstanding (as
adjusted for subsequent stock splits, recapitalizations and the like), the
holders of Series B Preferred Stock, voting as a separate class, shall be
entitled to elect one (1) director of the corporation (the "Series B Director").
At any meeting held for the purpose of electing or nominating directors, the
presence in person or by proxy of the holders of a majority of the Series B
Preferred Stock then outstanding shall constitute a quorum of the Series B
Preferred Stock for the election or nomination of the Series B Director. A
vacancy in the directorship elected solely by the holders of Series B Preferred
Stock shall be filled only by vote of the holders of Series B Preferred Stock.
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(c) Notwithstanding the provisions of Section 5(a) above, so
long as 7,216,309 shares of Series D Preferred Stock remain outstanding (as
adjusted for subsequent stock splits, recapitalizations and the like), the
holders of Series D Preferred Stock, voting as a separate class, shall be
entitled to elect one (1) director of the corporation (the "Series D Director").
At any meeting held for the purpose of electing or nominating directors, the
presence in person or by proxy of the holders of a majority of the Series D
Preferred Stock then outstanding shall constitute a quorum of the Series D
Preferred Stock for the election or nomination of the Series D Director. A
vacancy in the directorship elected solely by the holders of Series D Preferred
Stock shall be filled only by vote of the holders of Series D Preferred Stock.
6. Protective Provisions. So long as at least twenty-five percent
(25%) of the shares of any series of Preferred Stock remain outstanding, this
corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of a majority of the then
outstanding shares of Series A, Series B, Series C-1, Series C-2, Series C-3 and
Series D Preferred Stock, voting together as a single class:
(a) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the corporation is disposed of;
(b) alter or change the rights, preferences or privileges of
the shares of any series of Preferred Stock so as to adversely affect the
shares;
(c) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on a
parity with, any then existing series of Preferred Stock with respect to voting,
dividends, redemption or upon liquidation; or
(d) amend the corporation's Articles of Incorporation or
bylaws.
7. Status of Converted Stock. In the event any shares of
Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so
converted shall be cancelled and shall not be issuable by the corporation. The
Articles of Incorporation of this corporation shall be appropriately amended to
effect the corresponding reduction in the corporation's authorized capital
stock.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when, as and if
declared by the Board, out of any assets of the corporation legally available
therefor, such dividends as may be declared from time to time by the Board.
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52
2. Liquidation Rights. Upon the liquidation, dissolution or
winding up of the corporation, the assets of the corporation shall be
distributed as provided in Section 2 of Division (B) of this Article III.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. Except in the election of a director by the
holders of Series B Preferred Stock and by the holders of Series D Preferred
Stock as provided in Sections 5(b) and 5(c) of Division (B) of this Article III,
the holder of each share of Common Stock shall have the right to one vote, and
shall be entitled to notice of any shareholders' meeting in accordance with the
bylaws of this corporation, and shall be entitled to vote upon such matters and
in such manner as may be provided by law.
ARTICLE IV
A. The liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
B. The corporation is authorized, to the fullest extent permissible
under California law, to provide indemnification of agents (as defined in
Section 317 of the California Corporations Code) through bylaw provisions,
agreements with the agents, vote of shareholders or disinterested directors, or
otherwise in excess of the indemnification otherwise permitted by Section 317 of
the California Corporations Code, subject only to applicable limits set forth in
Section 204 of the California Corporations Code with respect to actions for
breach of duty to the corporation and its shareholders.
* * *
THREE: The foregoing amendment and restatement has been approved by
the Board.
FOUR: The foregoing amendment and restatement was approved by the
holders of the requisite number of shares of the corporation in accordance with
Sections 902 and 903 of the California General Corporation Law; the total number
of outstanding shares of each class entitled to vote with respect to the
foregoing amendment and restatement was 6,178,968 shares of Common Stock,
525,000 shares of Series A Preferred Stock, 5,512,000 shares of Series B
Preferred Stock, 569,525 shares of Series C-1 Preferred Stock, 605,122 shares of
Series C-2 Preferred Stock and 2,282,730 shares of Series C-3 Preferred Stock.
The number of shares voting in favor of the foregoing amendment and restatement
equaled or exceeded the vote required, such required vote being (a) a majority
of the outstanding shares of Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and
Series C-3 Preferred Stock, voting together as a single class, (b) a majority of
the outstanding shares of Series A Preferred Stock, Series B Preferred Stock,
Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series C-3 Preferred
Stock, voting together as a single class, and (c) a majority of the outstanding
shares of Common Stock, voting as a single class.
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53
IN WITNESS WHEREOF, the undersigned have executed this certificate
on February __, 1998.
----------------------------------------
Xxxxx Xxxxxxxx, President
----------------------------------------
Thi Thumasathit, Assistant Secretary
The undersigned certify under penalty of perjury that they have read
the foregoing Amended and Restated Articles of Incorporation and know the
contents thereof, and that the statements therein are true.
Executed at Palo Alto, California, on February __, 1998.
----------------------------------------
Xxxxx Xxxxxxxx, President
----------------------------------------
Thi Thumasathit, Assistant Secretary
[SIGNATURE PAGE TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF ADKNOWLEDGE INC.]
54
ADKNOWLEDGE INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
MARCH 4, 1998
55
TABLE OF CONTENTS
Page
1. Registration Rights.....................................................1
1.1 Definitions.......................................................1
1.2 Request for Registration..........................................2
1.3 Company Registration..............................................3
1.4 Obligations of the Company........................................4
1.5 Furnish Information...............................................5
1.6 Expenses of Registration..........................................5
1.7 Underwriting Requirements.........................................6
1.8 Delay of Registration.............................................6
1.9 Indemnification...................................................6
1.10 Reports Under Securities Exchange Act of 1934.....................8
1.11 Form S-3 Registration.............................................9
1.12 Assignment of Registration Rights................................10
1.13 "Market Stand-Off"Agreement......................................10
1.14 Termination of Registration Rights...............................10
2. Covenants of the Company...............................................11
2.1 Delivery of Financial Statements.................................11
2.2 Delivery of Additional Information...............................11
2.3 Inspection.......................................................11
2.4 Termination of Information and Inspection Covenants..............11
2.5 Confidentiality of Information...................................12
2.6 Right of First Offer.............................................12
3. Miscellaneous..........................................................13
3.1 Successors and Assigns...........................................13
3.2 Governing Law....................................................13
3.3 Counterparts.....................................................13
3.4 Titles and Subtitles.............................................13
3.5 Notices..........................................................13
3.6 Expenses.........................................................14
3.7 Amendments and Waivers...........................................14
3.8 Severability.....................................................14
3.9 Aggregation of Stock.............................................14
3.10 Entire Agreement.................................................14
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AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This Amended and Restated Investor Rights Agreement (the
"Agreement") is made as of the 4th day of March, 1998, by and between
AdKnowledge Inc., a California corporation (the "Company"), and the investors
listed on Schedule A hereto, each of which is herein referred to as an
"Investor."
RECITALS
WHEREAS, certain of the Investors (the "Existing Investors") hold
shares of the Company's Series A, B, Series C-1, Series C-2 and Series C-3
Preferred Stock and are parties to an Investor Rights Agreement, dated March 14,
1997, as amended by Amendment No. 1 to the Investor Rights Agreement, dated
December 31, 1997, between the Company and such Existing Investors (the "Prior
Agreement");
WHEREAS, certain of the Investors (the "Series D Investors") and the
Company are parties to the Series D Preferred Stock Purchase Agreement of even
date herewith, which provides for the sale and issuance of Series D Preferred
Stock to such Series D Investors; and
WHEREAS, in order to induce the Company to enter into the Series D
Preferred Stock Purchase Agreement and to induce the Series D Investors to
invest funds in the Company pursuant to the Series D Stock Purchase Agreement,
the Investors and the Company hereby agree that the Prior Agreement shall be
superseded and replaced in its entirety by this Agreement and that this
Agreement shall govern the rights of the Investors to cause the Company to
register shares of Common Stock issuable to the investors and certain other
matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "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 Securities and Exchange Commission (the "SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.12 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
(e) The term "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in
57
compliance with the Act, and the declaration or ordering of effectiveness of
such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common
Stock issuable or issued upon conversion of the Series B, Series C-1, Series
C-2, Series C-3 and/or Series D Preferred Stock, (ii) except with respect to
Sections 1.2 and 1.11, the Common Stock issuable or issued upon conversion of
the Series A Preferred Stock and (iii) 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 stock referenced in (i) or (ii)
above, excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which his or her rights under this Section 1 are not
assigned.
(g) 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.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the
earlier of (i) March 4, 2003, or (ii) twelve (12) 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 percent (30%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act for a
public offering in which the aggregate proceeds from the offering would 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) effect as soon as practicable, and in any event
shall use its best efforts to effect within 120 days of the receipt of such
request, 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 with Section 3.5 below.
(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 its 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
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58
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) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
1.2, 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 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 at least 90 days after receipt of
the request of the Initiating Holders; provided, however, the Company may not
exercise this deferral right more than once in any twelve (12) month period.
(d) 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:
(i) After the Company has effected two registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred 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 Initiating 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 1.11 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), the Company shall, at such time,
3
59
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 3.5 hereof, the Company shall,
subject to the provisions of Section 1.7 hereof, cause to be registered under
the Act all of the Registrable Securities that each such Holder has requested to
be registered.
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 registered thereunder, keep
such registration statement effective for a period of up to ninety (90) 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 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.
(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.
(g) Cause all such Registrable Securities registered
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
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(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) Provided such securities are being sold through
underwriters, use its best efforts to 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, (i) an
opinion, dated 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, addressed to the underwriters
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 and to the Holders requesting registration of Registrable
Securities.
1.5 Furnish Information.
(a) 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.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.11 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.11(b)(2), whichever is applicable.
1.6 Expenses of Registration. The Company shall bear and pay all
expenses incurred in connection with a registration requested pursuant to
Sections 1.2, 1.3 and 1.11, including without limitation, all registration,
filing and qualification fees, printer's and accounting fees and the Company's
legal fees, but excluding underwriter discounts and commissions relating to the
Registrable Securities and the fees and disbursements of counsel for 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 that if such
withdrawal is due to a material adverse change in the business of the Company
that the Holders were not previously aware of at the time of their request and
the Holders withdraw their request with reasonable promptness following
disclosure by the Company of such material adverse change, then the Holders
shall not be required to pay any such expenses and shall not forfeit as provided
above any rights to one demand registration pursuant to Section 1.2.
5
61
1.7 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) but in no event shall (i) the amount of securities
of the selling Holders included in the offering be reduced below thirty percent
(30%) of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities in which
case the selling shareholders may be excluded if the underwriters make the
determination described above and no other shareholder's securities are included
or (ii) notwithstanding (i) above, any shares being sold by a shareholder
exercising a demand registration right similar to that granted in Section 1.2 be
excluded from such offering or (iii) the Company limit the number of Registrable
Securities to be included in a registration pursuant to this Agreement in order
to include shares held by shareholders with no registration rights. For purposes
of the preceding sentence 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.
1.8 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.
1.9 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 become subject under
the Act, or the 1934 Act or other federal or state securities laws, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
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
6
62
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, other federal or
state securities laws, or any rule or regulation promulgated under the Act, the
1934 Act or other federal or state securities laws; and the Company will pay to
each such Holder, underwriter or controlling person 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 1.9(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
securities laws, 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 1.9(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 1.9(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 1.9(b)
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.9 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 1.9, 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
(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
7
63
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 1.9, 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 1.9. No indemnifying party,
in the defense of any such claim or litigation, shall, except with the consent
of each indemnified party, consent to entry of any judgment or entry into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party a release from all liability
in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 1.9
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 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 Reports Under Securities Exchange Act of 1934. 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) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act;
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(c) 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;
and
(d) take such action as is necessary to allow the Holders to
use Form S-3.
1.11 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders 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) 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 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 1.11: (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 (net of any
underwriters' discounts or commissions) of less than $500,000; (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 at least 90 days after receipt of the
request of the Holder or Holders under this Section 1.11; 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 (12) month period
preceding the date of such request, already effected two registrations on Form
S-3 for the Holders pursuant to this Section 1.11; (5) if the Company has
already effected three registrations on Form S-3 for the Holders pursuant to
this Section 1.2; or (6) 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.
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(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. Registrations effected pursuant to this
Section 1.11 shall not be counted as demands for registration or registrations
effected pursuant to Sections 1.2 or 1.3, respectively.
1.12 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided: (a) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.13 below,
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.
1.13 "Market Stand-Off" Agreement. Each Holder 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 which was not acquired directly in the
public market or in a public offering by the Company, except common stock
included in such registration; provided, however, that:
(a) all executive officers and directors of the Company
enter into similar agreements; and
(b) such market stand-off time period shall not exceed 180
days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.14 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1, and all such
rights shall terminate, (i) five (5) years following the consummation of the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the initial firm commitment underwritten
offering of its securities to the general public or (ii) on such date after the
closing of such sale of securities 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 90-day period.
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66
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall deliver to
each Investor:
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company, a statement of
shareholder's equity as of the end of such year, and a statement of cash flows
for such year, which reports shall be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP") and audited by
nationally recognized independent accountants;
(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement, an
unaudited balance sheet, an unaudited statement of cash flows and a statement of
shareholder's equity as of the end of such fiscal quarter; and
(c) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time request;
provided, however, that the Company shall not be obligated under this subsection
(c) or any other subsection of Section 2.1 to provide information which it deems
in good faith to be a trade secret or similar confidential information.
2.2 Delivery of Additional Information. The Company shall deliver
to each Holder who holds at least 500,000 shares of Registrable Securities:
(a) within twenty (20) days of the end of each month, an
unaudited income statement, statement of cash flows and balance sheet for and as
of the end of such month, in reasonable detail; provided, however, that the
Company's obligation under this subsection 2.2(a) shall not commence until the
end of the third month from the date hereof; and
(b) as soon as practicable, but in any event thirty (30)
days prior to the end of each fiscal year, a business plan for the next fiscal
year.
2.3 Inspection. The Company shall permit each Investor, 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, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.3 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information;
provided, further, that the Investors coordinate their visitations and
inspections so as to minimize the disruptions and interruptions to the Company.
2.4 Termination of Information and Inspection Covenants. The
covenants set forth in subsections 2.2(a) and (b) and Section 2.3 shall
terminate as to Investors and be of no further force or effect when the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the firm commitment underwritten offering of its
securities to the general public is consummated or when the Company first
becomes subject to
11
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the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur.
2.5 Confidentiality of Information. The information provided
pursuant to Sections 2.1 and 2.2 shall be used by each Holder or any permitted
assignee of each Holder solely in furtherance of its interests as an investor in
the Company, and such Holder and any permitted assignee of such Holder shall
maintain the confidentiality of all information of the Company obtained under
Sections 2.1 and 2.2, unless such information (i) was known by such Holder or
permitted assignee prior to its disclosure to them by the Company, (ii) is
disclosed to such Holder or permitted assignee without restriction as a matter
of right by a third party not affiliated with or working for the Company, or
(iii) has become publicly available through no fault of such Investor or
permitted assignee. Notwithstanding the foregoing, a Holder may disclose, if
applicable, (i) to Holder's general and limited partners, or (ii) Holder's Board
of Directors or executive officers such information provided that such general
or limited partners, or such Board of Directors or executive officers agree to
be bound by the terms of this Section 2.5.
2.6 Right of First Offer. Subject to the terms and conditions
specified in this paragraph 2.6, the Company hereby grants to each Investor a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). For purposes of this Section 2.6, an Investor includes
any general partners and affiliates of an Investor. An Investor shall be
entitled to apportion the right of first offer hereby granted it among itself
and its partners and affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Investor stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the price and
terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Series B, Series C-1, Series C-2, Series C-3 or
Series D Preferred Stock then held, by such Investor bears to the total number
of shares of Common Stock of the Company then outstanding (assuming full
conversion of all convertible securities), issued and held, or issuable upon
conversion of the Series B, Series C-1, Series C-2, Series C-3 or Series D
Preferred Stock, then held by all Investors. The Company shall promptly, in
writing, inform each Investor that purchases all the shares available to it
("Fully-Exercising Investor") of any other Investor's failure to do likewise.
During the ten-day period commencing after receipt of such information, each
Fully-Exercising Investor shall be entitled to obtain that portion of the Shares
for which Investors were entitled to subscribe but which were not subscribed for
by the Investors which is equal to the proportion that the number of shares of
Common Stock issued and held, or issuable upon conversion of Series B, Series
C-1, Series C-2, Series C-3 or Series D Preferred Stock then held, by such
Fully-Exercising Investor bears to the
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68
total number of shares of Common Stock issued and held, or issuable upon
conversion of the Series B, Series C-1, Series C-2, Series C-3 or Series D
Preferred Stock then held, by all Fully-Exercising Investors who wish to
purchase some of the unsubscribed shares.
(c) If all Shares which Investors are entitled to obtain
pursuant to subsection 2.6(b) are not elected to be obtained as provided in
subsection 2.6(b) hereof, the Company may, during the 60-day period following
the expiration of the period provided in subsection 2.6(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable than, those specified in
the Notice. If the Company does not enter into an agreement for the sale of the
Shares within such period, or if such agreement is not consummated within 30
days of the execution thereof, the right provided hereunder shall be deemed to
be revived and such Shares shall not be offered unless first reoffered to the
Investors in accordance herewith.
(d) The right of first offer in this Section 2.6 shall not
be applicable (i) to the issuance or sale of shares of Common Stock (or options
therefor) to Company employees, directors, officers, or consultants for the
primary purpose of soliciting or retaining their employment or services, (ii) to
or after consummation of a bona fide, firmly underwritten public offering of
shares of Common Stock, registered under the Act pursuant to registration
statement on Form S-1, (iii) the issuance of Common Stock pursuant to the
conversion of the Series B, Series C-1, Series C-2, Series C-3 or Series D
Preferred Stock, or (iv) the issuance of securities in connection with a bona
fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock, or otherwise.
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.
3.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
3.3 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.
3.4 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.
3.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon
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69
personal delivery to the party to be notified, (ii) five (5) days following
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, or (iii) facsimile with confirmed receipt.
3.6 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.
3.7 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. 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, whether or not such holder
consented to such amendment or waiver.
3.8 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.
3.9 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
3.10 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first above written.
COMPANY: ADKNOWLEDGE INC.
By:
------------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
SERIES D INVESTORS ----------------------------------------
By:
------------------------------------
Title:
---------------------------------
Address:
----------------------------------------
----------------------------------------
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT]
71
EXISTING INVESTORS: XXXXXXX XXXXXXX XXXXXXXX & XXXXX VIII
By: KPCB VIII Associates, Its General Partner
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
KPCB INFORMATION SCIENCES ZAIBATSU FUND II
By: KPCB VII Associates, Its General Partner
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
KPCB JAVA FUND
By: KPCB VIII Associates, Its General Partner
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Address: c/o Kleiner Xxxxxxx Xxxxxxxx & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000-0000
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT]
72
XXXXXXXX VII
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
XXXXXXXX ASSOCIATES FUND II
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
XXXXXXXX SOFTWARE PARTNERS
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Address: c/x Xxxxxxxx Funds
0000 Xxxx Xxxx Xxxx, #000
Xxxxx Xxxx, XX 00000
[SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT]
73
SCHEDULE A
INVESTORS
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx VIII
KPCB Information Sciences Zaibatsu Fund II
KPCB Java Fund
Fah-Xxxx Xxxxxx
Xxxxxx Xxxxxxxxx
Xxxx-Xxxx Xxx
Xxxx-Xxxx Xxx
Xxxx Xxxxx
Xxx Xxxxxxx
Xxxxxx Xxxx
Chi Kiong Xxxx
Xxxx Chen
Xxxxxxxx VII
Xxxxxxxx Associates Fund II
Xxxxxxxx Solftware Partners
CMP Media, Inc.
Xxxxx X. Xxxxxx
WS Investment Company 95B
Xxxxxx-SBIC, X.X.
Xxxxxx Technology Ventures II, X.X.
Xxxxxx EDB Partners, X.X.
Xxxxxx Japan Partners, X.X.
Xxxxxx Media & Info. Tech.
Partech U.S. Partners III C.V.
Parvest U.S. Partners II C.V.
Double Black Diamond II LLC
Almanori Limited
Multinvest Limited
InfoTech Ventures Ltd.
Asian Venture Capital Investment Corp.
TWG Investment LDC
O, W & W Investments Ltd.
A-1
74
CO-SALE AGREEMENT
This Co-Sale Agreement (the "Agreement") is made this 4th day of
March, 1998 by and among AdKnowledge Inc., a California corporation (the
"Company"), the holders of shares of the Company's Common Stock listed on
Exhibit A hereto (the "Shareholders," which term includes each Shareholder's
heirs, executors, guardians, successors and assigns), and the holders of the
Company's Series D Preferred Stock listed on Exhibit B hereto (the "Investors").
WHEREAS, each of the Shareholders is the beneficial owner of the
number of shares of the Company's Common Stock listed on Exhibit A hereto (the
"Stock," which term for purposes of this Agreement also includes any additional
shares of Common Stock of the Company now owned or hereafter acquired by any
Shareholder).
WHEREAS, the Shareholders and the Company acknowledge that they are
entering into this Agreement as an inducement to and in consideration of the
purchase of shares of the Series D Preferred Stock of the Company by the
Investors pursuant to that certain Series D Preferred Stock Purchase Agreement
of even date herewith by and among the Company and such Investors.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties agree as follows:
1. Definitions.
(a) "Preferred Stock" shall mean the Company's outstanding
Series A, Series B, Series C-1, Series C-2, Series C-3 and Series D Preferred
Stock.
(b) "Common Stock" shall mean (i) the Company's Common
Stock, (ii) shares of Common Stock issued or issuable upon conversion of the
Company's outstanding Preferred Stock, (iii) shares of Common Stock issuable
upon exercise of outstanding options to the extent such options are then
exercisable and/or the stock issuable thereupon would not be subject to
repurchase by the Company, and (iv) shares of Common Stock issuable upon
conversion of any outstanding convertible securities.
2. Sales by Shareholders.
(a) Subject to any right of first refusal in favor of the
Company, if any Shareholder proposes to sell or transfer any shares of Stock in
one or more related transactions which will result in (i) the transfer of 50,000
or more shares of Stock by such Shareholder or (ii) the transferee of such
shares holding more than fifty percent (50%) of the Common Stock, then such
Shareholder shall promptly give written notice (the "Notice") to the Company and
to the Investors at least twenty (20) days prior to the closing of such sale or
transfer. The Notice shall describe in reasonable detail the proposed sale or
transfer including, without limitation, the number of shares of Stock to be sold
or transferred, the nature of such sale or transfer, the consideration to be
paid, and the name and address of each prospective purchaser or transferee. In
the event that the sale or transfer is being made pursuant to the provisions or
paragraph 3(a) or 3(b) hereof, the Notice shall state under which paragraph the
sale or transfer is being made.
75
(b) Each Investor shall have the right, exercisable upon
written notice to such Shareholder within ten (10) days after receipt of the
Notice, to participate in such sale of Stock on the same terms and conditions.
To the extent one or more of the Investors exercise such right of participation
in accordance with the terms and conditions set forth below, the number of
shares of Stock that the Shareholder may sell in the transaction shall be
correspondingly reduced.
(c) Each Investor may sell all or any part of that number of
shares of Stock equal to the product obtained by multiplying (i) the aggregate
number of shares of Stock covered by the Notice by (ii) a fraction the numerator
of which is the number of shares of Common Stock owned by the Investor at the
time of the sale or transfer and the denominator of which is the total number of
shares of Common Stock outstanding at the time of the sale or transfer.
(d) If any Investor fails to elect to fully participate in
such Shareholder's sale pursuant to this Section 2, the Shareholder shall
promptly give notice of such failure to the Investors who did so elect (the
"Participants"). Such notice may be made by telephone if confirmed in writing
within two (2) days. The Participants shall have five (5) days from the date
such notice was given to agree to sell their pro rata share of the unsold
portion. For purposes of this paragraph, a Participant's pro rata share of an
unsold portion shall be the ratio of (x) the number of shares of Common Stock
held by such Participant to (y) the total number of shares of Common Stock held
by all the Participants and the Shareholder.
(e) Each Participant shall effect its participation in the
sale by promptly delivering to the Shareholder for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent:
(i) the type and number of shares of Common Stock
which such Participant elects to sell; or
(ii) that number of shares of Series D Preferred Stock
which is at such time convertible into the number of shares of Common Stock
which such Participant elects to sell; provided, however, that if the
prospective purchaser objects to the delivery of Series D Preferred Stock in
lieu of Common Stock, such Participant shall convert such Preferred Stock into
Common Stock and deliver Common Stock as provided in subparagraph 2(e)(i) above.
The Company agrees to make any such conversion concurrent with the actual
transfer of such shares to the purchaser.
(f) The stock certificate or certificates that the
Participant delivers to the Shareholder pursuant to paragraph 2(e) shall be
transferred to the prospective purchaser in consummation of the sale of the
Stock pursuant to the terms and conditions specified in the Notice, and the
Shareholder shall concurrently therewith remit to such Participant that portion
of the sale proceeds to which such Participant is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase shares or
other securities from a Participant exercising its rights of co-sale hereunder,
the Shareholder shall not sell to such prospective purchaser or purchasers any
Stock unless and until, simultaneously with such sale, the Shareholder shall
purchase such shares
2.
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or other securities from such Participant for the same consideration and on the
same terms and conditions as the proposed transfer described in the Notice.
(g) The exercise or non-exercise of the rights of the
Participants hereunder to participate in one or more sales of Stock made by the
Shareholder shall not adversely affect their rights to participate in subsequent
sales of Stock subject to paragraph 2(a).
(h) If none of the Investors elect to participate in the
sale of the Stock subject to the Notice, the Shareholder may, not later than
sixty (60) days following delivery to the Company and each of the Investors of
the Notice, conclude a transfer of not less than all of the Stock covered by the
Notice on terms and conditions not more favorable to the transferor than those
described in the Notice. Any proposed transfer on terms and conditions more
favorable than those described in the Notice, as well as any subsequent proposed
transfer of any of the Stock by the Shareholder, shall again be subject to the
co-sale rights of the Investors and shall require compliance by the Shareholder
with the procedures described in this Section 2.
3. Exempt Transfers.
(a) Notwithstanding the foregoing, the co-sale rights of the
Investors shall not apply to (i) any pledge of Stock made pursuant to a bona
fide loan transaction that creates a mere security interest, (ii) any transfer
to the ancestors, descendants or spouse or to trusts for the benefit of such
persons or a Shareholder; or (iii) any bona fide gift; provided that (A) the
transferring Shareholder shall inform the Investors of such pledge, transfer or
gift prior to effecting it and (B) the pledgee, transferee or donee shall
furnish the Investors with a written agreement to be bound by and comply with
all provisions of this Agreement. Such transferred Stock shall remain "Stock"
hereunder, and such pledgee, transferee or donee shall be treated as a
"Shareholder" for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section
2 shall not apply to the sale of any Stock (i) to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), (ii) to the Company pursuant to a stock restriction agreement
between the Shareholder and the Company which provides the Company with the
right to repurchase such Stock upon the occurrence of certain events, or (iii)
if prior to such sale, the Shareholder held less than five percent (5%) of the
Company's outstanding shares or the Shareholders collectively held less than ten
percent (10%) of the Company's outstanding shares.
4. Prohibited Transfers.
(a) In the event a Shareholder should sell any Stock in
contravention of the co-sale rights of the Investors under this agreement (a
"Prohibited Transfer"), the Investors, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
below, and the Shareholder shall be bound by the applicable provisions of such
option.
(b) In the event of a Prohibited Transfer, each Investor
shall have the right to sell to the Shareholder the type and number of shares of
Stock equal to the number of shares each Investor would have been entitled to
transfer to the purchaser under Section 2(c)
3.
77
hereof had the Prohibited Transfer been effected pursuant to and in compliance
with the terms hereof. Such sale shall be made on the following terms and
conditions:
(i) The price per share at which the shares are to be
sold to the Shareholder shall be equal to the price per share paid by the
purchaser to the Shareholder in the Prohibited Transfer. The Shareholder shall
also reimburse each Investor for any and all fees and expense, including legal
fees and expenses, incurred pursuant to the exercise or the attempted exercise
of the Investor's rights under Section 2.
(ii) Within ninety (90) days after the later of the
dates on which the Investor (A) received notice of the Prohibited Transfer or
(B) otherwise become aware of the Prohibited Transfer, each Investor shall, if
exercising the option created hereby, deliver to the Shareholder the certificate
or certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(iii) The Shareholder shall, upon receipt of the
certificate or certificates for the shares to be sold by an Investor, pursuant
to this subparagraph 4(b), pay the aggregate purchase price therefor and the
amount of reimbursable fees and expenses, as specified in subparagraph 4(b)(i),
in cash or by other means acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by a
Shareholder to transfer Stock in violation of Section 2 hereof shall be void and
the Company agrees it will not effect such a transfer nor will it treat any
alleged transferee as the holder of such shares without the written consent of a
majority in interest of the Investors.
5. Legend.
(a) Each certificate representing shares of Stock now or
hereafter owned by the Shareholders or issued to any person in connection with a
transfer pursuant to Section 3(a) hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND BETWEEN THE
SHAREHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE
CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE CORPORATION."
(b) Each Shareholder agrees that the Company may instruct
its transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in Section 5(a) above to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
4.
78
6. Miscellaneous.
6.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California.
6.2 Amendment. Any provision may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of (i) as to the
Company, only by the Company, (ii) as to the Investors, by persons holding more
than fifty percent (50%) in interest of the Common Stock held by the Investors
and their assignees, pursuant to Section 6.3 hereof, and (iii) as to each
Shareholder, such Shareholder, provided that any Investor may waive any of his
rights hereunder without obtaining the consent of any other Investor. Any
amendment or waiver effected in accordance with clauses (i), (ii) and (iii) of
this paragraph shall be binding upon each Investor, its successors and assigns,
the Company and the Shareholder in question.
6.3 Assignment of Rights. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
The rights of the Investors hereunder are only assignable (i) by each of such
Investors to any other Investor or (ii) to an assignee or transferee who
acquires all of the Common Stock purchased by an Investor or at least 50,000
shares of Common Stock.
6.4 Term. This Co-Sale Agreement shall terminate upon the earlier
of (i) the closing of a firm commitment underwritten public offering pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of the Company's Common Stock at a price
per share of not less than $1.67 (as adjusted for stock splits, reverse stock
splits and the like effected after the date of this Agreement) and an aggregate
offering price of not less than $10,000,000, (ii) the closing of the Company's
sale of all or substantially all of its assets or the acquisition of the Company
by another entity by means of merger or consolidation resulting in the exchange
of the outstanding shares of the Company's capital stock for securities or
consideration issued, or caused to be issued, by the acquiring entity or its
subsidiary, (iii) such time as the Investors hold an aggregate of less than
7,000,000 shares of Common Stock, and (iv) the execution by the Company of a
general assignment for the benefit of creditors or the appointment of a receiver
or trustee to take possession of the property and assets of the Company.
6.5 Ownership. Each Shareholder represents and warrants that he is
the sole legal and beneficial owner of the shares of stock subject to this
Co-Sale Agreement and that no other person has any interest (other than a
community property interest) in such shares.
6.6 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given upon personal delivery to the
party to be notified or five (5) days after deposit in the United States mail,
by registered or certified
5.
79
mail, postage prepaid and properly addressed to the party to be notified as set
forth 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 hereto.
Notwithstanding the foregoing, the telephone notice permitted by Section 2(d)
shall be effective at the time it is given.
6.7 Severability. In the event one or more of the provisions of
this Co-Sale Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Co-Sale Agreement, and this
Co-Sale Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
6.8 Attorney Fees. In the event that any dispute among the parties
to this Co-Sale Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Co-Sale Agreement, including without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.9 Counterparts. This Co-Sale 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.
6.10 Stock Split. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.
6.11 Aggregation of Stock. All shares of Common Stock 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6.
80
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
ADKNOWLEDGE INC.
By:
------------------------------------
Xxxxx Xxxxxxxx
President
Address: 0000 Xxxxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
INVESTORS:
By:
------------------------------------
Title:
---------------------------------
Address:
-------------------------------
-------------------------------
7.
81
XXXXXXXX VII
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
XXXXXXXX ASSOCIATES FUND II
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: c/x Xxxxxxxx Fund
0000 Xxxx Xxxx Xxxx, #000
Xxxxx Xxxx, XX 00000
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
8.
82
XXXXXXX XXXXXXX XXXXXXXX & XXXXX VIII
By: KPCB VIII Associates, Its General Partner
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
KPCB INFORMATION SCIENCES ZAIBATSU FUND II
By: KPCB VII Associates, Its General Partner
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
KPCB JAVA FUND
By: KPCB VIII Associates, Its General Partner
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Address: c/o Kleiner Xxxxxxx Xxxxxxxx & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000-0000
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
9.
83
SHAREHOLDERS:
----------------------------------------------
Xxxxx Xxxxxxxx
Address:
-------------------------------------
-------------------------------------
-----------------------------------------------
Thi Thumasathit
Address:
-------------------------------------
-------------------------------------
[SIGNATURE PAGE TO CO-SALE AGREEMENT]
10.
84
Exhibit A
Shareholder List
Xxxxx Xxxxxxxx
Thi Thumasathit
85
Exhibit B
Investor List
KPCB Java Fund
KPCB VIII
KPCB Info Sciences Zaibatsu II
Xxxxxxxx VII
Xxxxxxxx Associates Fund II
Xxxxxxxx Software Partners
Xxxxxx-SBIC, X.X.
Xxxxxx Technology Ventures II, X.X.
Xxxxxx EDB Partners, X.X.
Xxxxxx Japan Partners, X.X.
Xxxxxx Media & Info. Tech.
Partech U.S. Partners III C.V.
Parvest U.S. Partners II C.V.
Double Black Diamond II LLC
Almanori Limited
Multinvest Limited
InfoTech Ventures Ltd.
Asian Venture Capital Investment Corp.
TWG Investment LDC
O, W & W Investments Ltd.
86
CONSENT OF SPOUSE
I, _________________________, the spouse of ______________________,
one of the shareholders referred to as a "Shareholder" in the foregoing Co-Sale
Agreement, dated March ___, 1998, acknowledge that I have read the foregoing
Agreement and that I know its contents. I am aware that by its provisions if I
and/or my spouse agree to sell all or part of the shares of the Company held of
record by either or both of us, including my community interest in such shares,
if any, co-sale rights (as described in the Agreement) must be granted to the
Investors (as defined in the Agreement) by the seller. I hereby agree that those
shares and my interest in them, if any, are subject to the provisions of the
Agreement and that I will take no action at any time to hinder operation of, or
violate, the Agreement.
Signature: _____________________________
Effective: March __, 1998 Print Name: ____________________________
