CONVERTIBLE PROMISSORY NOTE PURCHASE AGREEMENT
THIS CONVERTIBLE PROMISSORY NOTE PURCHASE AGREEMENT (this
"AGREEMENT") dated as of November 12, 1997, is entered into between Network
Computer, Inc., a Delaware corporation (the "COMPANY" or "NCI"), and
Middlefield Ventures, Inc., a Delaware corporation ("MALLARD").
WHEREAS, Mallard desires to invest in NCI by purchasing convertible
promissory notes with an aggregate principal amount of up to $12,000,000 upon
the terms and subject to the conditions set forth in this Agreement, and NCI
desires such an investment; and
WHEREAS, Mallard and NCI have entered into a Technology Escrow
Agreement of even date herewith; and
WHEREAS, Intel Corporation, a Delaware corporation and the sole
stockholder of Mallard ("Teal"), and NCI have entered into a Cooperation
Agreement involving the contribution of $3,000,000 to NCI's non-recurring
engineering efforts of even date herewith.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"BUSINESS DAY" means a day other than Saturday or Sunday, on which
commercial banks are open for business in San Francisco, California.
"DOLLARS" and the sign "$" each means lawful money of the United
States.
"GOVERNMENTAL AUTHORITY" means any United States federal, state,
local or other governmental department, commission, board, bureau, agency,
central bank, court, tribunal or other instrumentality or authority, domestic
or foreign, exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"INDEBTEDNESS" means: (i) all indebtedness or other obligations
for borrowed money or for the deferred purchase price of property or
services; (ii) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired (even though the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property); (iv) all
obligations under capital leases; (v) all reimbursement or other obligations
under or in respect of letters of credit
and bankers acceptances; and (vi) all indebtedness secured by any Lien upon
or in property owned whether or not a person assumed or became liable for the
payment of such indebtedness.
"LIEN" means any mortgage, deed of trust, pledge, security
interest, assignment, deposit arrangement, charge or encumbrance, lien
(statutory or other), or other preferential arrangement (including any
conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing or any
agreement to give any security interest).
"MATERIAL ADVERSE EFFECT" means any event, matter, condition or
circumstance which: (i) has or would reasonably be expected to have a
material adverse change on NCI's business, prospects, operating results or
financial condition; (ii) would materially impair the ability of NCI to
perform or observe its obligations under or in respect of the Transaction
Documents; or (iii) materially affects the legality, validity, binding effect
or enforceability of any of the Agreement or the Notes.
"MILESTONE" means the Second Note Milestone or the Third Note
Milestone, as applicable.
"NOTE" means the First Note (as defined in Section 2.01(b)), the
Second Note (as defined in Section 2.03(a)) or the Third Note (as defined in
Section 2.03(b)), each of which shall be in substantially the form attached
hereto as EXHIBIT A and shall be issued by NCI to Mallard in accordance with
the terms and conditions set forth herein. Each Note will bear a principal
amount of Four Million Dollars ($4,000,000.00).
"SECOND NOTE MILESTONE" means the milestone detailed as such on
Schedule A attached hereto.
"THIRD NOTE MILESTONE" means the milestone detailed as such on
Schedule A attached hereto.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the
Admission Agreement attached hereto as EXHIBIT B and all other certificates,
documents, agreements and instruments delivered to Mallard under or in
connection with this Agreement.
ARTICLE II
PURCHASE AND SALE OF NOTES
SECTION 2.01 SALE AND ISSUANCE OF THE FIRST NOTE.
(a) The Company shall adopt and file with the Secretary
of State of Delaware on or before the Closing (as defined below) the Restated
Certificate of Incorporation in the form attached hereto as EXHIBIT C (the
"RESTATED CERTIFICATE").
2
(b) Subject to the terms and conditions of this
Agreement, Mallard agrees to purchase at the Closing, and the Company agrees
to sell and issue to Mallard at the Closing, one Note in the principal amount
of Four Million Dollars ($4,000,000) (the "FIRST NOTE") upon receipt of such
amount.
SECTION 2.02 CLOSING. The purchase and sale of the First Note
shall take place at the offices of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx, at
10:00 a.m. California Time on November 12, 1997 (which time and place is
designated as the "CLOSING"). At the Closing, the Company shall deliver to
Mallard the First Note against payment of the purchase price therefor by
check, wire transfer, or a combination thereof. The "Closing" for the Second
Note and the Third Note shall be the respective date of funding of each Note.
SECTION 2.03 SALE AND ISSUANCE OF THE SECOND NOTE AND THE THIRD
NOTE. At NCI's election, NCI shall issue and sell to Mallard, and Mallard
agrees to purchase from NCI, on the terms and conditions herein set forth:
(a) A second Note with a principal amount of Four
Million Dollars ($4,000,000) (the "SECOND NOTE") upon receipt of such amount
PROVIDED NCI has met the Second Note Milestone; and
(b) A third Note with a principal amount of Four Million
Dollars ($4,000,000) (the "THIRD NOTE") upon receipt of such amount PROVIDED
NCI has met the Third Note Milestone.
(c) If the Second Note Milestone or the Third Note
Milestone is achieved and accepted pursuant to Section 2.03(d) but NCI
chooses not to sell and issue the Second Note or Third Note, respectively, to
Mallard, NCI shall so notify Mallard promptly in writing (the "WAIVER
NOTICE"). Mallard shall then have the right to purchase, and NCI shall issue
and sell to Mallard, that number of shares of the Company's Series D
Preferred Stock as equals Four Million Dollars ($4,000,000) divided by the
Conversion Price of the applicable Note PROVIDED, HOWEVER, Mallard so
notifies NCI within five (5) business days of receipt of the Waiver Notice
and funds the purchase price therefore at a time and to a location specified
by NCI. Documentation of such purchase shall be in a form reasonably
satisfactory to both NCI and Mallard and shall be included in the definition
of "Conversion Shares" as defined in Section 4.01(c) below.
(d) When NCI believes it has appropriately completed the
Milestone, NCI will deliver evidence thereof to Mallard. Mallard will accept
or reject the Milestone within fifteen (15) Business Days after delivery;
failure to give notice of acceptance or rejection within that period will
constitute acceptance. Mallard may reject the Milestone if the Milestone
fails in some material respect to meet the requirements therefor. Any
rejection notice will include a detailed description of any such failures in
a manner sufficient to allow NCI to reproduce and correct them. If Mallard
rejects the Milestone, NCI will use reasonable commercial efforts to correct
promptly the failures specified in the rejection notice and re-deliver the
Milestone to Mallard. The acceptance/rejection/correction provisions above
shall be
3
reapplied until the Milestone is accepted; provided, however, that upon the
third or any subsequent rejection NCI shall have no continued obligation to
make further correction. Mallard may not reject a resubmitted Milestone for a
failure that was not cited in the immediately preceding rejection notice.
SECTION 2.04 PROCEDURE FOR PURCHASE OF SECOND NOTE AND THIRD
NOTE. The purchase of the Second Note or Third Note, as applicable, shall be
made upon written notice from NCI to Mallard, which notice shall be received
by Mallard not later than 3:00 P.M. California time five days prior to the
proposed date of the sale of the Note. Each such notice (a "NOTICE OF
BORROWING") shall refer to this Agreement and shall specify: (i) that the
Second Note Milestone or Third Note Milestone, as applicable, has been
achieved, (ii) the proposed date of the sale of the Note, which shall be a
Business Day; and (iii) payment instructions with respect to the funds to be
made available to NCI as a result of such borrowing. Upon fulfillment of the
applicable conditions set forth in this Agreement, Mallard shall purchase the
Note from NCI on the date set forth on the Notice of Borrowing.
ARTICLE III
TERMS OF THE NOTES
SECTION 3.01 INTEREST. Interest shall accrue on the unpaid
principal amount of each Note from the date of such Note until the maturity
thereof, at a rate equivalent to the lesser of (a) 5.0% or (b) the maximum
interest rate permitted under applicable federal and state laws. Interest
shall be computed as simple annual interest on the basis of a year of 360
days for the actual number of days occurring in the period for which such
interest is payable. Interest accrued on a particular Note will be forgiven
upon conversion of such Note into shares of Series D Preferred Stock or the
Series A Common Stock issuable upon conversion thereof.
SECTION 3.02 REPAYMENT OF THE NOTES. The principal amount and
accrued interest outstanding under each Note hereunder shall be due and
payable on or before the fifth anniversary of the date of issuance of such
Note (the "MATURITY DATE"), unless earlier prepaid under Section 3.03,
converted under Section 3.05 (in which event interest will be forgiven) or
accelerated in accordance with Section 3.08.
SECTION 3.03 PREPAYMENTS. NCI may, upon prior notice to Mallard
not later than 10 Business Days prior to the date of prepayment, prepay the
outstanding principal amount and interest under any Note in whole or in part,
without premium or penalty. The notice given of any prepayment shall specify
the date and amount of the prepayment and the date of the Note to which such
prepayment shall be applied.
SECTION 3.04 PAYMENTS. NCI shall make each payment under the
Notes, unconditionally and in full without set-off, counterclaim or other
defense, not later than 3:00 p.m. (California Time) on the Maturity Date in
Dollars and in immediately available funds, at the offices of Mallard (as set
forth in Section 8.02 below, which may be amended from time to time in
accordance therewith), or to such other office and account of Mallard as it
from time to time shall designate in a written notice to NCI.
4
SECTION 3.05 CONVERSION OF NOTES.
(a) RIGHT TO CONVERT. Subject to and upon compliance
with the provisions of this Agreement, Mallard shall have the right at its
option to convert the outstanding principal amount under the First Note, the
Second Note or the Third Note or any portion thereof PROVIDED such portion of
principal amount is at least $1,000,000, into that number of fully paid and
non-assessable shares of NCI Series D Preferred Stock obtained by dividing
the principal amount under such Note surrendered for conversion by the
Conversion Price (as defined below) in effect at such time.
(b) AUTOMATIC CONVERSION OF THE FIRST NOTE. Unless
earlier converted pursuant to Section 3.05(a) above, the outstanding
principal amount under the First Note shall automatically be converted into
that number of fully paid and non-assessable shares of NCI Series D Preferred
Stock obtained by dividing the principal amount under the Note surrendered
for conversion by the Conversion Price (as defined below) in effect at such
time upon the sale by the Company of its Common Stock in a public offering
pursuant to a registration statement filed by the Company under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), with proceeds of
greater than $20,000,000 (an "IPO").
(c) AUTOMATIC CONVERSION OF THE SECOND NOTE AND THE
THIRD NOTE. Unless earlier converted pursuant to Section 3.05(a) above, the
outstanding principal amount under the Second Note and the Third Note shall
automatically be converted into that number of fully paid and non-assessable
shares of NCI Series D Preferred Stock obtained by dividing the principal
amount under the Note surrendered for conversion by the Conversion Price (as
defined below) in effect at such time upon the consummation of an IPO.
(d) EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF
PREFERRED STOCK ON CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. In
order to exercise the right to conversion with respect to a Note, Mallard
shall surrender the Note and shall give written notice of conversion to NCI
that Mallard elects to convert the Note or the specified portion thereof
specified in said notice. Such notice shall also state the name or names
(with address) in which the certificate or certificates for shares of NCI
Series D Preferred Stock which shall be issuable on such conversion shall be
issued.
As promptly as practicable, but in no event more than 15 Business
Days after satisfaction of the requirements for conversion set forth above,
NCI shall issue and shall deliver to Mallard, a certificate or certificates
for the number of full shares issuable upon the conversion of such Note or
portion thereof in accordance with the provisions of this subsection (d) and
a check or cash in respect of any fractional interest in respect of a share
of NCI Series D Preferred Stock arising upon such conversion, as provided
below. In case any Note shall be surrendered for partial conversion, NCI
shall execute and deliver to the holder of the Note so surrendered, without
charge, a new Note or Notes in authorized denominations in an aggregate
principal amount equal to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any
such Note (or the specified portion thereof) on the date on which the
requirements set forth above in this
5
Agreement required to be satisfied by the holder have been satisfied as to
such Note (or portion thereof), and the person whose name any certificate or
certificates for shares of NCI Series D Preferred Stock shall be issuable
upon such conversion shall be deemed to have become on said date the holder
of record of the shares represented thereby.
No fractional shares or scrip representing fractional shares shall
be issued upon conversion of Notes. If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, NCI shall make an
adjustment therefor in cash at the current fair market value thereof.
(e) CONVERSION PRICE. The "CONVERSION PRICE" shall be
(i) in the case of the First Note, $1.58, unless the Company has, between the
date hereof and April 30, 1998, sold its capital stock in a financing in
which the Company has received gross proceeds of an excess of $5,000,000 (a
"SUBSEQUENT FINANCING") at a differing price, in which case such Note will
convert at the lower of $1.58 or such differing price, and (ii) in the case
of the Second Note and Third Note, $1.58, unless the Company has, between the
date hereof and the date on which such Notes are issued, sold its capital
stock in a Subsequent Financing at a differing price, in which case such
Notes shall convert at (A) such differing price if such financing is prior to
an IPO or (B) the average closing sale price of the Company's Common Stock
for the five (5) Business Days preceding the date on which NCI received
notice pursuant to Section 2.05(c) or Section 3.05(d) above, as the case may
be. Notwithstanding the foregoing, a Subsequent Financing shall not include
(i) the issuance or sale of Common Stock (or options therefor) to employees,
consultants and directors, pursuant to plans or agreements approved by the
Board of Directors for the primary purpose of soliciting or retaining their
services, (ii) the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities that are outstanding on the
date hereof or that are not outstanding on the date hereof but which NCI is
contractually obligated to issue and sell hereafter, (iii) the issuance of
securities in connection with a bona fide business acquisition by the
Company, whether by merger, consolidation, sale of assets, sale or exchange
of stock or otherwise, (iv) the issuance of securities to financial
institutions or lessors in connection with commercial credit arrangements,
equipment financings or similar transactions, (v) the purchase of shares of
Series B, Series C or Series C-1 Preferred Stock by NCI or Oracle pursuant to
the right afforded by NCI and Oracle to certain holders thereof in Sections 1
and 2 of the Put/Call and Voting Agreement dated August 11, 1997, by and
among NCI, Oracle and certain stockholders of the Company, or (vi) the
issuance after the date hereof of up to 22,000,000 shares of Series A-1
Preferred Stock, at a purchase price of $1.10 per share pursuant to the
Convertible Note Purchase Agreement dated July 23, 1997, between Oracle and
NCI.
(f) EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any of the following events occur, namely (i) any reclassification
or change of outstanding shares of NCI Series D Preferred Stock (other than a
change in par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination), (ii) any
consolidation, merger or combination of NCI with another corporation as a
result of which holders of NCI Series D Preferred Stock shall be entitled to
receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such Preferred Stock (a
6
"Merger"), or (iii) any sale or conveyance of the properties and assets of
NCI as, or substantially as, an entirety to any other corporation as a result
of which holders of Preferred Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Preferred Stock (an "Asset Sale"), then NCI or the
successor or purchasing corporation, as the case may be, shall execute with
Mallard an amendment to this Agreement providing that all issued and
outstanding Notes shall be convertible into the kind and amount of shares of
stock and other securities or property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale
or conveyance by a holder of a number of shares of Preferred Stock issuable
upon conversion of such Notes immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance.
(g) RESERVATION OF SHARES; SHARES TO BE FULLY PAID. NCI
shall provide, free from preemptive rights, out of its authorized but
unissued shares or shares held in treasury, sufficient shares to provide for
the conversion of the Notes from time to time as such Notes are presented for
conversion. From the execution of this Agreement, NCI will take all
corporate action which may, in the opinion of its counsel, be necessary in
order that NCI may validly and legally issue shares of such NCI Series D
Preferred Stock at such adjusted Conversion Price.
NCI covenants that all shares of NCI Series D Preferred Stock (and
the shares of Series A Common Stock issuable upon conversion thereof) which
may be issued upon conversion of Notes will upon issue be fully paid and
non-assessable by NCI and free from all taxes, Liens and other charges with
respect to the issue thereof.
SECTION 3.06 TAXES ON PAYMENTS. To the extent applicable, NCI
shall withhold any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority ("TAXES") from any amounts payable to Mallard hereunder and so
notify Mallard as promptly as possible thereafter, NCI shall send to Mallard
notice showing payment thereof. NCI will not be responsible for any income
tax of Mallard for interest due on the Note, or stamp duty or other tax due
on conversion of the Note into shares of Preferred Stock.
SECTION 3.07 NO REBORROWING. Once repaid or converted, the
principal amount of the Notes may not be reborrowed.
SECTION 3.08 ACCELERATION. Notwithstanding the provisions of
Section 3.05(b), (c) or (f), Mallard may alternatively elect to be repaid the
outstanding principal amount and accrued interest on the Notes (the
"OUTSTANDING BALANCE") in the event of an IPO, a Merger or an Asset Sale.
Such election shall be made by written notice received by NCI within five (5)
Business Days of Mallard's receipt of notice from NCI that it intends to
consummate such IPO, Merger or Asset Sale within the succeeding ninety (90)
days. Such repayment shall be made within 45 Business Days after the
completion of such IPO or upon completion of a Merger or Asset Sale.
7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF NCI. NCI hereby
represents and warrants to Mallard that, except as set forth on the Schedule
of Exceptions (the "SCHEDULE OF EXCEPTIONS") furnished to Mallard which
exceptions shall be deemed to be representations and warranties as if made
hereunder:
(a) 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 Delaware 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 NCI. 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.
(b) CAPITALIZATION AND VOTING RIGHTS. The authorized
capital of the Company consists, or will consist immediately prior to the
Closing, of:
(i) PREFERRED STOCK. 375,000,000 shares of
Preferred Stock (the "PREFERRED STOCK"), 84,999,900 shares of which have been
designated Series A Preferred Stock and are outstanding, 70,000,000 shares of
which have been designated Series A-1 Preferred Stock and 20,909,090 shares
are outstanding, 14,500,000 shares of which have been designated Series B
Preferred Stock and 13,924,553 shares are outstanding, 60,000,000 shares of
which have been designated Series C Preferred Stock and 40,003,946 shares are
outstanding, 60,000,000 shares of which are designated Series C-1 Preferred
Stock and none are outstanding, 12,000,000 of which are designated Series D
Preferred Stock and none are outstanding. The rights, privileges and
preferences of the Preferred Stock will be as stated in the Company's
Restated Certificate.
(ii) COMMON STOCK. 425,000,000 shares of common
stock ("COMMON STOCK"), 302,000,000 shares of which have been designated
Series A Common Stock of which 43,850 shares are outstanding, and 60,000,000
shares of which have been designated Series B Common Stock none of which are
issued and outstanding.
(iii) The outstanding shares of Preferred Stock and
Common Stock have all been duly and validly authorized and issued, fully paid
and nonassessable, and were issued in accordance with the registration or
qualification provisions of the Securities Act and any relevant state
securities laws or pursuant to valid exemptions therefrom.
(iv) Except for (A) the conversion privileges of the
Preferred Stock to be issued under this Agreement, (B) the rights provided in
the Stockholders Agreement, dated August 11, 1997, among NCI and certain
stockholders of NCI (the "STOCKHOLDERS AGREEMENT"), (C) the rights provided
in the Put/Call and Voting Agreement dated
8
August 11, 1997, among NCI and certain stockholders of NCI (the "P/C VOTING
AGREEMENT") and (D) currently outstanding options to purchase 16,608,881
shares of Series C Preferred Stock and 7,338,517 shares of Series A Common
Stock granted to employees pursuant to the Company's equity incentive plans
(the "OPTION PLANS"), 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. The Company
is not a party or subject to any agreement or understanding, and, to the best
of 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 other than the P/C Voting Agreement and the Stockholders Agreement.
(c) AUTHORIZATION. The execution, delivery and performance
of the Transaction Documents and any other agreement contemplated hereunder
by NCI have been duly authorized by all necessary corporate action of NCI.
The shares of Series D Preferred Stock to be issued upon conversion of the
Notes and the shares of Series A Common Stock issuable upon conversion of
such shares of Series D Preferred Stock (collectively, the "CONVERSION
SHARES") have been or will be duly authorized by all necessary corporate
action of NCI (including, without limitation, approval of the filing of an
appropriate amendment to the Company's Certificate of Incorporation
authorizing the Conversion Shares) and, upon issuance and payment therefor,
will be validly issued, fully paid and non-assessable, and issued, upon
Mallard making appropriate written investment representations to NCI upon the
conversion of each Note into shares of Series D Preferred Stock as provided
in this Agreement, in compliance with the qualification and registration
requirements or exemptions therefrom under all applicable state and federal
securities laws.
(d) VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The
Series D Preferred Stock issuable upon conversion of the Notes and the Series
A Common Stock issuable upon conversion of the shares of Series D Preferred
Stock issuable upon conversion of the have been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Restated
Certificate, 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 and under applicable state and federal
securities laws.
(e) APPROVALS AND CONSENTS. No approval, consent or
authorization of any natural person, firm, corporation or Governmental
Authority which has not heretofore been obtained is necessary for the
execution or delivery of this Agreement, the Transaction Documents or any
other agreement contemplated hereunder by NCI or for the performance by NCI
of any of the terms or conditions thereof, except (i) at NCI's election, the
filing of a Notice of Sale of Securities Pursuant to Regulation D promulgated
under the Securities Act, and (ii) the filing of a Notice with the California
Commissioner of Corporations pursuant to Section 25102(f) of the California
Corporations Code.
(f) OFFERING. Subject in part to the truth and accuracy
of Mallard's representations set forth in Section 4.02 of this Agreement, the
offer, sale and issuance of the Notes as contemplated by this Agreement are
exempt from the registration requirements of the
9
Securities 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.
(g) LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that
questions the validity of this Agreement or the Transaction Documents, 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 Effect on NCI, or
any change in the current equity ownership of the Company. The foregoing
includes, without limitation, actions, suits, proceedings or investigations
pending or threatened involving the prior employment of any of the Company's
officers, 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.
(h) PATENTS AND TRADEMARKS. To its knowledge (but
without having conducted any special investigation or patent search), the
Company has sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information,
proprietary rights and processes necessary for its business as now conducted
without any conflict with or infringement of the rights of others. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware
that any of its employees is obligated under 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 his or her best efforts to
promote the interests of the Company or that would conflict with the
Company's business as conducted. Neither the execution nor delivery of this
Agreement nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated.
(i) COMPLIANCE WITH LAW. NCI, to its knowledge, is in
material compliance with all applicable statutes, laws, regulations and
executive orders of the United States of America and all states, foreign
countries, and other governmental bodies and agencies having jurisdiction
over its business or properties except to the extent non-compliance would not
have a Material Adverse Effect on NCI, and NCI has received no notice of any
violation of such statutes, laws, regulations or orders which has not been
remedied prior to the date hereof.
(j) AGREEMENTS; CONTRACTS. NCI has not materially
breached, nor does it have knowledge of any claim or threat that it has
materially breached, any terms or conditions of any material agreement,
contract, lease, license, instrument or commitment that,
10
individually or in the aggregate, could have a Material Adverse Effect on
NCI, nor is NCI in violation of any term of its Certificate of Incorporation
or Bylaws, as now in effect. The execution, delivery and performance of and
compliance with this Agreement and the other Agreements contemplated hereby,
and the issuance of the Notes or the Conversion Shares, have not resulted and
will not result in any violation of, or conflict with, or constitute a
default under any of the foregoing, or result in the creation of any Lien or
charge upon any of the properties or assets of NCI.
(k) DISCLOSURE. The Company has provided Mallard with
all the information that it has requested for deciding whether to purchase
the Notes. To its knowledge, neither this Agreement nor any other written
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.
(l) TITLE TO PROPERTY AND ASSETS. The Company owns its
property and assets free and clear of all Liens, except such Liens that are
immaterial in size (individually or in the aggregate), 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 its knowledge,
holds a valid leasehold interest free of any Liens.
(m) FINANCIAL STATEMENTS. NCI has furnished Mallard
with the balance sheet of NCI as of May 31, 1997, and the related statements
of operations and cash flows for the nine-month period ended May 31, 1997 and
the balance sheet of NCI as of September 30, 1997, and the related statement
of operations and cash flows for the four-month period ended September 30,
1997 (together, the "NCI FINANCIAL STATEMENTS"). All of such NCI Financial
Statements, (i) are in accordance with the respective books of NCI; (ii) have
been prepared in all material respects in accordance with GAAP except that
such do not contain any footnotes required by GAAP; (iii) present fairly the
financial position of NCI as of the date thereof and the results of
operations and cash flows of NCI for the respective period indicated therein;
and (iv) do not reflect any material items of nonrecurring income except as
stated therein. NCI has no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that
would be required to be reflected in a balance sheet, prepared in accordance
with GAAP that were not disclosed or provided for in the NCI Financial
Statements other than liabilities incurred since September 30, 1997, which
were incurred in the ordinary course of business and are not individually or
in the aggregate, material to NCI's business, operating results or financial
condition ("NCI'S BUSINESS"). All reserves set forth on the NCI Financial
Statements were adequate. There are no loss contingencies (as such term is
used in Statement of Financial Accounting Standards No. 5) that were not
adequately provided for in the NCI Financial Statements.
(n) ABSENCE OF CHANGES. Since September 30, 1997: (a)
there has been no material adverse change in NCI's Business or any
development particular to NCI's Business and not generally known to the
public that reasonably could be expected to cause a material adverse change
in NCI's Business; (b) there has been no damage, destruction or loss
11
(whether or not covered by insurance) which has had a Material Adverse Effect
on NCI; (c) there has been no change by NCI in accounting principles or
methods except insofar as may be required by a change in generally accepted
accounting principles; (d) there has been no revaluation by NCI of any of its
assets, including, without limitation, writing down the value of inventory or
writing off notes or accounts receivable; and (e) NCI has conducted its
business only in the ordinary course consistent with past practice.
(o) TAX RETURNS, PAYMENTS AND ELECTIONS. The Company
has filed all tax returns and reports as required by law. These returns and
reports are true and correct in all material respects. The Company has paid
all taxes and other assessments due, except those contested by it in good
faith that are listed in the Schedule of Exceptions. The provision for taxes
of the Company as shown in the Financial Statements is adequate for taxes due
or accrued as of the date thereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended (the "CODE"), to be treated as
a Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation or amortization) that would have a material effect
on the Company, its financial condition, its business as presently conducted
or any of its properties or material assets.
SECTION 4.02 REPRESENTATIONS AND WARRANTIES OF MALLARD. Mallard
hereby represents and warrants to NCI that:
(a) AUTHORIZATION. Mallard has full power and authority
to enter into this Agreement and the Transaction Documents, and each such
agreement constitutes its valid and legally binding obligation, enforceable
in accordance with its terms.
(b) ORGANIZATION, GOOD STANDING AND QUALIFICATION.
Mallard is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now conducted.
Mallard 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 Mallard. Other than as disclosed on SCHEDULE A attached
hereto, Mallard does not presently own or control, directly or indirectly,
any interest in any other corporation, association, or other business entity,
and Mallard is not a participant in any joint venture, partnership, or
similar arrangement.
(c) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement
is made with Mallard in reliance upon its representation to NCI, which by its
execution hereof Mallard hereby confirms, that the Notes to be received by
it, the Series D Preferred Stock issuable upon conversion of the Notes and
the Series A Common Stock issuable upon conversion of the shares of Series D
Preferred Stock issuable upon conversion of the Notes (collectively, the
"SECURITIES") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that Mallard has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, Mallard further represents that it does not have any contract,
undertaking, agreement
12
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.
(d) DISCLOSURE OF INFORMATION. Mallard believes it has
received all the information it considers necessary or appropriate for
deciding whether to purchase the Notes. Mallard 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 Notes, 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 4.01 of this Agreement or the right of
Mallard to rely thereon.
(e) INVESTMENT EXPERIENCE. Mallard is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for 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 Notes.
If other than an individual, Investor also represents it has not been
organized for the purpose of acquiring the Notes.
(f) ACCREDITED INVESTOR. Mallard is an "accredited
investor" within the meaning of SEC Rule 501 of Regulation D, as presently in
effect.
(g) RESTRICTED SECURITIES. Mallard 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 Securities Act, only in certain limited circumstances.
In this connection, Mallard represents that it is familiar with SEC Rule
144, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.
(h) FURTHER LIMITATIONS ON DISPOSITION. Without in any
way limiting the representations set forth above, Mallard 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 4.02, and:
(i) There is then in effect a Registration
Statement under the Securities Act covering such proposed disposition and
such disposition is made in accordance with such Registration Statement; or
(ii) (1) Mallard 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 (2)
if reasonably requested by the Company, Mallard 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
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
13
(i) LEGENDS. It is understood that the certificates
evidencing the Securities may bear one or all of the following legends:
(i) "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 under such Securities 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 Securities Act."
(ii) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
SECTION 4.03 CALIFORNIA COMMISSIONER OF CORPORATIONS AND
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.
ARTICLE V
CONDITIONS
SECTION 5.01 CONDITIONS OF MALLARD AT THE CLOSING. The
obligation of Mallard to purchase the Notes at the Closing shall be subject
to the satisfaction of each of the following conditions:
(a) The representations and warranties of NCI contained
in Section 4.01 shall be true on and as of the Closing with the same effect
as though such representations and warranties had been made on and as of the
date of such Closing.
(b) 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 Closing.
(c) The President, Chief Executive Officer or Chief
Financial Officer of the Company, on behalf of the Company, shall deliver to
Mallard at the Closing a certificate stating that the conditions specified in
Sections 5.01(a) and (b) have been fulfilled and stating that there shall
have been no Material Adverse Effect on NCI since September 30, 1997.
14
(d) All authorizations, approvals, or permits, if any,
of any Governmental Authority 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 Closing.
(e) The Admission Agreement, in substantially the form
attached hereto as EXHIBIT B, shall have been executed by all applicable
parties and the appropriate approvals for amending the P/C Voting Agreement
and the Stockholders Agreement shall have been obtained.
(f) There is no Event of Default (as defined in Section
7.01).
SECTION 5.02 OTHER CONDITIONS OF MALLARD. The obligation of
Mallard to purchase the Second Note or the Third Note, as the case may be,
shall be subject to the satisfaction of each of the following conditions:
(a) the conditions set forth in Section 5.01(a),
5.01(b), 5.01(c) and 5.01(d) shall have been satisfied.
(b) NCI shall have given the Notice of Borrowing as
provided in Section 2.04.
(c) Mallard shall have received, in form and substance
reasonably satisfactory, such additional approvals, opinions, documents and
other information as Mallard may reasonably request.
SECTION 5.03 CONDITIONS OF NCI. The obligations of the Company
to Mallard under this Agreement are subject to each of the following
conditions:
(a) The representations and warranties of Mallard
contained in Section 4.02 shall be true on and as of the Closing and the date
on which the Second Note and Third Note, if applicable, are issued, with the
same effect as though such representations and warranties had been made on
and as of such dates.
(b) Mallard shall have funded the principal amount of
the Notes as specified in Sections 2.01(b) and 2.03(a) and (b).
(c) All authorizations, approvals, or permits, if any,
of any Governmental Authority 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 Closing.
15
ARTICLE VI
COVENANTS
SECTION 6.01 AFFIRMATIVE COVENANTS. So long as any of the Notes
shall remain unpaid or Mallard shall have any obligation to purchase Notes
hereunder, NCI agrees that:
(a) PRESERVATION OF EXISTENCE. NCI will maintain and
preserve, through itself or any successor to its business, its corporate
existence, its rights to transact business and all other rights, franchises
and privileges necessary or desirable in the normal course of its business
and operations and the ownership of its material properties.
(b) PAYMENT OF TAXES. NCI will pay and discharge all
taxes, fees, assessments and governmental charges or levies imposed upon it
or upon its properties or assets prior to the date on which penalties attach
thereto, and all lawful claims for labor, materials and supplies which, if
unpaid, might become a Lien upon any properties or assets of NCI, except to
the extent such taxes, fees, assessments or governmental charges or levies,
or such claims, are being contested in good faith by appropriate proceedings
and are adequately reserved against in accordance with generally accepted
accounting principles.
(c) COMPLIANCE WITH LAWS. NCI will comply in all
material respects with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority and the terms of any
material indenture, contract or other instrument to which it may be a party
or under which it or its properties may be bound, except to the extent
failure to so comply would not have a Material Adverse Effect.
(d) MAINTENANCE OF PROPERTIES. NCI will use
commercially reasonable efforts to maintain and preserve all of its material
properties necessary or useful in the proper conduct of its business in good
working order and condition in accordance with the general practice of other
corporations of similar character and size, ordinary wear and tear excepted.
(e) LICENSES. NCI will use commercially reasonable
efforts to obtain and maintain all licenses, authorizations, consents,
filings, exemptions, registrations and other governmental approvals necessary
in connection with the execution, delivery and performance of the Transaction
Documents, the consummation of the transactions therein contemplated or the
operation and conduct of its business and ownership of its properties.
(f) FURTHER ASSURANCES AND ADDITIONAL ACTS. NCI will
execute, acknowledge, deliver, file, notarize and register at its own expense
all such further agreements, instruments, certificates, documents and
assurances and perform such acts as Mallard shall deem reasonably necessary
or appropriate to effectuate the purposes of the Transaction Documents, and
promptly provide Mallard with evidence of the foregoing reasonably
satisfactory in form and substance to Mallard.
16
(g) PLACE OF BUSINESS. The Company shall provide
Mallard prompt written notice of any change in the location of its principal
place of business and its chief executive office from 0000 Xxxxxx Xxxxxxx,
Xxxxxxx Xxxxxx, Xxxxxxxxxx.
(h) INSPECTION RIGHTS. The Company shall permit
Mallard, at Mallard's expense, to visit and inspect the Company's properties,
to examine its books of account and records and to copy the same and to make
excerpts therefrom, and to discuss the Company's affairs, finances and
accounts with its officers, all at such reasonable times during normal
business hours as may be reasonably requested by Mallard, so long as such
inspection, examination, copying and discussions do not unreasonably
interfere with the business of the Company and Mallard agrees to keep any and
all information obtained during inspection, examination, copying and
discussions confidential, not disclose such information (except as may be
required by law or court order, such information and not otherwise known to
Mallard through other sources or publicly known).
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01 EVENTS OF DEFAULT. Any of the following events that
shall occur shall constitute an "EVENT OF DEFAULT":
(a) PAYMENTS. NCI shall fail to pay when due any amount
of principal of, or interest on, any Note, or any other amount payable under
any Transaction Document, and such failure shall remain unremedied by NCI for
a period of 30 days following the date of notice that such payment is due.
(b) REPRESENTATIONS AND WARRANTIES. Any representation
or warranty by NCI in the Transaction Documents shall prove to have been
incorrect in a material respect when made or deemed made.
(c) FAILURE BY NCI TO PERFORM CERTAIN COVENANTS. NCI
shall fail to perform or observe any material term, covenant or agreement
contained in this Agreement and any such failure shall remain unremedied for
a period of 30 days from the notice by Mallard of the occurrence thereof.
(d) BANKRUPTCY. NCI shall admit in writing its
inability to, or shall fail generally or be generally unable to, pay its
debts (including its payrolls) as such debts become due, or shall make a
general assignment for the benefit of creditors; or NCI shall file a
voluntary petition in bankruptcy or a petition or answer seeking
reorganization, to effect a plan or other arrangement with creditors or any
other relief under the Bankruptcy Reform Act of 1978 (the "BANKRUPTCY CODE")
or under any other state or federal law relating to bankruptcy or
reorganization granting relief to debtors, whether now or hereafter in
effect, or shall file an answer admitting the jurisdiction of the court and
the material allegations of any involuntary petition filed against NCI
pursuant to the Bankruptcy Code or any such other state or federal law;
17
or NCI shall be adjudicated a bankrupt, or shall make an assignment for the
benefit of creditors, or shall apply for or consent to the appointment of any
custodian, receiver or trustee for all or any substantial part of NCI's
property, or shall take any action to authorize any of the actions or events
set forth above in this subsection; or an involuntary petition seeking any of
the relief specified in this subsection shall be filed against NCI; or any
order for relief shall be entered against NCI in any involuntary proceeding
under the Bankruptcy Code or any such other state or federal law referred to
in this subsection (d).
(e) DEFAULT UNDER OTHER INDEBTEDNESS. NCI shall: (i)
fail to make any payment of any principal of, or interest or premium on, any
material Indebtedness (other than in respect of the Notes) when due (whether
by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such
Indebtedness as of the date of such failure or otherwise agreed to by the
parties; or (ii) fail to perform or observe any material term, covenant or
condition on its part to be performed or observed under any material
agreement or instrument relating to any other Indebtedness, when required to
be performed or observed, and such failure shall continue after the
applicable grace period, if any, specified in such agreement or instrument,
if the effect of such failure to perform or, observe accelerates the maturity
of such Indebtedness.
SECTION 7.02 CURE. Upon each of such Event of Default, the
Company shall have thirty (30) days to cure such default after receipt of
written notice of default from Mallard specifying the nature of the Company's
default. If the Company is unable to cure its default within such thirty
(30) day period, Mallard may, at its option, accelerate repayment of the
Outstanding Balance in which case the Outstanding Balance shall be due and
payable immediately. Upon any default of the Company hereunder, Mallard may
pursue any remedies that are available to it. In addition, Mallard shall
have a right to offset any amounts due upon such a default against any
amounts (including royalties, if any) payable by Mallard or its parent to the
Company.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 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 NCI and Mallard. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon both parties hereto.
SECTION 8.02 NOTICES. Except as may be otherwise provided
herein, all notices, requests, waivers and other communications made pursuant
to this Agreement shall be in writing and shall be conclusively deemed to
have been duly given (a) when hand delivered to the other party; (b) when
received when sent by facsimile at the address and number set forth below
(provided, however, that notices given by facsimile shall not be effective
unless either (i) a
18
duplicate copy of such facsimile notice is promptly given by one of the other
methods described in this Section 8.02, or (ii) the receiving party delivers
a written confirmation of receipt for such notice either by facsimile or any
other method described in this Section 8.02; (c) three business days after
deposit in the U.S. mail with first class or certified mail receipt requested
postage prepaid and addressed to the other party as set forth below; or (d)
the next business day after deposit with a national overnight delivery
service, postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party
receives a confirmation of delivery from the delivery service provider.
To Mallard: To the Company:
Middlefield Ventures, Inc. Network Computer, Inc.
0000 Xxxxxxx Xxxxxxx Xxxx. 0000 Xxxxxx Xxxxxxx
Xxxxx Xxxxx, XX 00000 Xxxxxxx Xxxxxx, XX 00000
Attn: Treasurer Attn: Xxxxx Xxxxxx
Fax Number: (000) 000-0000 Attn: Xxxxx Xxxx, Esq.
Fax Number: (000) 000-0000
with copies to: with copies to:
Intel Corporation Xxxxxxxxx Xxxxxxx xx.xx.
000 Xxxxxxx Xxxxxxx Xxxx. 000 Xxxxxxxxxxxx Xxxxx
Mail Stop SC4-203 Menlo Park, CA 94025
Xxxxx Xxxxx, XX 00000 Attn: Xxxxx Xxxxxxx
Attn: General Counsel Fax Number: (000) 000-0000
Fax Number: (000) 000-0000
SECTION 8.03 SURVIVAL. All covenants, agreements,
representations and warranties made herein shall, except to the extent
otherwise provided herein, survive the execution and delivery of this
Agreement, the execution and delivery of the Notes, and shall continue in
full force and effect so long as Mallard has any commitment, any Notes remain
outstanding or unpaid or any obligation to perform any other act under this
Agreement or the Transaction Documents otherwise remains unsatisfied.
SECTION 8.04 BENEFITS OF AGREEMENT. The Transaction Documents
are entered into for the sole protection and benefit of the parties hereto
and their successors and assigns, and no other person shall be a direct or
indirect beneficiary of, or shall have any direct or indirect cause of action
or claim in connection with, any Transaction Document.
SECTION 8.05 BINDING EFFECT; ASSIGNMENT. This Agreement shall
become effective when it shall have been executed by NCI and Mallard and
thereafter shall be binding upon, inure to the benefit of and be enforceable
by NCI, Mallard and their respective successors and assigns; PROVIDED that
NCI may not assign any of its rights, interests or obligations under this
Agreement or the other Transaction Documents, and any attempt to do so shall
be null and void without Mallard's prior written consent, which consent shall
not be unreasonably withheld. NCI
19
hereby consents to the assignment or transfer of all or any part of the
obligations and rights by Mallard to Mallard's parent or to one or more
subsidiaries of Mallard or of Mallard's parent.
SECTION 8.06 GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with the law of the State of Delaware without
regard to application of principles of conflicts of laws.
SECTION 8.07 ENTIRE AGREEMENT. This Agreement and the documents
referred to herein constitute the entire agreement between 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.
SECTION 8.08 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.
SECTION 8.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the
same agreement.
SECTION 8.10 PUBLIC ANNOUNCEMENTS. Neither party shall use the
other's name nor refer to the other directly or indirectly in connection with
the investment contemplated herein in any advertisement, news release or
professional or trade publication, or in any other manner, unless otherwise
required by law, or with prior written consent. The parties agree that there
will be no press release or other public statement issued by either party
relating to this Agreement unless required by law or mutually agreed to, and
further agree to keep the terms and conditions of such in strictest
confidence, it being understood that this restriction shall not prohibit
disclosure to the parties counsel, accountants and professional advisors. If
either party determines that it is required by law to disclose the terms and
conditions of this Agreement and the Notes, or to file this Agreement or the
Notes with any governmental agency or authority, it shall, a reasonable time
before making any such disclosure or filing, consult with the other regarding
such filing and seek confidential treatment for such portions of those
agreements as may be reasonably requested by the other.
Notwithstanding the above, the Company may disclose the existence
of this Agreement and the Notes to bona fide potential investors who are
under obligations of nondisclosure, similar to those contained herein and
which the Company believes in good faith are seriously considering investing
in the Company. In addition, the Company may disclose that a financial
relationship exists between the parties hereto (but not the terms of such
financial relationship) to customers, potential customers, strategic partners
or potential strategic partners.
SECTION 8.11 DISPUTE RESOLUTION. The parties agree to negotiate
in good faith to resolve any dispute between them regarding this Agreement.
If the negotiations do not resolve the dispute to the reasonable satisfaction
of both parties, then each party shall nominate
20
one officer as its representative. These representatives shall, within thirty
(30) days of a written request by either party to call such a meeting, meet
in person and alone (except for one assistant for each party) and shall
attempt in good faith to resolve the dispute. If the disputes cannot be
resolved in such meeting, the parties agree that they shall, if requested in
writing by either party, meet within thirty (30) days after such written
notification for one day with an impartial mediator and consider dispute
resolution alternatives other than litigation. If an alternative method of
dispute resolution is not agreed upon within thirty (30) days after the one
day mediation, either party may begin litigation proceedings. This procedure
shall be a prerequisite before taking any additional action hereunder.
[SIGNATURE PAGE FOLLOWS]
21
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
NETWORK COMPUTER, INC.
By:
------------------------------------
Title: Chief Executive Officer
---------------------------------
MIDDLEFIELD VENTURES, INC.
By:
------------------------------------
Title:
---------------------------------
--Signature Page to the Convertible Note Purchase Agreement--
EXHIBIT A
FORM OF CONVERTIBLE PROMISSORY NOTE
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED FOR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IS AN EFFECT WITH RESPECT TO THE
SECURITIES 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.
CONVERTIBLE PROMISSORY NOTE
$______ ______, 000__
Xxxxxxx Xxxxxx, Xxxxxxxxxx
FOR VALUE RECEIVED, Network Computer, Inc., a Delaware corporation
("MAKER" or "NCI"), promises to pay to the order of Middlefield Ventures,
Inc., a Delaware corporation ("HOLDER" or "MALLARD"), the principal sum of
Four Million Dollars ($4,000,000), together with interest from the date of
this Note on the unpaid principal balance at a rate equal to the lesser of
(a) 5.0% or (b) the maximum interest rate permitted under applicable federal
and state laws. Interest shall be computed as simple annual interest on the
basis of a year of 360 days for the actual number of days occurring in the
period for which such commitment fee or interest is payable. Payment shall
be made by Maker to Holder at the offices of Mallard, located at 0000 Xxxxxxx
Xxxxxxx Xxxx., Xxxxx Xxxxx, XX 00000, or to such other office and account of
Holder as it from time to time shall designate in a written notice to Maker.
This Note is issued pursuant to that certain Convertible Note
Purchase Agreement dated as of November 12, 1997, between Maker and Holder
(the "AGREEMENT"). Terms used herein have the meanings assigned to those
terms in the Agreement, unless otherwise defined herein.
The terms of payment of principal and accrued interest shall be in
accordance with the terms and conditions of the Agreement. Payment shall be
made in lawful tender of the United States and shall be credited first to
accrued interest then due and payable with the remainder applied to
principal. Prepayment of the principal, together with accrued interest, may
be made at any time without penalty or premium, subject to Section 3.03 of
the Agreement.
The unpaid principal on this Note (or any portion thereof) shall be
convertible at the election of Holder into shares of NCI Series D Preferred
Stock pursuant to the terms and conditions set forth in the Agreement.
If action is instituted to collect this Note, Maker will pay all
costs and expenses, including reasonable attorneys' fees, incurred in
connection with such action. Maker hereby waives notice of default,
presentment or demand for payment, protest or notice of nonpayment or
dishonor and all other notices or demands relative to this instrument.
The holding of any provision of this Note to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provisions and the other provisions of this Note shall remain in full force
and effect.
This Note shall be construed in accordance with the laws of the
state of Delaware, without regard to the conflicts of law provisions of the
state of Delaware or of any other state.
The Maker has caused this Convertible Promissory Note to be issued
as of the date first above written.
NETWORK COMPUTER, INC.
By:
------------------------------------
Title:
---------------------------------
EXHIBIT B
ADMISSION AGREEMENT
EXHIBIT C
RESTATED CERTIFICATE
