EXHIBIT 10.20
JetFax, Inc.
----------------------
SERIES F PREFERRED STOCK
PURCHASE AGREEMENT
------------------------
March 5, 1996
SCHEDULES AND EXHIBITS
Schedule I - Purchasers
Schedule II - Additional Purchasers
Schedule 4.4 - Options and Other Rights
Schedule 4.5 - Conflicts
Schedule 4.7 - Liabilities
Schedule 4.8 - Adverse Changes
Schedule 4.10 - Contracts
Schedule 4.11 - Related Person Indebtedness
Schedule 4.12 - Litigation
Schedule 4.13 - Consents
Schedule 4.14 - Encumbrances
Schedule 4.15 - Technology
Schedule 4.17 - Plans
Schedule 4.22 - Related Party Transactions
Schedule 5.7 - Risk Factors
Schedule 12.7 - Agent's Fees
Exhibit A - Certificate of Designation
Exhibit B - Financial Statements
Exhibit C - Form of Opinion
[Execution Copy]
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS AGREEMENT (this "Agreement") is made as of March 5, 1996, by and among
JETFAX, INC., a Delaware corporation (the "Company"), and each of the parties
listed on the Schedule of Purchasers attached hereto as Schedule I (the
---------------------- ----------
"Schedule of Purchasers"). The persons listed on the Schedule of Purchasers are
----------------------- ----------------------
sometimes hereinafter referred to collectively as the "Purchasers" and
individually as a "Purchaser."
WHEREAS, the Company is a corporation engaged in the development,
marketing, sale and license of fax products and technologies; and
WHEREAS, the Company desires to issue and sell, and the Purchasers desire
to purchase, certain securities of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein contained, the Company and each Purchaser hereby agree as
follows:
SECTION 1
---------
Definitions
-----------
1.1 For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(a) "Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(b) "Certificate of Designation" shall have the meaning specified in
Section 2.1 hereof.
(c) "Closing" and "Closing Date" shall have the meanings specified in
Section 3 hereof.
(d) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Act.
(e) "Common Stock" shall have the meaning specified in Section 4.4(a)
hereof.
(f) "Note" and "Notes" shall mean the 10% convertible Notes issued by
the Company to certain of the Purchasers pursuant to the Note Purchase
Agreement.
(g) "Note Purchase Agreement" shall mean the Note Purchase Agreement
dated as of August 3, 1994, as amended, by and among the Company and certain of
the Purchasers.
(h) "Preferred Stock" shall have the meaning specified in Section
4.4(a) hereof.
(i) "Series A Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(j) "Series B Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(k) "Series C Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(l) "Series D Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(m) "Series E Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(n) "Series F Preferred" shall have the meaning specified in Section
2.1 hereof.
(o) "Series P Preferred" shall have the meaning specified in Section
4.4(a) hereof.
(p) "Shares" shall have the meaning specified in Section 2.1 hereof.
(q) "Tax" or "Taxes" shall mean taxes and similar governmental
impositions payable to any federal, state, local or foreign taxing authority,
including (i) income, minimum, franchise, property, withholding, employment,
social security, excise, stamp, occupation, windfall profits, transfer and gains
taxes, (ii) customs duties, imposts, charges, levies, or other similar
-2-
assessments of any kind, and (iii) interest, penalties, and additions to tax
imposed with respect thereto.
(r) "Technology" shall have the meaning specified in Section 4.15
hereof.
1.2 Wherever used in this Agreement (a) the words "include" or "including"
shall be construed as incorporating, also, "but not limited to" or "without
limitation", (b) the word "day" means a calendar day unless otherwise specified,
(c) the word "party" means each and every person whose signature is set forth at
the end of this Agreement, (d) the word "law" (or "laws") means any statute,
ordinance, resolution, regulation, code, rule, order, decree, judgment,
injunction, mandate or other legally binding requirements of a government
entity, (e) the word "notice" shall mean notice in writing (whether or not
specifically stated) and shall include notices, consents, approvals and any
other written communication contemplated under this Agreement and (f) the words
"business day" shall mean any day other than Saturday, Sunday or a day on which
commercial banks located in San Francisco, California are required or authorized
by law to close.
1.3 Certain other words and phrases are defined or described elsewhere in
this Agreement and/or the Exhibits and Schedules hereto. Unless the context
otherwise requires, words in the singular number include the plural and vice
versa. Use of the masculine, feminine or neuter shall include each such other
gender. All Schedules and Exhibits hereto are hereby incorporated herein and
made a part hereof. Unless specified to the contrary, references to Articles,
Sections, Schedules and/or Exhibits mean the particular Article, Section,
Schedule or Exhibit in or to this Agreement. References to this Agreement shall
include this Agreement as varied or modified from time to time by the parties.
SECTION 2
---------
Authorization, Purchase and Sale of the Shares
----------------------------------------------
2.1 Authorization of the Shares. The Company has authorized the issuance
---------------------------
and sale of up to 3,500,000 shares of its Series F Preferred Stock, $.01 par
value per share ("Series F Preferred"), having the rights, restrictions,
privileges and preferences as set forth in the Certificate of Designations,
Preferences and Rights of Series F Preferred Stock of the Company as filed on or
before the date hereof and attached hereto as Exhibit A (the "Certificate of
---------
-3-
Designation"). For purposes of this Agreement, the term "Shares" shall mean the
shares of Series F Preferred authorized for issuance and sale as provided in
this Section 2.1.
2.2 Sale and Purchase of the Shares. At the initial Closing, and subject
-------------------------------
to the terms and conditions hereof, the Company will issue and sell to the
Purchasers and each Purchaser will purchase from the Company the number of
shares of Series F Preferred set forth opposite its name on Schedule I, at a
----------
purchase price of $2.75 per share.
SECTION 3
---------
Closing, Payment and Delivery
-----------------------------
The purchase and sale of the Shares being purchased by the Purchasers
hereunder shall take place at 10:00 a.m. at the offices of General Counsel
Associates, 0000 Xxxxxxxx Xxxxx, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000 on March 5,
1996, and at such other time, date and place as is consistent with the terms of
this Agreement (which time, date and place, and any future such time, date and
place, are referred to in this Agreement as a "Closing" and a "Closing Date").
At the initial Closing the Company shall deliver to each of the Purchasers a
certificate representing the number of Shares set forth opposite the Purchaser's
name on Schedule I against delivery to the Company by the Purchaser of the
----------
amount of the purchase price of such Shares in the form of Note(s) in the
aggregate principal amount, plus accrued interest, as set forth opposite each
such Purchaser's respective name on the Schedule of Purchasers and the amount in
immediately available funds as set forth opposite each such Purchaser's
respective name on the Schedule of Purchasers.
In addition, on or prior to March 31, 1996, at a purchase price of $2.75
per share, and subject to the satisfaction of the Company's counsel as to
securities laws issues, the Company (a) shall sell to each of the persons listed
on Schedule II hereto who elects to so purchase, the number of Shares set forth
-----------
opposite such person's name on Schedule II against delivery to the Company by
-----------
such person of the amount of the purchase price of such Shares in the form of
Note(s) in the aggregate principal amount, plus accrued interest, as set forth
opposite such person's name on Schedule II and the amount in immediately
-----------
available funds as set forth opposite such person's name on the Schedule II (or
-----------
any combination thereof) and (b) may sell additional Shares to such persons as
designated by the Company. Any subsequent sales of Shares pursuant to the
-4-
foregoing provision shall be made pursuant to the provisions of this Agreement.
As a condition of such purchase, all purchasers of such Shares shall execute a
counterpart of this Agreement and shall, for all purposes, be considered
Purchasers hereunder. Notwithstanding anything in this Agreement to the
contrary, if less than 3,500,000 Shares are sold by March 31, 1996, the term
Shares shall only refer to such lesser number.
SECTION 4
---------
Representations and Warranties of the Company
---------------------------------------------
The Company hereby represents and warrants as of the date hereof to each
Purchaser as follows:
4.1 Organization and Standing. The Company is duly incorporated, validly
-------------------------
existing and in good standing under the laws of the State of Delaware. The
Company has full corporate power and authority to own its properties and assets
and carry on its business as it was heretofore and is currently being conducted
by the Company. The Company is duly licensed or qualified to transact business
as a foreign corporation, and is in good standing, in all jurisdictions in which
the nature of the business transacted by it or the character of the properties
owned or leased by it requires such licensing or qualification, except where the
failure to be so qualified will not have a material adverse effect on the
business, properties or condition, financial or otherwise ( the "Condition"), of
the Company.
4.2 Corporate Power and Authority. The Company has full corporate power
-----------------------------
and authority to enter into this Agreement and to sell the Shares and to carry
out and perform its obligations under the terms of this Agreement.
4.3 Subsidiaries. The Company does not directly or indirectly own any
------------
equity interest in any other corporation, partnership, limited liability
company, joint venture or other business association or entity; provided,
--------
however, the Company from time to time maintains money market accounts or
-------
similar investment vehicles.
4.4 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of 13,500,000
shares of Common Stock, $.01 par value per share
-5-
("Common Stock"), and 9,500,000 shares of Preferred Stock, $.01 par value per
share ("Preferred Stock"). Of the Preferred Stock, 1,000,000 shares have been
designated as Series A Preferred Stock, $.01 par value per share ("Series A
Preferred"), 1,000,000 shares have been designated as Series B Preferred Stock,
$.01 par value per share ("Series B Preferred"), 600,000 shares have been
designated as Series C Preferred Stock, $.01 par value per share ("Series C
Preferred"), 100,000 shares have been designated as Series D Preferred Stock,
$.01 par value per share ("Series D Preferred"), 2,500,000 shares have been
designated as Series E Preferred Stock, $.01 par value per share ("Series E
Preferred"), 500,000 shares have been designated as Series P Preferred Stock,
$.01 par value per share ("Series P Preferred") and 3,500,000 shares have been
designated as Series F Preferred. Immediately prior to the initial Closing,
954,474 shares of the Common Stock, 750,996 shares of Series A Preferred,
533,974 shares of the Series B Preferred, 564,834 shares of the Series C
Preferred, 67,890 shares of the Series D Preferred, 930,594 shares of the Series
E Preferred, 90,000 shares of the Series P Preferred and none of the Series F
Preferred will be issued and outstanding, and all such issued and outstanding
shares will have been duly authorized and validly issued, will be fully paid and
nonassessable, and will have been offered, issued, sold and delivered by the
Company in compliance with applicable federal and state securities law.
(b) Except as specified in Schedule 4.4, in this Agreement or in the
------------
Certificate of Designation, there are no authorized or outstanding preemptive,
conversion or other rights, options, warrants, securities, commitments or
agreements granted or issued by or binding upon the Company for the issuance,
purchase or acquisition of any shares of its capital stock or any securities
convertible into or exchangeable for shares of its capital stock or obligating
the Company to grant, extend or enter into any such commitment or agreement.
4.5 Authorization; No Conflicts. All corporate action on the part of the
---------------------------
Company necessary for the authorization, execution, delivery and performance by
the Company of this Agreement and the consummation of the transactions
contemplated herein has been taken. This Agreement is the valid and binding
obligation of the Company, enforceable in accordance with its terms. Except as
specified in Schedule 4.5, the execution, delivery and performance by the
------------
Company of this Agreement will not, assuming the truth and accuracy of each of
the Purchasers' representations and warranties
-6-
set forth in Section 5 hereof, result in any violation of and will not conflict
with, or result in a breach of any of the terms of or loss of benefit under, or
permit the acceleration of any obligation under, or constitute a default under,
any provision of federal or state law to which the Company is subject, the
Company's Certificate of Incorporation, the Company's By-Laws or any agreement
or instrument to which the Company is a party or by which it or any of its
properties is bound or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such term, except where such violation, conflict, breach,
default, loss or acceleration would not have a material adverse effect,
individually or in the aggregate, on the Condition of the Company. Except as
specified in Schedule 4.5, no shareholder of the Company has any preemptive
------------
rights or rights of first refusal by reason of the issuance of the Shares which
rights have not been duly waived. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, will be free of restrictions on transfer other than restrictions
on transfer under this Agreement and under applicable federal and state
securities laws, and will be free of any liens or encumbrances other than as set
forth in this Agreement. The shares of Common Stock issuable upon conversion of
the Shares have been duly and validly reserved and are not subject to any
preemptive rights or rights of first refusal and, upon issuance in accordance
with the Certificate of Designation, will be validly issued, fully paid and
nonassessable.
4.6 Financial Information. The unaudited financial statements of the
---------------------
Company as of December 31, 1995, and the audited financial statements of the
Company as of March 31, 1995, attached hereto as Exhibit B (a) are in accordance
---------
with the books and records of the Company, (b) present fairly the financial
position and results of operations and (as to the audited financial statements
only) changes in financial position of the Company at the dates and for the
periods to which they relate and (c) were prepared in accordance with generally
accepted accounting principles in all material respects applied on a consistent
basis (other than, with respect to the unaudited statements, as to footnote
presentation and year-end adjustments).
4.7 Absence of Undisclosed Liabilities. Except as set forth on Schedule
---------------------------------- --------
4.7, the Company has no liabilities (fixed, accrued, contingent or otherwise,
---
including any Tax liabilities due) ("Liabilities") which are not fully reflected
or provided for on
-7-
the most recent financial statements referred to in Section 4.6, except
Liabilities incurred in the ordinary course of business since the date of such
financial statements or which individually or in the aggregate are not
materially adverse to the Condition of the Company. The Company is not aware of
any reasonable basis for the assertion against the Company of any other
Liability other than Liabilities that are not individually or in the aggregate
material to the Condition of the Company.
4.8 Absence of Certain Changes. Except to the extent described in this
--------------------------
Agreement, in Schedule 4.8 or in the other Schedules to this Agreement, since
------------
the date of the most recent financial statements referred to in Section 4.6
there has not been any event or condition of any character which has materially
and adversely affected the Condition of the Company, including the following:
(a) the creation, incurrence, assumption or guarantee of any
indebtedness, or the subjection of any of the Company's assets to any lien
except for liabilities, indebtedness or liens that, individually or in the
aggregate, are not materially adverse to the Condition of the Company;
(b) any resignation or termination of employment of any key officer
or any knowledge by the Company of any impending resignation or termination of
employment by any such key officer;
(c) except in the ordinary course of business, any material increase
in the compensation payable or to become payable by the Company to any of its
officers or directors, or any material increase of any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made by the Company for
or with any officer or director;
(d) any damage, destruction or loss of any of the properties or assets
of the Company (whether or not covered by insurance) materially adversely
affecting the Condition of the Company;
(e) any declaration, setting aside or payment of any dividend or other
distribution in respect of any of the Company's capital stock or any redemption,
purchase or other acquisition of any such stock by the Company;
-8-
(f) any material change in any method of accounting or accounting
practice of the Company;
(g) any notes or accounts receivable or portions thereof written off
by the Company as uncollectible (except for write-offs in the ordinary course of
business and consistent with past practice);
(h) any issuance or sale of any stock, bonds or other corporate
securities of which the Company is the issuer;
(i) any sale, assignment, transfer or encumbrance of any of the assets
(real, personal or mixed) of the Company, except in the ordinary course of
business and consistent with past practice; or
(j) any collective bargaining agreements entered into by the Company.
4.9 Taxes. The Company has filed or will file within the time prescribed
-----
by law (including extensions of time approved by the appropriate taxing
authority) all Tax returns and reports required to be filed with the United
States Internal Revenue Service, with the State of Delaware, with the State of
California and with all other jurisdictions where such filing is required by
law, except where the failure to so file would not have a material adverse
effect on the Condition of the Company. The Company has paid or, as and to the
extent required by generally accepted accounting principles, made adequate
provision in the most recent financial statements referred to in Section 4.6 for
the payment of, all Taxes, interest, penalties, assessments or deficiencies
shown to be due or claimed to be due on or in respect of such Tax returns and
reports. The Company's Tax returns have not, to the best of the Company's
knowledge and belief, been audited by the United States Internal Revenue Service
nor by any state taxing authority. There is no claim or assessment pending or,
to the knowledge of the Company, threatened against the Company for any alleged
deficiency in Taxes, except where such claim would not be materially adverse to
the Condition of the Company.
4.10 Contracts. Except as set forth in Schedule 4.10, the Company has no
--------- -------------
current contracts, agreements or the like of any material nature. Except as
set forth in Schedule 4.10, the Company has complied with all the provisions of
-------------
all said contracts and agreements except where such failure has not had a
material adverse
-9-
effect, individually or in the aggregate, on the Company. Except as set forth in
Schedule 4.10, the Company is not in violation or default under any such
-------------
contract or agreement except where such violation or default has not had a
material adverse effect, individually or in the aggregate, on the Company.
Except as set forth in Schedule 4.10, to the best of the Company's knowledge,
-------------
none of the other parties to any such contract is in violation or default under
any such contract in any material respect that would have a material adverse
effect on the Condition of the Company. The Company has not received any notice
of cancellation or any written communication threatening cancellation of any
material contract by any party thereto.
4.11 Shareholders, Directors and Officers; Indebtedness. Set forth on
--------------------------------------------------
Schedule 4.11 is a correct and complete list or description of all indebtedness
-------------
of the Company to its officers, directors or shareholders or any of their
respective relatives and of all indebtedness of such persons to the Company.
4.12 Litigation. Except as set forth in Schedule 4.12, there is neither
---------- -------------
pending nor, to the Company's knowledge, threatened any action, suit,
proceeding, arbitration or claim, whether or not purportedly on behalf of the
Company, to which the Company is or may be named as a party or its property or
assets is or may be subject and in which an unfavorable outcome, ruling or
finding in any such matter or for all such matters taken as a whole might have a
material adverse effect on the Condition of the Company. Except as set forth in
Schedule 4.12, there are no unsatisfied judgements or outstanding orders,
-------------
injunctions, decrees, stipulations or awards of any court, tribunal or
arbitrator against the Company or any of its properties or assets that,
individually or in the aggregate, are material and adverse to the Condition of
the Company.
4.13 Consents. Except as set forth on Schedule 4.13, all consents,
-------- -------------
approvals, orders or authorizations of, or registrations, qualifications,
designations, declarations or filings with, any federal or state governmental
authority (including under the "blue sky laws" of an such state governmental
authority), any party to a contract to which the Company is bound or any other
third party, on the part of the Company, required in connection with the
execution and delivery of this Agreement or the consummation of the transactions
under the terms of this Agreement, shall have been made or obtained prior to,
and be effective as of, any Closing, other than any notice filings required to
be made after such
-10-
Closing pursuant to Regulation D under the Act and any applicable "blue sky
laws."
4.14 Title to Properties; Liens and Encumbrances. The Company has a valid
-------------------------------------------
and indefeasible ownership interest in all of its property and assets (real or
personal, tangible or intangible) material to its business, free from all
mortgages, pledges, liens, security interests, encumbrances or charges, except
as listed on Schedule 4.14 hereto. The Company is not in violation of any law,
-------------
regulation or ordinance relating to its property or assets which violation would
have a material adverse effect on the business of the Company. All personal
property and assets, and all buildings, structures and fixtures used by it in
the conduct of its business, are in good operating condition and repair, except
where such failure or failures, individually or in the aggregate, would not have
a material adverse effect on the Condition of the Company.
4.15 Technology.
----------
(a) Set forth on Schedule 4.15 are all patents, patent rights,
-------------
trademarks, trademark rights, copyrights, proprietary rights, licenses and
processes, and all registrations and applications for registration with respect
to any of the foregoing, owned or used by the Company and material to its
business (the "Technology"). Other than as set forth on Schedules 4.12 and
------------------
4.15, the Company is not aware of and has not received any notice of
----
infringement upon or conflict with the asserted rights of others with respect to
any of the Technology or the Proprietary Technology (as defined below) except
where such would not have a material adverse effect, individually or in the
aggregate, on the Condition of the Company. To the Company's knowledge, all
Technology and all Proprietary Technology owned or used by the Company are owned
or used by it free of any adverse claims, rights or encumbrances as to the
Company's rights thereto except where such claims, rights or encumbrances would
not have a material adverse effect, individually or in the aggregate, on the
Condition of the Company, and the Company has used reasonable efforts to protect
its rights to continued secrecy thereof.
(b) Except as set forth on Schedule 4.15, the Company owns or
-------------
possesses the right to use the full range of trade secrets, technical knowledge
and experience, confidential information and other proprietary knowledge,
technical, engineering and operating data relating to the products, designs,
schematics, plans, operating principles, formulas, computer software programs,
-11-
electronically recordable data or concepts, marketing data, inventions,
improvements, research and development records and reports, experimental and
engineering reports, product specifications, manufacturing specifications, raw
materials specifications, drawings, photographs, models, compilations of
information, records, books and papers, quality control reports and
specifications, manufacturing and production techniques and methods and any
other information possessed by the Company concerning the design, formulation,
manufacturing, quality control, testing, storage, development, improvement,
installation, and operation of the Company's products and services and material
to the Condition of the Company (collectively, "Proprietary Technology").
(c) Each engineer and officer of the Company has executed a
proprietary information and inventions agreement to protect the Company's rights
to the Technology.
4.16 Compliance. The Company is not in violation of any term of any law,
----------
judgment, decree, order, rule or regulation to which the Company is subject and
a violation of which, individually or in the aggregate, would have a material
adverse effect on the Condition of the Company. The Company has obtained and
maintains in full force and effect all permits, licenses, consents, approvals,
registrations, authorizations and qualifications under all applicable laws, and
with all applicable governmental authorities, required for the conduct by it of
its business and the ownership or possession by it of its properties and assets,
except to the extent the failure to so obtain and maintain would not have a
material adverse effect, individually or in the aggregate, on the Condition of
the Company. All required reports and filings with governmental authorities have
been properly made as and when required, except where the failure to report or
file would not, individually or in the aggregate, have a material adverse effect
on the Condition of the Company.
4.17 ERISA.
-----
(a) The Company has not incurred any liability to the Pension Benefit
Guaranty Corporation (the "PBGC") except for required premium payments, which
payments have been paid when due. To the best of the Company's knowledge, no
prohibited transactions or events have occurred which might give rise to any
liability of the Company under Section 406 of the Employee Retirement Income
Security Act of 1974, as amended, and the regulations thereunder
-12-
("ERISA") or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) No employee benefit plan within the meaning of Section 3(3) of
ERISA which covers, or during the period of five years ending on the date
hereof, has covered, employees of the Company (an "ERISA Plan") is a defined
benefit plan, multi-employer plan or plan subject to the minimum funding
standards of Section 412 of the Code (that is, a pension plan within the meaning
of the Code).
(c) No proceeding has been initiated by any person (including the
PBGC) to terminate any ERISA Plan.
(d) With respect to each ERISA Plan, (i) all payments and
contributions due from the Company to date have been made and all amounts
properly accrued to date as liabilities of the Company that have not been paid
have been properly reflected in the books of the Company, except for payments
and contributions that are not, individually or in the aggregate, material and
adverse to the Condition of the Company; (ii) to the best of the Company's
knowledge, the Company has complied with, and each ERISA Plan materially
conforms in form and operation to, all applicable laws and regulations
applicable to the ERISA Plans, including, without limitation, ERISA and the Code
except where the failure to so comply would not, individually or in the
aggregate, have a material and adverse effect on the Condition of the Company;
and (iii) except as set forth on Schedule 4.17 hereto, each ERISA Plan that is
-------------
an employee pension benefit plan intended to qualify under Section 401 of the
Code (that is, an ERISA Plan that is not a welfare plan) has received a
favorable determination letter from the Internal Revenue Service with respect to
such qualification, its related trust has been determined to be exempt from
taxation under Section 501(a) of the Code and nothing has occurred since the
date of such letter that has adversely affected or is likely to adversely affect
such qualification or exemption.
(e) Each ERISA Plan maintained by the Company or for the benefit of
the employees is listed in Schedule 4.17 hereto.
-------------
4.18 Employees; Labor Relations. To the best knowledge of the Company, no
--------------------------
labor union or any representative thereof has made any attempt to organize or
represent employees of the Company. There are no unfair labor practice charges,
pending trials with respect to unfair labor practice charges, pending material
grievance
-13-
proceedings or adverse decisions of a Trial Examiner of the National Labor
Relations Board against the Company. To the best knowledge of the Company,
relations with employees of the Company are satisfactory.
4.19 Insurance. The Company maintains in full force and effect insurance
---------
which is customary in its industry and which the Company believes is
commercially reasonable given the risks involved in the business conducted by
the Company.
4.20 Environmental and Safety Laws. The Company is not aware of and has
-----------------------------
not received notice of, and is not aware of any basis for, any violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, which violations, individually or in the
aggregate, would have a material adverse effect on the Company's business.
4.21 Manufacturing and Marketing Rights. Except as set forth in Schedule
---------------------------------- --------
4.10, the Company has not granted rights to manufacture, produce or assemble its
----
products or use any of its Technology to any other person, except for grants
that are not material and adverse to the Condition of the Company, and is not
bound by any agreement that affects, in any material and adverse way, the
Company's right to develop, manufacture or assemble its products.
4.22 Related Party Transactions. Except as set forth on Schedule 4.22, to
-------------------------- -------------
the best of the Company's knowledge no officer or director of the Company or
member of the immediate family of any of the foregoing:
(a) owns or has owned, directly or indirectly, any interest in (except
for less than one percent stock holdings for investment purposes in securities
of publicly traded companies), or is an officer, director, employee or
consultant of, any Person which is or was engaged in business as, a competitor,
lessor, lessee, supplier or customer of the Company;
(b) owns, directly or indirectly, as a whole or in part, any tangible
or intangible property that the Company uses in the conduct of its business; or
(c) has any cause of action or other claim whatsoever against, or owes
any amount to, the Company, except for immaterial claims in the ordinary course
of business such as for accrued
-14-
vacation pay, accrued benefits under employee benefit plans, and medical, dental
and other similar health benefit plans existing on the date hereof.
4.23 Returns and Complaints. The Company has received no customer
----------------------
complaints concerning alleged defects in its products (or design thereof) that,
to the Company's knowledge, would have a material adverse effect on the
Condition of the Company.
SECTION 5
---------
Representations and Warranties of Purchasers
--------------------------------------------
Each Purchaser hereby represents and warrants as of the date hereof to the
Company as follows:
5.1 Experience. It acknowledges that investment in the Shares is highly
----------
speculative and involves a substantial and high degree of risk of loss of its
entire investment. It is familiar with the terms, risks and merits of an
investment in the Company through the purchase of the Shares. It (either alone
or together with its purchaser representative, if any) has such knowledge and
experience in financing and business matters that it is capable of evaluating
and understanding the merits and risks of this investment and can bear the
economic risk of this transaction. It has adequate means of providing for
current and anticipated financial needs and contingencies, is able to bear the
economic risk for an indefinite period of time and has no need for liquidity of
the investment in the Shares and could afford complete loss of such investment.
It has a preexisting personal or business relationship with the Company or one
of its officers, directors or controlling persons and/or by reason of its
business or financial experience it has the capacity to protect its own
interests in connection with the transactions contemplated by this Agreement.
5.2 Investment. It is acquiring the Shares for investment for its own
----------
account, not as a nominee or agent and not with a view to the resale, transfer
or other disposition thereof and any sale or disposition of its Shares will be
made only if such Shares are registered under the Act or the sale or disposition
is made in compliance with an exemption under the Act or the rules thereunder
and any applicable state securities laws. It understands that the Shares and
the shares of Common Stock issuable upon conversion of the Shares have not been
registered under the Act by reason of specified exemptions from the registration
provisions of the Act.
-15-
5.3 Restrictions on Resale.
----------------------
(a) It acknowledges that the Shares must be held indefinitely unless
they are subsequently registered under the Act or an exemption from such
registration is available. It has been advised or is aware of the provisions of
Rules 144 and 144A promulgated under the Act, which permit the resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions and that such Rules may not be available for resale of the Shares.
(b) It acknowledges that all certificates representing the Shares
shall have endorsed thereon the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED UNDER SUCH ACT, OR
SUCH STATE LAWS, OR AN OPINION OF COUNSEL IS FURNISHED TO THE COMPANY
(WHICH OPINION AND COUNSEL RENDERING SAME SHALL BE REASONABLY SATISFACTORY
TO THE COMPANY) TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
Such legend shall be removed by the Company upon delivery to it of an opinion of
counsel to the Company (which opinion and counsel rendering same shall be
reasonably satisfactory to the Company) that a registration statement under the
Act is at the time effective with respect to the transfer of the legended
security or that such security may be transferred without such registration
statement being in effect and without the requirements of a legend on the
certificate in the hands of the transferee.
5.4 Access to Data. It has had an opportunity to discuss the Company's
--------------
business, management and financial affairs with its management and has had the
opportunity to review the Company's facilities. It acknowledges that any
projections or forecasts provided to it by or on behalf of the Company are
necessarily speculative and may prove to be incorrect and it is not subscribing
for the Shares in reliance thereon. It is not subscribing for the Shares as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or any
-16-
solicitation of a subscription by a person not previously known to it in
connection with investments in securities generally.
5.5 Authorization. It has full power and authority to enter into and to
-------------
perform this Agreement in accordance with its terms. All action (corporate or
otherwise) on the part of each Purchaser necessary for the authorization,
execution, delivery and performance by each Purchaser of this Agreement and the
consummation of the transactions contemplated herein has been taken. This
Agreement is a valid and binding obligation of each Purchaser, enforceable in
accordance with its terms.
5.6 Accreditation. It has been advised or is aware of the provisions of
-------------
Regulation D promulgated under the Act relating to the accreditation of
investors, and it is an "Accredited Investor" as defined in Regulation D.
5.7 Risk Factors. It acknowledges that it has received and read the risk
------------
factors set forth on Schedule 5.7 hereto.
------------
5.8 Notes. It is the holder of the Note(s) being surrendered by it to the
-----
Company pursuant to this Agreement, free and clear of any liens, pledges or
encumbrances.
5.9 Excluded Purchasers. In addition, Talkot Partners II, LLC hereby
-------------------
represents and warrants to the Company that it qualifies as "excluded from the
count of purchasers" for purposes of Section 25102(f) of the California
Corporations Code pursuant to Rule 260.102.13 of Title 10 of the California Code
of Regulations.
SECTION 6
---------
Purchaser Conditions to Closing
-------------------------------
Each Purchaser's obligation to purchase the Shares at any Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of each of the following conditions:
6.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 4 hereof shall be true and correct in
all respects when made and shall be true and correct in all respects on and as
of the Closing Date with the same force and effect as if made on and as of the
Closing Date except as affected by the consummation of the transactions
contemplated by this Agreement.
-17-
6.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all respects.
6.3 Opinion of Company's Counsel. The Purchasers shall have received from
----------------------------
General Counsel Associates, counsel to the Company, an opinion addressed to the
Purchasers, dated as of the initial Closing Date, and in substantially the form
attached hereto as Exhibit C.
---------
6.4 Legal Investment. At the time of each Closing, the purchase of the
----------------
Shares to be purchased by the Purchasers hereunder shall be legally permitted by
all laws and regulations to which the Purchasers and the Company are subject.
6.5 Certificates.
------------
(a) The Company shall have delivered to the Purchasers a certificate
or certificates of an officer of the Company, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Sections 6.1 and
6.2 hereof.
(b) The Company shall have delivered to the Purchasers a certificate
of good standing as to the Company issued by the Secretary of State of the State
of Delaware.
6.6 Proceedings and Documents; Consents and Waivers; Amendment. All
----------------------------------------------------------
corporate and other proceedings in connection with the transactions contemplated
hereby and all documents and instruments incident to such transactions shall be
satisfactory in form and substance to the Purchasers and their counsel. Prior
to the Closing, the Company shall have obtained all consents or waivers, if any,
other than as specified in Schedule 4.5, necessary to execute and deliver this
------------
Agreement and issue the Shares, and to carry out the transactions contemplated
hereby and thereby, and all such consents and waivers shall be in full force and
effect.
6.7 Certificate of Designation. The Certificate of Designation set forth
--------------------------
in Exhibit A shall have been duly filed with the Secretary of State of the State
---------
of Delaware as provided by Delaware law and not rescinded or amended.
SECTION 7
---------
-18-
Company Conditions to Closing
-----------------------------
The Company's obligation to sell the Shares to be purchased at any Closing
is subject to the fulfillment on or prior to the Closing Date of each of the
following conditions:
7.1 Representations and Warranties. The representations and warranties
------------------------------
made by each of the Purchasers in Section 5 hereof shall be true and correct
when made and shall be true and correct on the Closing Date.
7.2 Legal Investment. At the time of the Closing, the purchase of the
----------------
Shares to be purchased by the Purchasers hereunder shall be legally permitted by
all laws and regulations to which the Purchasers and the Company are subject.
7.3 Certificates. The Purchasers shall have executed and delivered
------------
certificates, in form and substance satisfactory to the Company and its counsel,
attesting to the status of each Purchaser as an "Accredited Investor" as defined
in Regulation D promulgated under the Act.
SECTION 8
---------
Information Rights
------------------
8.1 Financial Information. The Company hereby covenants and agrees, so
---------------------
long as any Purchaser holds at least the number of shares of Series F Preferred
issued to it hereunder, the Company shall furnish the following reports to all
such Purchasers:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 120 days thereafter, a consolidated balance
sheet of the Company and its subsidiaries (if any) as at the end of such fiscal
year and a consolidated statement of income of the Company and its subsidiaries
(if any) for such year, all in reasonable detail and all prepared in accordance
with generally accepted accounting principles and practices and audited by
nationally recognized independent certified public accountants. If any such
audited financial statements are not prepared on a consistent basis, a note to
that effect will be included therein.
-19-
(b) As soon as practicable after the end of each calendar quarter, and
in any event within 60 days thereafter (except the last quarter of the Company's
fiscal year), an unaudited consolidated balance sheet of the Company and its
subsidiaries (if any) as at the end of such quarter and an unaudited
consolidated statement of income of the Company and its subsidiaries (if any)
for such quarter, all prepared in accordance with generally accepted accounting
principles in all material respects (other than as to footnote presentation and
year-end adjustments) consistently applied, all in reasonable detail and
accompanied by a certificate signed by the chief financial officer of the
Company that such statements present fairly the financial condition of the
Company and its subsidiaries (if any) as of the end of such quarter and the
results of their operations for such quarter.
8.2 Additional Information. The Company hereby covenants and agrees as
----------------------
follows:
(a) The Company shall furnish to all Purchasers who hold at least
10,000 shares of Series F Preferred, as soon as available, but in any event not
later than 30 days prior to the commencement of each fiscal year after the date
hereof, a business report of the Company and projected budgets for such fiscal
year as approved by the Company's Board of Directors.
(b) The Company shall, upon prior written notice and subject to the
reasonable discretion of the Company and subject to appropriate measures
regarding confidentiality, permit any Purchaser who holds at least 10,000 shares
of Series F Preferred to visit and inspect the properties and assets of the
Company, including its books of account and records.
8.3 Confidentiality. Each Purchaser agrees to hold all information
---------------
received pursuant to this Section 8 in confidence, not to use such information
for any purpose other than monitoring and/or evaluating its investment in the
Company and not to disclose any of such information to any third party. The
foregoing obligation of confidentiality shall not apply to any information or
materials relating to the Company or its business or operations that has entered
the public domain through no fault of the Purchaser, that an authorized
executive officer of the Company has authorized for public dissemination, that
the Purchaser knew or possessed prior to its being disclosed or delivered by the
Company
-20-
or that the Purchaser obtained from sources having no duty of confidentiality to
the Company.
8.4 Assignment of Information Rights. The rights granted pursuant to
--------------------------------
Sections 8.1 and 8.2 may be assigned by any Purchaser (or by any subsequent
transferee of such rights) in connection with any transfer or assignment of
Shares to a transferee that is a partner of any Purchaser that is a general or
limited partnership (or former partner, provided such partner was a partner of
the Purchaser as of, or after, the date of this Agreement) or that is a member
of any Purchaser that is a limited liability company (or former member, provided
such member was a member of the Purchaser as of, or after, the date of this
Agreement); provided, however, that (a) such transfer of Shares may otherwise be
-------- -------
effected in accordance with applicable securities laws, (b) such transferee
acquires at least 10,000 Shares and (c) each transferee agrees in writing to
take and hold such Shares and information subject to the provisions and upon the
conditions specified in this Section 8.
8.5 Termination. The provisions of Sections 8.1 and 8.2 shall terminate
-----------
upon the closing of an underwritten public offering by the Company under the Act
of any of its equity securities for its own account pursuant to an offering
resulting in aggregate gross proceeds to the Company of not less than $8,000,000
including underwriting discounts and commissions and in which the public
offering price (as adjusted for any stock splits, stock dividends,
distributions, recapitalizations and similar events) is not less than $5.00 per
share.
SECTION 9
---------
Registration Rights
-------------------
9.1 Requested Registration.
----------------------
(a) Request for Registration. If the Company shall receive from
------------------------
Holders (as defined below) of fifty percent (50%) of the issued or issuable
Registrable Securities (as defined below) (the "Initiating Holders"), a written
request that the Company effect a registration under the Act with respect to not
less than a number of shares (as adjusted for recapitalizations) of Registrable
Securities, sufficient (when aggregated with the offering of other holders who
have similar registration rights who have so requested registration) so that the
net proceeds of a proposed offering of such shares would be reasonably estimated
to
-21-
exceed $3,000,000, the Company will promptly give written notice of the proposed
registration to all other Holders and as soon as practicable, use its best
efforts to effect such registration (including, without limitation, appropriate
qualification under blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within twenty (20) days after actual receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to take any
-------- -------
action to effect any such registration, qualification or compliance pursuant to
this Section 9.1:
(i) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Act;
(ii) Prior to the earlier of (i) September 1, 1997, or (ii) six (6)
months after the effective date of the Company's first registered public
offering of its stock;
(iii) If the Company receives an opinion of counsel to the effect
that the Holders can make open market sales of the outstanding Common Stock held
by them without registration, subject to the volume and manner of sale
limitations or such similar exemption from registration requirements of the Act;
(iv) During the period starting with the date sixty (60) days prior
to the Company's estimated date of filing of, and ending on the date six (6)
months immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective);
(v) After the Company has effected one such registration pursuant
to this Section 9.1(a), and such registration has been declared or ordered
effective; or
-22-
(vi) If the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, in which case the Company's obligation to use its best efforts to
register, qualify or comply under this Section 9.1(a) shall be deferred for a
period not to exceed 120 days from the date of receipt of the written request
from the Initiating Holders.
Subject to the foregoing clauses (i) through (vi), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 9.1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 9.1(a). In such event, the right of any Holder to registration pursuant
to this Section 9.1 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 9.1, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited as provided herein. The Company shall (together with all
Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter(s) selected for such underwriting by the Company, but such selection
subject to the reasonable approval of a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 9.1, if the
managing underwriter(s) advise(s) the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders participating and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. No Registrable Securities excluded from the underwriting by reason
of the underwriters' marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may
-23-
round the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder disapproves of the terms of the under writing, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 90 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
9.2 Registration on Form S-3.
------------------------
(a) If any Holder or Holders holding in the aggregate not less than
twenty-five percent (25%) of the issued or issuable Registrable Securities
request that the Company file a registration statement on Form S-3 (or any
successor form to Form S-3) for a public offering of the Registrable Securities
the reasonable anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $500,000, and the Company
is then entitled to use Form S-3 under applicable Commission rules to register
the Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder or Holders may reasonably request; provided,
--------
however, that the Company shall not be required to effect more than one
-------
registration pursuant to this Section 9.2 in any six month period. The
substantive provisions of Section 9.5 shall be applicable to each registration
initiated under this Section 9.2.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 9.2 (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act; (ii) if the Company, within ten (10) days of the receipt of the request
of the Initiating Holders, gives notice of its bona fide intention to effect the
filing of a registration statement with the Commission within ninety (90) days
of receipt of such request (other than with respect to a registration statement
relating to Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of
-24-
Registrable Securities); (iii) during the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following, the effective date of any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective; or (iv) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its shareholders for registration statements to be filed in the near future,
then the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed 120 days from the receipt
of the request to file such registration by such Holder.
9.3 Optional Registrations. If at any time or times after the date first
----------------------
written above, the Company shall determine to register any of its securities
(for itself or for any other securities holder of the Company) under the Act or
any successor legislation (other than a registration relating to stock option
plans, employee benefit plans or a Rule 145 transaction), and in connection
therewith the Company may lawfully register its Common Stock, the Company will
promptly give written notice thereof to the then Holders of all issued or
issuable Registrable Securities and will use its best efforts to include in such
registration and to effect the registration under the Act of all Registrable
Securities which such Holders may request in writing delivered to the Company
within fifteen (15) days after receipt by such Holders of the notice given by
the Company; provided, however, if the managing underwriter for the Company
-------- -------
advises the Company in writing that including all or part of the Registrable
Shares in such offering will adversely affect the marketing of the proposed
offering, then, in connection with any such underwritten offering by the Company
of any of its securities, such registration of Registrable Securities shall be
limited to not less than five percent (5%) of the total number of shares to be
sold in the case of an initial public offering of the Company's securities, and
ten percent (10%) of the total number of shares to be sold in the case of a
subsequent offering; further provided, however, that such limited number of
------- -------- -------
shares of Common Stock in such offering shall be taken from those owned (or
obtainable upon the exercise of rights with respect to other securities) by a
group of holders requesting registration
-25-
consisting of the Holders and other holders having similar registration rights
to those of the Holders, and such limitation shall be imposed upon the Holders
and such other holders pro rata on the basis of the total number of (i) shares
of Registrable Securities owned by the requesting Holders and (ii) shares of
Common Stock owned, or obtainable by them upon the exercise of rights with
respect to other securities, by such other requesting holders. In the event of
such a limitation, shares of persons not having similar registration rights will
not be included in such registration. Notwithstanding the foregoing, the Company
shall not be obligated to take any action pursuant to this Section 9.3 in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Act. The Company shall have the right to select the managing
underwriter or underwriters for any underwritten public offering made pursuant
to a registration under this Section 9.3. Subject to the foregoing, if such
proposed registration is in connection with an underwritten offering of Common
Stock, upon request of any Holder, the Company shall use its reasonable efforts
to cause the managing underwriter therefor to include in such underwritten
offering the Registrable Securities as to which the Holder requests such
inclusion, on terms and conditions comparable to those of the securities offered
on behalf of the Company.
9.4 Definitions. For the purposes of Section 9:
-----------
(a) The term "Registrable Securities" shall mean (i) the Common Stock
issued or issuable upon conversion of all outstanding shares of the Company's
Preferred Stock that are so convertible, including without limitation the Series
F Preferred; and (ii) any Common Stock or other securities of the Company issued
or issuable with respect to the Common Stock described in clause (i) by way of a
stock dividend or stock split, or other distribution, with respect to or in
exchange for or replacement of such Common Stock or other securities.
(b) The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of effectiveness of
such registration statement.
-26-
(c) The term "Holder" means any person owning or having immediately
exercisable right to acquire Registrable Securities, including any of the
Purchasers, so long as such Purchaser holds any Registrable Securities.
9.5 Expenses of Registration.
------------------------
(a) All expenses of the registration and offering incurred in
connection with (i) one registration pursuant to Section 9.1, (ii) any
registration under Section 9.2, subject to (b) below and (iii) three
registrations pursuant to Section 9.3, shall be borne by the Company, except
that the Holders shall bear underwriting commissions and discounts attributable
to their Registrable Securities being registered and the fees and expenses of
separate counsel, if any, for such Holders. All other selling expenses relating
to securities registered on behalf of the Holders and all other registration
expenses shall be borne by the Holders of such securities pro rata. If the
Company includes in any registration any securities to be offered by it, all
expenses thereof shall be borne solely by the Company.
(b) A proportionate share of the expenses of the registration and
offering incurred in connection with (i) any registration pursuant to Section
9.2 after the second registration thereunder and (ii) any registration pursuant
to Section 9.3 after the third registration thereunder, shall be borne pro rata
by the Holder or Holders requesting the registration on the basis of the ratio
of the number of their shares so registered to the total number of shares
included in such registration.
9.6 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted the Purchaser under sections 9.1, 9.2 and 9.3 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by the
Purchaser; provided that if such transfer or assignment is to a partner of any
--------
Purchaser that is a general or limited partnership (or former partner, provided
such partner was a partner of the Purchaser as of, or after, the date of this
Agreement) or is to a member of any Purchaser that is a limited liability
company (or former member, provided such member was a member of the Purchaser as
of, or after, the date of this Agreement) such transferee or assignee need not
be acceptable to the Company; and provided, further, that (a) such transfer may
-------- -------
otherwise be effected in accordance with applicable securities laws, (b) such
assignee or transferee acquires at least
-27-
5,000 shares of the Registrable Securities (appropriately adjusted for
recapitalizations or stock splits) and (c) each assignee or transferee agrees in
writing to take and hold such securities subject to the provisions and upon the
conditions specified in this Section 9.
9.7 Standoff Agreement. The Holders shall, if requested by the managing
------------------
underwriter or underwriters of any proposed firm underwritten public offering of
securities by the Company, agree not to sell any of their Registrable Securities
or any other securities of the Company owned by such Holders in any transaction
other than pursuant to such underwritten public offering for a period of up to
180 days beginning on the effective date of the applicable registration
statement, provided that the Company's officers and directors and each holder of
10% or more of the Company's issued and outstanding Common Stock also agree to
such limitations. The Holders shall upon request execute a separate written
agreement confirming and agreeing as to the foregoing.
9.8 Registration Indemnification. In the event of any registration under
----------------------------
the Act pursuant to Section 9 of Registrable Securities of any Holder, the
Company will hold harmless such Holder and each underwriter of such securities
and each other person, if any, who controls such Holder or such underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities to which such Holder or such underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement, or any preliminary prospectus or final
prospectus or amendment or supplement thereto on the effective date thereof, or
arise out of or are based upon 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; and will reimburse such Holder and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
-------- -------
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, or any preliminary prospectus or final prospectus or
amendment or supplement thereto, in reliance upon and
-28-
in conformity with written information furnished to the Company through an
instrument duly executed by such Holder or such underwriter specifically for use
in the preparation thereof.
It shall be a condition precedent to the obligation of the Company to
include in any registration statement any Registrable Securities then held by a
Holder that the Company shall have received an undertaking reasonably
satisfactory to it and its counsel from each Holder, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Act, with respect to any
statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company through an instrument duly
executed by the Holder specifically for use in the preparation of such
registration statement, preliminary prospectus or final prospectus or such
amendment or supplement thereto.
Promptly after receipt by an indemnified party under this Section 9.8
of notice of the commencement of any action involving a claim referred to in the
preceding provisions of Section 9.8, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and or assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses incurred by the latter in connection with the
defense thereof.
9.9 Registration Procedures. Whenever the Company is required by this
-----------------------
Agreement to use its best efforts to effect the registration of any securities,
the Company shall:
(a) prepare and file with the Commission a registration statement
with respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective as provided herein;
-29-
(b) prepare and file with the Commission all amendments and
supplements to such registration statement and any prospectus used therewith as
may be necessary to keep such registration statement effective and current and
to comply with the provisions of the Act with respect to the sale or other
disposition of such securities;
(c) furnish to each Holder of such securities such number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents, as such Holder may reasonably
request in order to facilitate the disposition of its securities; and
(d) use its best efforts to register or qualify the securities under
such other securities or "blue sky" or other applicable laws of such
jurisdictions within the United States as the Holder shall reasonably request,
to enable the Holder to consummate the public sale or other disposition in such
juris dictions of such securities.
9.10 Rule 144 Undertakings. At any time and from time to time after the
---------------------
expiration of ninety (90) days following the earlier of the close of business on
such date as (i) a registration statement filed by the Company under the Act
becomes effective or (ii) the Company registers a class of securities under
section 12 of the Securities Exchange Act of 1934, as amended, the Company shall
use its best efforts to make publicly available and available to the Holders,
pursuant to Rule 144 of the Commission under the Act, such information as is
necessary to enable the Holders to make sales of Registrable Securities pursuant
to that Rule and the Company shall use its best efforts to timely file with the
Commission all documents and reports required of the Company under the
Securities Exchange Act of 1934. The Company shall furnish to any Holder upon
request (after the preceding sentence shall have become applicable), a written
statement executed by the Company as to compliance with the current public
information requirements of Rule 144.
9.11 Cooperation. In connection with any registration of Registrable
-----------
Securities pursuant to this Section 9, the Company agrees to:
(a) enter into such customary agreements (including, in the event of
any underwritten public offering, an underwriting agreement containing such
terms and provisions, as are customarily
-30-
contained in underwriting agreements for comparable offerings and, if no
underwriting agreement is entered into, an indemnification agreement on such
terms as is customary in transactions of such nature) and take all such other
actions as the Holders or the underwriters, if any, participating in such
offering and sale may reasonably request in order to expedite or facilitate such
offering and sale;
(b) furnish, at the request of the Holders or any underwriters
participating in such offering and sale, (i) a comfort letter or letters, dated
the date of the final prospectus with respect to the Common Stock registered
and/or the date of the closing for the sale of the Common Stock from the
independent certified public accountants of the Company and addressed to the
Holders and any underwriters participating in such offering and sale, which
letter or letters shall be in form and substance as is customarily given by
independent certified public accountants, and (ii) an opinion, dated the date of
the closing for the sale of the Common Stock, of the counsel representing the
Company with respect to such offering and sale addressed to the Holders and any
such underwriters, which opinion shall be in form and substance as is customary
in transactions of a similar nature for similar entities;
(c) make available for inspection by the Holders and the underwriters,
if any, participating in such offering and sale (which inspecting underwriters
shall, if reasonably possible, be limited to any manager or managers for such
participating underwriters), one counsel for the Holders and any such
underwriters, taken together, and one accountant or accounting firm retained by
the Holders and any such underwriters, taken together, all financial and other
records, corporate documents and properties of the Company, and supply such
additional information, as they shall reasonably request; provided that any such
party shall keep the contents thereof confidential in the manner prescribed by a
confidentiality agreement containing customary terms to be executed by the
persons who are provided such access.
9.12 Action to Suspend Effectiveness; Supplement to Registration
-----------------------------------------------------------
Statement. In connection with any registration of Registrable Securities
----------
pursuant to this Section 9:
(a) The Company will notify the Holders and their counsel promptly of
(i) any action by the Commission to suspend the effectiveness of the
registration statement covering the Common Stock requested to be registered or
the institution or threatening
-31-
of any proceeding for such purpose (a "STOP ORDER") or (ii) the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Common Stock requested to be registered for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose. Immediately
upon receipt of any such notice, the Holders shall cease to offer or sell any
Common Stock pursuant to the registration statement in the jurisdiction to which
such Stop Order or suspension relates. The Company will use all reasonable
efforts to prevent the issuance of any such Stop Order or the suspension of any
such qualification and, if any such Stop Order is issued or any such
qualification is suspended, to obtain as soon as possible the withdrawal or
revocation thereof, and will notify the Holders and their counsel at the
earliest practicable date of the date on which the Holders may offer and sell
Common Stock pursuant to the registration statement.
(b) For as long as sales of Registrable Securities are permitted
pursuant to a registration statement filed pursuant to this Section 9, the
Company will notify the Holders and their counsel promptly of the occurrence of
any event or the existence of any state of facts that, in the judgment of the
Company, should be set forth in such registration statement. Immediately upon
receipt of such notice, the Holders shall cease to offer or sell any Common
Stock pursuant to such registration statement, cease to deliver or use such
registration statement and, if so requested by the Company, return to the
Company, at its expense, all copies (other than permanent file copies) of such
registration statement. The Company will, as promptly as practicable, take such
action as may be necessary to amend or supplement such registration statement in
order to set forth or reflect such event or state of facts. The Company will
furnish copies of such proposed amendment or supplement to the Holders and their
counsel.
SECTION 10
----------
First Purchase Rights
---------------------
10.1 Right of First Purchase. The Company hereby grants to the Purchasers
-----------------------
the right of first purchase for a number of shares of the same class of New
Securities (as defined below) which the Company may, from time to time, propose
to sell and issue. Each Purchaser shall be entitled to purchase a number of
shares of the class of New Securities sufficient to maintain its Pro Rata
Ownership in the Company after taking into account the proposed
-32-
issuance by the Company. "Pro Rata Ownership" at any given time means the
following ratio:
(a) the sum of (i) the total number of shares of Common Stock then
held by the Purchaser, plus (ii) the total number of shares of Conversion Stock
(as defined below) then held by the Purchaser;
divided by
----------
(b) the sum of (i) the total number of shares of Common Stock then
outstanding, plus (ii) the total number of shares of Conversion Stock at that
time.
"Conversion Stock" shall mean all then outstanding shares of convertible
preferred stock of the Company, other securities of the Company that are
convertible into Common Stock, and options, warrants and other instruments or
rights that are exercisable for or convertible into Common Stock. As used in
this Section 10, the number of shares of Conversion Stock at any given time
shall be calculated as the number of shares of Common Stock into which it is
then convertible, assuming conversion of all such securities and exercise of all
such options, warrants and rights.
(c) Except as set forth below, "New Securities" shall mean any shares
of capital stock of the Company including common stock and preferred stock,
whether now authorized or not, and rights, options or warrants to purchase said
shares of common stock or preferred stock, and securities of any type whatsoever
that are, or may become, convertible into said shares of common stock or
preferred stock. Notwithstanding the foregoing, "New Securities" shall not
include (i) the shares of Series F Preferred to be issued pursuant to this
Agreement, (ii) securities offered to the public generally pursuant to a
registration statement or pursuant to Regulation A under the Act, (iii) shares
issued pursuant to the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other reorganization
whereby the Company or its shareholders own not less than a majority of the
voting power of the surviving or successor corporation, (iv) shares of Common
Stock or options, warrants or rights issued to employees, officers or directors
of, or consultants, customers or vendors to, the Company, pursuant to any stock
option or similar plan approved by the Board of Directors of the Company and
securities issued upon the exercise of any such options, warrants or rights, (v)
stock issued in connection with
-33-
any stock split, stock dividend or recapitalization by the Company, (vi) any
securities issued upon conversion of any preferred stock of the Company, (vii)
previously issued options, warrants or rights to purchase the Company's capital
stock and securities issued upon the exercise of any such options, warrants or
rights or (viii) any borrowings, direct or indirect, from financial institutions
or other persons by the Company, whether or not presently authorized, including
any type of loan or payment evidenced by any type of debt instrument, provided
such borrowings do not have any equity features, including warrants, options or
other rights to purchase capital stock, and are not convertible into capital
stock of the Company.
10.2 Mechanics.
---------
(a) In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Purchasers written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. Each Purchaser shall have thirty (30) days
from the date of receipt of any such notice to agree to purchase up to such
Purchaser's share (calculated in accordance with Section 10.1) of such New
Securities for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. Each Purchaser shall have a right of overallotment such that
if any Purchaser fails to exercise its right hereunder to purchase its pro rata
portion of New Securities, the Company shall so notify the other Purchasers, and
the other Purchasers may purchase the nonpurchasing Purchaser's portion on a pro
rata basis, within seven (7) days from the date of receipt of such notice. The
Company shall notify the Purchaser of any material revision to the price and
terms of the issuance of New Securities and the Purchaser shall be entitled to
fifteen (15) additional days in order to respond to the Company.
(b) In the event any Purchaser fails to exercise such right of first
purchase within said 30 day period (as extended, if applicable), the Company
shall have 120 days thereafter to sell or enter into an agreement (pursuant to
which the sale of the New Securities covered thereby shall be closed, if at all,
within 60 days from the date of said agreement) to sell the New Securities not
elected to be purchased by the Purchaser at a price and upon terms no more
favorable to the purchasers of such securities than specified in the Company's
notice to the Purchaser. In the event
-34-
the Company has not sold the New Securities or entered into an agreement to sell
the New Securities within said 120 day period (or sold and issued New Securities
in accordance with the foregoing within 60 days from the date of said
agreement), the Company shall not thereafter issue or sell any of such New
Securities, without again offering the securities to the Purchasers in the
manner provided above.
(c) The right of first purchase granted under this Agreement shall
terminate upon the closing of the first public offering of the Common Stock of
the Company to the general public which is effected pursuant to a registration
statement filed with, and declared effective by, the Commission under the Act,
resulting in proceeds to the Company of at least $8,000,000, including
underwriting discounts and commissions and in which the public offering price
(as adjusted for any stock splits, stock dividends, distributions,
recapitalizations and similar events) is not less that $5.00 per share.
(d) The right of first purchase granted hereunder is not assignable
except in connection with a transfer of Shares to a transferee that is a partner
of any Purchaser that is a general or limited partnership (or former partner,
provided such partner was a partner of the Purchaser as of, or after, the date
of this Agreement) or that is a member of any Purchaser that is a limited
liability company (or former member, provided such member was a member of the
Purchaser as of, or after, the date of this Agreement); provided, however, that
-------- -------
(a) such transfer of Shares may otherwise be effected in accordance with
applicable securities laws, (b) such transferee acquires at least 10,000 Shares
and (c) each transferee agrees in writing to take and hold such Shares subject
to the provisions and upon the conditions specified in this Section 10.
SECTION 11
----------
Restrictions on Transferability; Compliance with Act
----------------------------------------------------
11.1 Restrictions on Transferability. The Shares, and the shares of Common
-------------------------------
Stock issued on conversion thereof (the "Conversion Shares"), shall not be
transferable except upon the conditions specified in this Section 11, which
conditions are intended to insure compliance with the provisions of the Act.
Each Purchaser will cause any proposed transferee of the Shares and the
Conversion Shares held by such Purchaser to agree to take and hold
-35-
such securities subject to the provisions and upon the conditions specified in
this Section 11.
11.2 Restrictive Legend. Each certificate representing (i) the Share, (ii)
------------------
the Conversion Shares and (iii) any other securities issued in respect of the
Shares or Conversion Shares upon any stock split, stock combination, stock
dividend, recapitalization, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 11.3 below) be stamped or
otherwise imprinted with a legend in substantially the form set forth in Section
5.3 (in addition to any legend required under applicable state securities laws).
11.3 Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing securities of the Company required to bear the legend set forth in
Section 5.3 (or any similar legend) agrees to comply in all respects with the
provisions of this Section 11.3. Prior to any proposed transfer of any such
securities (unless there is in effect a registration statement under the Act
covering the proposed transfer), the holder thereof shall give written notice to
the Company of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and (except in transactions in compliance with Rule 144)
shall be accompanied by either (i) a written opinion of legal counsel who shall
be reasonably satisfactory to the Company addressed to the Company and
reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed transfer of the securities may be effected without
registration under the Act, or (ii) a "no action" letter from the Commission to
the effect that the transfer of such securities without registration will not
result in a recommendation by the staff of the Commission that action be taken
with respect thereto, whereupon the holder of such securities shall be entitled
to transfer such securities in accordance with the terms of the notice delivered
by the holder to the Company, provided, however, that no opinion of counsel or
-------- -------
"no action" letter shall be required for any transfer resulting solely from a
distribution of securities from a partnership to its partners or from a limited
liability company to its members. Each certificate evidencing the securities
transferred pursuant to the above shall bear the legend set forth in Section
5.3, except that such certificate shall not bear such restrictive legend if, in
the opinion of counsel for the Company, such legend is not required in order to
establish compliance with any provision of the Act.
-36-
SECTION 12
----------
Miscellaneous
-------------
12.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of California without giving effect to principles of
conflicts of law thereunder.
12.2 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
12.3 Entire Agreement; Amendment; Waiver.
-----------------------------------
(a) This Agreement (including the Schedules and Exhibits hereto) and
the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
(b) This Agreement may be amended or modified upon the written
consent of the Company and holders in interest of not less than a majority of
the aggregate of the Series F Preferred then outstanding.
(c) Any provision of this Agreement may be waived with respect to
rights of any Purchaser by a written instrument executed by holders in interest
of not less than a majority of the aggregate of the Series F Preferred then
outstanding.
(d) Any amendment or waiver made in accordance with this Section 12.3
shall be binding upon each holder of any Shares then outstanding, each future
holder of such Shares and the Company.
12.4 Notices. All notices and other communications required or permitted
-------
under this Agreement shall be in writing and shall be deemed effectively given
upon personal delivery, upon delivery by a nationally recognized overnight
courier service or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the Company at its
address set forth on the signature page of this Agreement and to a Purchaser at
its address on Schedule I or the signature pages of this Agreement, or at such
----------
other address as any party may designate by ten days prior written notice given
pursuant to the terms of this section.
-37-
12.5 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of any Shares upon any breach or default
of the Company under this Agreement shall impair any such right, power or remedy
of such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or in any similar breach or default
occurring thereafter; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative and
not alternative.
12.6 Separability. In the event any provision of this Agreement shall be
------------
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
12.7 Agent's Fees.
------------
(a) The Company (i) represents and warrants that, other than as set
forth on Schedule 12.7, it has retained no finder or broker in connection with
-------------
the transactions contemplated by this Agreement and (ii) hereby agrees to
indemnify and to hold each Purchaser harmless from any liability for commissions
or compensation in the nature of an agent's fee to any broker or other person or
firm (and the reasonable costs and expenses of defending against such liability
or asserted liability) arising from any act by the Company or any of its
employees or representatives, including any claim by any alleged agent, broker
or finder set forth on Schedule 12.7.
-------------
(b) Each Purchaser (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company and the
other Purchasers harmless from any liability for any commissions or compensation
in the nature of an agent's fee to any broker or other person or firm
-38-
(and the reasonable costs and expenses of defending against such liability or
asserted liability) for which each Purchaser, or any of its employees or
representatives, are responsible.
12.8 Availability of Common Stock for Conversion. The Company shall, from
-------------------------------------------
time to time, in accordance with the laws of the State of Delaware take such
actions as are within its control as are necessary to increase the authorized
amount of Common Stock if at any time the number of shares of Common Stock
remaining unissued and available for issuance shall be insufficient to permit
conversion of all the then outstanding convertible preferred stock of the
Company.
12.9 Mergers, etc.; Redemptions of Stock.
-----------------------------------
(a) Without the consent of the holders of at least a majority of the
shares of Series F Preferred then outstanding, the Company will not effect a
merger or consolidation (other than whereby the Company or its shareholders own
not less than a majority of the voting power of the surviving or successor
corporation) or sell or otherwise transfer all or substantially all of the
Company's assets (other than pursuant to a pledge of assets by the Company as
collateral pursuant to any agreement with any bank, lender or group of lenders,
equipment lessor or similar lending institution or individuals in connection
with such entities or individuals providing credit facilities or equipment
financings to the Company pursuant to any approval of the Board of Directors of
the Company); provided, however, that notwithstanding the foregoing, no consent
of the holders of shares of Series F Preferred shall be required under this
Section 12.9(a) for any of the foregoing actions if as a result of such action
each of the holders of the Series F Preferred receives proceeds (consisting of
cash and/or property; for purposes of this Section 12.9(a) the value of any
property shall be as determined in good faith by the Board of Directors of the
Company) per share equal to at least $5.00 (as equitably adjusted to reflect any
stock splits, combinations, stock dividends, reclassifications and similar
events).
(b) Without the consent of the holders of at least a majority of the
shares of Series F Preferred then outstanding, the Company shall not purchase,
redeem or otherwise acquire any share of its Common Stock or any class of
Preferred Stock whose preference or priority as to dividends or assets is
inferior to the Series F Preferred; provided, however, that notwithstanding the
-39-
foregoing, (i) the Company, pursuant to any repurchase rights or any rights of
first refusal, may (without the consent called for in this Section 12.9(b))
purchase shares of capital stock of the Company from consultants, employees or
directors upon termination of their employment or engagement, as the case may
be, or upon any proposed sale or other transfer by any such consultant, employee
or director of any shares of the Company's capital stock) and (ii) the Company
may (without the consent called for in this Section 12.9(b)) purchase shares of
capital stock of the Company and options therefor in connection with the
recision and repurchase offer referred to on Schedule 4.8.
------------
(c) The provisions of this Section 12.9 shall terminate upon the
closing of an underwritten public offering by the Company under the Act of any
of its equity securities for its own account pursuant to an offering resulting
in aggregate gross proceeds to the Company of not less than $8,000,000 including
underwriting discounts and commissions and in which the public offering price
(as adjusted for any stock splits, stock dividends, distributions,
recapitalizations and similar events) is not less than $5.00 per share.
12.10 California Commissioner of Corporations. THE SALE OF THE
---------------------------------------
SECURITIES WHICH 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.
12.11 Expenses. The Company shall bear its own expenses and legal fees
--------
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby. The Company shall pay the reasonable legal fees and
disbursements of Shartsis, Xxxxxx & Xxxxxxxx, counsel to the Purchasers, with
respect to this Agreement and the transactions contemplated hereby.
12.12 Waiver. Pursuant to Section 12.5 of the Note Purchase Agreement, the
------
Purchasers, constituting a Majority of the Investors (as defined in the Note
Purchase Agreement) hereby waive, with respect to the rights of all Investors
(as defined in the Note Purchase Agreement), any rights to notice set forth in
Section 9.2
-40-
of the Note Purchase Agreement, to the extent such rights relate to the issuance
and sale of the Shares and the Common Stock issuable upon conversion thereof as
contemplated by this Agreement.
12.13 Limit on Sale of Shares. The Company agrees that, in the event that
-----------------------
as of the date that is sixty-one (61) days from the date of this Agreement the
Company has sold fewer than a total of 3,500,000 shares of Series F Preferred,
the Company will not thereafter sell more shares of Series F Preferred without
the consent of the holders of at least a majority of the shares of Series F
Preferred then outstanding; provided, however, that notwithstanding the
foregoing the Company may at any time sell up to a total of 3,000,000 shares of
Series F Preferred without the consent otherwise required by this Section 12.13.
12.14 Board of Directors. The Company and the Purchasers acknowledge and
------------------
agree that so long as PolyVentures II Limited Partnership, or affiliates thereof
("PolyVentures"), hold 363,636 or more shares of the issued and outstanding
Series F Preferred, PolyVentures shall have, in accordance with the laws of the
State of Delaware, the right to elect as a member of the Board of Directors of
the Company one (1) individual designated by PolyVentures. The right set forth
in this Section 12.14 is in addition to, and not in lieu of, any right of the
holders of Series F Preferred generally to elect a member or members of the
Board of Directors of the Company as set forth in the Certificate of
Designation. The provisions of this Section 12.14 shall terminate upon the
closing of an underwritten public offering by the Company under the Act of any
of its equity securities for its own account pursuant to an offering resulting
in aggregate gross proceeds to the Company of not less than $8,000,000 including
underwriting discounts and commissions and in which the public offering price
(as adjusted for any stock splits, stock dividends, distributions,
recapitalizations and similar events) is not less than $5.00 per share.
12.15 Interpretation. All parties have been assisted by counsel in the
--------------
preparation and negotiation of this Agreement and the transactions contemplated
hereby, and this Agreement shall be construed according to its fair language.
The rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement.
-41-
12.16 Titles. The titles of the sections of this Agreement are for
------
convenience of reference only and are not to be considered in construing this
Agreement.
12.17 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one Agreement.
[balance of this page intentionally left blank]
-42-
[Series F Preferred Stock Purchase Agreement]
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
JETFAX, INC.
By: /s/ Xxxx Xxxxxx
------------------------
Xxxx Xxxxxx
President
Address:
0000 Xxxxxx Xxxx
Xxxxx Xxxx, XX 00000
[PURCHASER]
[Note: a separate signature page for
each Purchaser]
By: _______________________
Name:
Title:
Address:
[____________________________]
[____________________________]
-43-
The Series F Preferred Stock Purchase Agreement was signed by the following
individuals/entities:
Xxxxxxxxxx Xx-Xxxxxx
Xxxxxxx Xxxxxx
Antaeus Enterprises, Inc.
Xxxxxxx X. Xxxx
Beinecke Trust
Xxxxx Xxxx
Xxxx Investors Ltd Partnership
Xxxx & Xxxxxxxx Xxxx
Xxxxxx Associates
Xxxxx X. Xxxxxx
Xxxxx X. Xxxxx
Xxxxx Xxxxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxxx, Xxxxxxx
Granite Capital XX
Xxxx-Xxxxxxx, Xxxx
Xxxx, Xxxxxxxx
Xxxxxx, Xxxxxxxx X. & Xxxxxxx Living Trust
Xxxxxxx, Xxxxx
Xxxxx Xxxxxxx-Xxxxxx Family Trust
Xxxxxxxx, Xxxxx
Xxxxxxx Family Trust
Lego, Xxxx X.
Xxxxxx, Xxxxxx X. & Xxxxxxxx X. Xxxxxx Living Trust
Marwit Capital
Xxxxxx Family Trust
Xxxxxxx, Xxxxxxxxx
Poly Ventures, X.X.
Xxxxxx-Xxxxxxxx, Xxxxx
Prism Partners I
Xxxxxxx X. Xxxxxx Living Trust
Rose, Xxxxxxxx
Xxxxxxxxx, Xxxx X.
Xxxxxx, Xxxxxx
Saratoga Springs Co. Ltd.
Xxxxxxxxxx, Xxxxx X.
Xxxxxx Family Trust
Xxxxxxxx, Xxxxxxx & Xxxxxx Trustees
Xxxxxx, Xxxxxx
Talkot Partners
Xxxxxxx Xxxxxx Living Trust
Traslader SA
Xxxxxx, Xxxxxxx
-46-
