EXHIBIT 10.10
TOP TIER SOFTWARE, INC.
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AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
July 11, 2000
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TOP TIER SOFTWARE, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (the
"Agreement") is made as of July 11, 2000, by and among TopTier Software, Inc., a
Delaware corporation (the "Company"), and the persons and entities listed on
Exhibit A hereto (the "Investors").
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RECITALS
WHEREAS, the Company and the Investors are parties to the Series A
Preferred Stock Purchase Agreement, the Series B Preferred Stock Purchase
Agreement, the Series C Preferred Stock Purchase Agreement, the Series D
Preferred Stock Purchase Agreement, or the Series E Preferred Stock Purchase
Agreement, whereby the Company has sold or will sell, and those Investors have
acquired or will acquire, that number of shares of the Company's Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock set forth opposite each Investor's
name on Exhibit A hereto (the "Purchased Shares," which term shall also include
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any additional shares of Common Stock and/or Preferred Stock of the Company, or
securities convertible into or exchangeable for such shares, now owned or
hereafter acquired by the Investors).
WHEREAS, certain of the Investors hold securities of the Company and
possess certain registration rights with respect to such securities pursuant to
the Investors' Rights Agreement dated June 20, 1997 (the "1997 Rights
Agreement"), the Investors' Rights Agreement dated October 6, 1998 (the "1998
Rights Agreement") and the Amended and Restated Investors' Rights Agreement
dated October 27, 1999 (the "1999 Rights Agreement"); and
WHEREAS, the Investors who are parties to the 1997 Rights Agreement,
the 1998 Rights Agreement and the 1999 Rights Agreement desire to terminate the
1997 Rights Agreement, 1998 Rights Agreement and 1999 Rights Agreement and to
accept the rights created pursuant hereto in lieu of such previously granted
rights; and
WHEREAS, the execution of this Agreement by the Company is a condition
to the obligations of the Investors under the Series E Preferred Stock Purchase
Agreement and the Company wishes to execute this Agreement and grant to the
Investors the rights contained herein in order to fulfill such condition;
NOW THEREFORE, in consideration of the foregoing, and the mutual
consideration set forth herein, the parties agree as follows:
SECTION 1.
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Restrictions on Transferability;
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Registration Rights
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1.1. Certain Definitions. As used in this Agreement, the following terms shall
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have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Conversion Shares" means the Common Stock issued or issuable upon
conversion of the Preferred Shares as defined herein.
"Preferred Shares" shall mean, collectively, the Company's outstanding
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock.
"Common Stock" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon conversion of the Company's outstanding
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock.
"Holder" shall mean any Investor holding Registrable Securities and
any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.
"Initiating Holders" shall mean Holders in the aggregate of not less
than thirty percent (30%) of the Registrable Securities as defined for purposes
of that particular section.
"IPO Holders" shall mean Azure Capital Partners.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding underwriting
discounts and commissions, and the compensation of regular employees of the
Company which shall be paid in any event by the Company).
"Registrable Securities" means (i) the Conversion Shares; and (ii) any
Common Stock of the Company issued or issuable in respect of the Preferred
Shares or Conversion Shares or other securities issued or issuable with respect
to the Preferred Shares or Conversion Shares upon any stock split, stock
dividend, recapitalization, or similar event, or any Common Stock otherwise
issued or issuable with respect to the Conversion Shares or Preferred Shares;
provided, however, that
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shares of Common Stock or other securities shall only be treated as Registrable
Securities if and so long as they have not been (A) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 of this Agreement.
"Securities 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.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for the Holders (except as
provided by Section 1.9).
1.2. Restrictions. The Preferred Shares and the Conversion Shares shall not
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be sold, assigned, transferred or pledged except upon the conditions specified
in this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. The Investors will cause any proposed
purchaser, assignee, transferee or pledgee of the Preferred Shares or the
Conversion Shares to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
1.3. Restrictive Legend. Each certificate representing (i) the Preferred
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Shares, (ii) the Conversion Shares, and (iii) any other securities issued in
respect of the securities referenced in clauses (i) and (ii) upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 1.4 below) be
stamped or otherwise imprinted with legends in the following form (in addition
to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
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THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP
PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE FIRST
REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER
AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH LOCKUP PERIOD IS
BINDING ON TRANSFEREES OF THESE SHARES."
Each Investor and Holder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.
1.4. Notice of Proposed Transfers. The holder of each certificate
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representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail and, if requested by
the Company, shall be accompanied at such holder's expense by either (i) an
unqualified written opinion of legal counsel who shall, and whose legal opinion
shall be, reasonably satisfactory to the Company, addressed to the Company, to
the effect that the proposed transfer of the Restricted Securities may be
effected without registration under the Securities 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 Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder to
the Company. The Company will not require such a legal opinion or "no action"
letter (a) in any transaction in compliance with Rule 144, (b) in any
transaction in which an investor which is a corporation distributes Restricted
Securities after six (6) months after the purchase thereof solely to its
majority-owned subsidiaries or affiliates for no consideration, or (c) in any
transaction in which an investor which is a partnership distributes Restricted
Securities after six (6) months after the purchase thereof solely to partners
thereof for no consideration, provided that each transferee agrees in writing to
be subject to the terms of this Section 1.4. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 1.3 above, except that such certificate shall not bear such
restrictive legend if, in the opinion of counsel for such holder and the
Company, such legend is not required in order to establish compliance with any
provisions of the Securities Act.
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1.5. Requested Registration.
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(a) Request for Registration. In case the Company shall receive from
Initiating Holders a written request that the Company effect any qualification,
compliance or registration with respect to Registrable Securities where the
reasonably anticipated aggregate price to the public, net of underwriting
discounts and commissions, would exceed $10,000,000 the Company will :
(i) within ten (10) days of the receipt thereof, give written
notice of the proposed registration, qualification or compliance to all
other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation,
the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations
issued under the Securities 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 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 1.5:
(1) 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 Securities Act;
(2) Prior to the earlier of (i) six (6) months following
the Company's initial public offering or (ii) August 1, 2003;
(3) During the three (3) month period ending on the date
three (3) 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);
(4) After the Company has effected one (1) such
registration pursuant to this subparagraph 1.5(a), such registration has
been declared or ordered effective and the securities offered pursuant to
such registration have been sold; or
(5) 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 it would be seriously
detrimental to the Company or its shareholders for a registration statement
to be filed in the near future, then the Company's obligation to use its
best efforts to register, qualify or comply under this Section 1.5 shall be
deferred for a single period not to exceed ninety (90) days from the date
of receipt of written request from the Initiating Holders; provided
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however, that the Company may not utilize this right more than once in any
twelve (12) month period.
Subject to the foregoing clauses (1) through (5), 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
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Section 1.5 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 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into and perform its
obligations under an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by a majority in interest of the
Initiating Holders (which managing underwriter shall be reasonably acceptable to
the Company). Notwithstanding any other provision of this Section 1.5, if the
managing underwriter advises 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 of Registrable Securities 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, provided
however, that the number of shares of Registrable Securities to be included in
such underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting. No Registrable Securities excluded
from the underwriting by reason of the underwriter's 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 round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration and such Registrable Securities shall not be
transferred in a public distribution prior to 180 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require.
1.6. Company Registration.
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(a) Notice of Registration. If at any time or from time to time, the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof;
and
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(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved in such registration, all the Registrable Securities specified in a
written request or requests made within twenty (20) days after receipt of such
written notice from the Company by any Holder, to the extent provided for in
subsection (b) hereof.
(b) Underwriting. If the registration of which the Company gives
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notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 1.6, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration by Holders to a minimum of 25% of
the total shares to be included in such underwriting or exclude them entirely in
the case of the Company's initial public offering in which case the Registrable
Securities of the selling Holders may be excluded if the underwriters make the
determination described above and no other shareholders' securities are included
in such registration. The Company shall so advise all Holders and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders 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. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder or other
holder to the nearest 100 shares. If any Holder of Registrable Securities
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, and the managing underwriter. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and shall not be transferred in a public
distribution prior to 180 days after the effective date of the registration
statement relating thereto, or such other shorter period of time as the
underwriters may require.
(c) Right to Terminate Registration. The Company shall have the
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right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7. Registration on Form S-3.
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(a) If Initiating Holders 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 shares of the Registrable Securities, the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $1,000,000, and the Company is a
registrant entitled to use Form S-3 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;
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provided, however, that the Company shall not be required to effect more than
three registrations pursuant to this Section 1.7 in any twelve (12) month
period. The Company will (i) promptly give written notice of the proposed
registration to all other Holders, and (ii) as soon as practicable, use its best
efforts to effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
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 receipt of such written notice from
the Company. The substantive provisions of Section 1.5(b) shall be applicable to
each registration initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 1.7:
(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 Securities Act,
(ii) during the three (3) month period ending on a date
three (3) months following the effective date of, a registration statement
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities),
(iii) 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 single period not to exceed
ninety (90) days from the receipt of the request to file such registration by
such Holder or Holders, provided however, that the Company may not utilize this
right more than once in any twelve (12) month period, or
(iv) the Company shall have already received, within any
twelve (12) month period, three (3) requests from Initiating Holders that the
Company file a registration statement on Form S-3.
1.8. Limitations on Subsequent Registration Rights. From and after the date
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of this Agreement, the Company shall not enter into any agreement granting any
holder or prospective holder of any securities of the Company registration
rights with respect to such securities unless the Company first obtains the
consent of the holders of at least a majority of the Registrable Securities.
1.9. Expenses of Registration. All Registration Expenses incurred in
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connection with any registration pursuant to Sections 1.5, 1.6 or 1.7 and the
reasonable cost of one special legal counsel
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to represent all of the Holders together in any such registration shall be borne
by the Company, provided that the Company shall not be required to pay the
Registration Expenses of any registration proceeding begun pursuant to Section
1.5, the request of which has been subsequently withdrawn by the Initiating
Holders. In such case, the Holders of Registrable Securities to have been
registered shall bear all such Registration Expenses pro rata on the basis of
the number of shares to have been registered unless the Holders of a majority of
the Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.5. Notwithstanding the foregoing, however, if
at the time of the withdrawal, the Holders have learned of a material adverse
change in the condition, business or prospects of the Company from that known to
the Holders at the time of their request, of which the Company had knowledge at
the time of the request, then the Holders shall not be required to pay any of
said Registration Expenses or to forfeit the right to one demand registration.
1.10. Registration Procedures. In the case of each registration,
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qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will use its best efforts to:
(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 for at least one hundred
twenty (120) days; provided however, that such 120-day period shall be extended
for a period of time equal to the period of time the Holder refrains from
selling any securities included in such registration at the request of the
underwriter of such offering.
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be reasonably necessary to comply with
the provisions of the Act with respect to the disposition of the securities
covered by such registration statement;
(c) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such agreement;
(d) use its best efforts to cause all such Registrable Securities
registered pursuant to hereunder to be listed on each securities exchange on
which similar securities issued by the Company are then listed;
(e) provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration;
and
(f) furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
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1.11. Indemnification.
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(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, each of its officers and directors and partners, and
each person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Section 1, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities
(joint or several) (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, preliminary or final
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation or alleged violation by the Company of any rule or regulation
promulgated under the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act") applicable to the Company in connection with any
such registration, qualification or compliance, and the Company will reimburse
each such Holder, each of its officers and directors, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, as incurred, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein or for any amounts paid in settlement of any such
claim, loss, damage and liability if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold
harmless the Company, each of its directors and officers, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (joint or several) (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, preliminary or final
prospectus, offering circular or other document, or any 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 the
Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, as incurred, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such
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registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the liability of a Holder
for indemnification under this Section 1.11 (b) shall not exceed the gross
proceeds from the offering received by such Holder and shall not apply to
amounts paid in settlement of any such claim, loss, damage and liability if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld .
(c) Each party entitled to indemnification under this Section 1.11
(the "Indemnified Party") shall give written notice to the party required to
provide indemnification (the "Indemnified Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, provided however that an Indemnified Party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section I unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(d) If the indemnification provided for in this Section 1.11 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party or by the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge and access to information.
(e) The obligations of the Company and Holders under this Section
1.11 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1.
11
1.12. Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 1.
1.13. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time
permit the sale of the Restricted Securities to the public without
registration or pursuant to a registration statement on Form S-3 (or
successor form thereof), after such time as a public market exists for
the Common Stock of the Company, the Company agrees to use its best
efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Exchange Act ;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements);
(c) So long as an Investor owns any Restricted Securities, to furnish
to the Investor forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public) or its eligibility to register securities pursuant to Form S-3 (at any
time after the end of the fiscal year in which the first registration statement
under the Act filed by the Company becomes effective), and of the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as an
Investor may reasonably request in availing itself of any rule or regulation of
the Commission allowing an Investor to sell any such securities without
registration; and
(d) Beginning after the date on which the Company would otherwise be
a registrant entitled to use Form S-3 to register the Registrable Securities,
take such additional actions as are reasonably necessary to make the Company
eligible under the Securities Act and the Exchange Act to use Form S-3 to
register Registrable Securities, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act.
1.14. Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Investors under Sections 1.5, 1.6 and 1.7 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by an
Investor (together with any affiliate); provided, that such consent shall not be
required if (a) such transfer may otherwise be effected in accordance with
applicable securities laws, (b) notice of such assignment is given to the
Company, and (c) such transferee or assignee (i) is a wholly-owned subsidiary,
or constituent partner (including limited partners) of such
12
Investor, or (ii) acquires from such Investor the lesser of (A) 100,000 or more
shares of Restricted Securities (as appropriately adjusted for stock splits and
the like) or (B) all of the Restricted Securities then owned by such Investor.
1.15. Standoff Agreement. Each Holder agrees in connection with the
------------------
initial registration of the Company's securities that, upon request of the
Company or the underwriters managing any underwritten initial public offering of
the Company's securities, not, to the extent requested by the Company or the
underwriters, to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days from the effective date of such
registration) as may be requested by the Company or such managing underwriters;
provided, however, that the officers, directors and one percent (1%)
stockholders of the Company who own stock of the Company also agree to such
restrictions.
1.16. Termination of Rights. No Holder shall be entitled to exercise any
---------------------
right provided for in this Section 1:
(a) after five (5) years following the consummation of the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the initial firm commitment underwritten offering of its
securities to the general public, or
(b) on or after the closing of a public offering of the Common Stock
of the Company, initiated by the Company, when all shares of the Holder's
Registrable Securities may be sold under Rule 144 during any 90-day period.
SECTION 2.
Right of Participation
----------------------
2.1. Purchasers' Right of Participation.
----------------------------------
(a) Right of Participation. Subject to the terms and conditions
contained in this Section 2.1 of even date herewith, the Company hereby grants
to (i) Vitria Technology, Inc. and its affiliates, and (ii) each Purchaser who
holds at least 500,000 shares of Registrable Securities, the right of
participation to purchase its Pro Rata Portion of any New Securities (as defined
in subsection 2. 1 (b)) which the Company may, from time to time, propose to
sell and issue. A Purchaser's "Pro Rata Portion" for purposes of this Section
2.1 is the ratio that (x) the sum of the number of shares of the Company's
Common Stock then held by such Purchaser and the number of shares of the
Company's Common Stock issuable upon conversion of the Preferred Stock then held
by such Purchaser, bears to (y) the sum of the total number of shares of the
Company's Common Stock then outstanding, the number of shares of the Company's
Common Stock issuable upon the exercise of any issued and outstanding rights,
options or warrants, and the number of shares of the Company's Common Stock
issuable upon conversion of any then outstanding Preferred Stock.
13
(b) Definition of New Securities. Except as set forth below, "New
----------------------------
Securities" shall mean any shares of capital stock of the Company, including
Common Stock and Preferred Stock, whether 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" does not include (i) the Preferred Shares or the Conversion Shares,
(ii) other than with respect to the IPO Holders in accordance with Section 2.3
hereof, securities offered to the public generally pursuant to a bona fide,
firmly committed, underwritten public offering pursuant to an effective
registration statement under the Securities Act, (iii) securities issued
pursuant to the bona fide business acquisition of another corporation by the
Company by merger, purchase of substantially all of the assets or shares 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, pursuant
to approval by the Board of Directors of the Company, including at least one
outside member, (iv) shares of the Company's Common Stock or related options or
warrants convertible into or exercisable for such Common Stock issued to
employees, officers and directors of, and consultants to, the Company, pursuant
to any arrangement approved by the Board of Directors of the Company, including
at least one outside member, (v) shares of the Company's Common Stock or related
options or warrants convertible into or exercisable for such Common Stock issued
to customers and vendors of the Company pursuant to any arrangement approved by
the Board of Directors of the Company, including at least one outside member;
(vi) shares of the Company's Common Stock or related options or warrants
convertible into or exercisable for such Common Stock issued to banks,
commercial lenders, lessors and other financial institutions in connection with
the borrowing of money or the leasing of equipment by the Company, (vii) stock
issued pursuant to any rights or agreements, including, without limitation,
convertible securities, options and warrants, provided that the Company shall
have complied with the rights of participation established by this Section 2.1
with respect to the initial sale or grant by the Company of such rights or
agreements, or (viii) stock issued in connection with any stock split, stock
dividend or recapitalization by the Company.
(c) Notice of Right. In the event the Company proposes to undertake
---------------
an issuance of New Securities, it shall give each Purchaser written notice of
its intention, describing the type of New Securities, the proposed number of New
Securities to be issued and the price and terms upon which the Company proposes
to issue the same. Each Purchaser shall have twenty (20) days from the date of
receipt of any such notice to agree to purchase shares of such New Securities
(up to the amount referred to in subsection 2.1(a)), 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.
(d) Exercise of Right. If any Purchaser exercises its right of
-----------------
participation under this Agreement, the closing of the purchase of the New
Securities with respect to which such right has been exercised shall take place
ninety (90) calendar days after the Purchaser gives notice of such exercise,
which period of time may be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of participation, the Company and the
Purchaser shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
14
(e) Regrant, Lapse and Reinstatement of Right. In the event a
-----------------------------------------
Purchaser fails to exercise the right of participation provided in this Section
2.1 within said twenty (20) day period, then in such event, the Company shall
give written notice of such event to each Purchaser exercising its rights under
Section 2.1 (a) (the "Exercising Purchasers"), and each such Exercising
Purchaser shall have the right to purchase, within five (5) days of receipt of
such notice, its Pro Rata Portion of any New Securities offered for purchase to
Purchasers other than Exercising Purchasers but not elected to be purchased
pursuant to Section 2.1 (a). The Company shall have sixty (60) days thereafter
to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within thirty (30) days from the
date of said agreement) to sell the New Securities not elected to be purchased
by such Purchaser at the price not less than and upon the terms no more
favorable to the purchasers of such securities than specified in the Company's
notice. In the event the Company has not sold the New Securities or entered into
an agreement to sell the New Securities within said sixty (60) day period (or
sold and issued New Securities in accordance with the foregoing within thirty
(30) days from the date of said agreement), the Company shall not thereafter
issue or sell any New Securities without first offering such securities to the
Purchasers in the manner provided above.
(f) Assignment. The right of the Purchasers to purchase any part of
----------
the New Securities may be assigned in whole or in part (i) to any partner,
subsidiary, affiliate, or shareholder of a Purchaser, or other persons or
organizations who acquire 100,000 or more shares of Restricted Securities (as
adjusted for stock splits and the like) and (ii) between and among any of the
Holders.
2.2. Termination of Participation Right. Subject to Section 2.3 hereof,
----------------------------------
the rights of participation granted under Section 2.1 of this Agreement shall
terminate on and be of no further force or effect upon the earlier of:
(a) the consummation of the sale of the Company's Common Stock in a
firm commitment underwritten public offering pursuant to a registration
statement under the Securities Act of 1933, as amended, at a public offering
price per share not less than $14.94 and an aggregate offering price of
$20,000,000 subsequent to which the Company shall be obligated to file annual
and quarterly reports with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act; or
(b) upon (i) the acquisition of all or substantially all the assets
of the Company, or (ii) an acquisition of the Company by another corporation or
entity by consolidation or merger in which the holders of the Company's
outstanding voting stock immediately prior to such transaction own, immediately
after such transaction, securities representing less than 50% or more of the
voting power of the corporation or other entity surviving such transaction.
2.3 IPO Participation Right. Notwithstanding anything contained in this
-----------------------
Agreement to the contrary, with respect to the IPO Holders, in the event that
the rights of participation granted under Section 2.1 of this Agreement have not
previously terminated in accordance with Section 2.2(b) hereof, such rights
shall terminate in accordance with the following:
(a) in the event that the registration statement filed in connection
with the Qualified IPO is filed with the SEC on a date (the "Qualified IPO
Filing Date") that is within one (1) year
15
from the date of this Agreement, then the IPO Holders' rights of participation
shall terminate immediately prior to the Qualified IPO Filing Date; and
(b) in the event that the Qualified IPO Filing Date occurs later than
one (1) year from the date of this Agreement, then the IPO Holders' rights of
participation shall terminate immediately after the closing of the Qualified
IPO.
2.4 Limitation on IPO Participation Right. The rights of participation
-------------------------------------
set forth in Section 2.3 held by the IPO Holders with respect to the Qualified
IPO shall be limited such that:
(a) the IPO Holders shall be entitled to exercise such rights of
participation and purchase, in the aggregate, up to the lesser of (i) the number
of shares equal to five percent (5%) of the number of shares of Common Stock
offered and sold by the Company in the Qualified IPO (exclusive of any shares
offered and sold pursuant to any underwriter's overallotment option), or (ii)
the number of shares which, if multiplied by the public offering price per
share, equals $5,000,000;
(b) notwithstanding the foregoing, if for any reason the Company is
advised by the SEC, the National Association of Securities Dealers, Inc., the
Nasdaq Stock Market, Inc. or any other regulatory body, or any of their staffs,
that the offering or sale of securities to the IPO Holders as described in
Section 2.3 would violate any federal or state securities laws or the rules or
regulations of the SEC, the National Association of Securities Dealers, Inc.,
the Nasdaq Stock Market, Inc. or any other regulatory body or their staffs, the
IPO Holders agree that their rights of participation in the Qualified IPO shall
be deemed waived without any further action by the IPO Holders;
(c) except as expressly modified by this Section 2.4, all other
provisions relating to rights of participation set forth in this Section 2,
including, without limitation, the notice, exercise and assignment provisions,
shall apply to the rights of participation with respect to an IPO.
2.5 Private Placement Right. Notwithstanding the provisions of Section
-----------------------
2.3, in the event that (i) the Qualified IPO occurs within one (1) year from the
date of this Agreement, or (ii) the rights of participation in the Qualified IPO
of the IPO Holders has been waived in accordance with Section 2.3(b) hereof,
then the Company agrees to sell to the IPO Holders securities of the Company at
fair market value at the time of their issuance (as determined in the good faith
judgment of the Board of Directors) in a private placement that as closely as
practicable approximates the economic benefit of the rights of participation in
the Qualified IPO (the "Private Placement Right"). In the event that the
exercise of the Private Placement Right results in the IPO Holders purchasing
restricted securities, no illiquidity discount shall be applied in determining
the economic benefit provided and the Company shall not be required to register
the resale of such restricted securities other than pursuant to the registration
rights granted in Section 1.5, 1.6 and 1.7 of this Agreement; provided, however,
that such securities shall be deemed Registrable Securities hereunder.
Notwithstanding the foregoing, if for any reason the Company is advised by legal
counsel, the SEC, the National Association of Securities Dealers, Inc., the
Nasdaq Stock Market, Inc. or any other regulatory body, or any of their staffs,
that the offering or sale of securities to the IPO Holders as described in this
Section 2.5 is contrary to any federal or state securities laws or the rules or
regulations of the SEC, the National Association of Securities Dealers, Inc.,
the Nasdaq Stock
16
Market, Inc. or any other regulatory body or their staffs, the IPO Holders agree
that their Private Placement Right shall be deemed waived without any further
action by the IPO Holders.
SECTION 3.
Miscellaneous
-------------
3.1. Successors and Assigns. Except as otherwise provided in this
----------------------
Agreement, the provisions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties to this
Agreement.
3.2. Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.3. Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California in the United States of America without
giving effect to the conflicts of laws principles thereof.
3.4. Counterparts. This Agreement may be executed in any number of
------------
counterparts, including counterparts transmitted by facsimile, each of which
shall be enforceable against the parties actually executing such counterparts,
and all of which together shall constitute one instrument.
3.5. Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be personally delivered or sent by international
express courier (e.g. DHL or Federal Express) addressed to the other party at
the address shown below or at such other address for which such party gives
notice hereunder. Notices sent by courier shall be deemed to have been given
three (3) days after deposit with any such courier.
3.6. Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7. Amendment and Waiver. Any provision of this Agreement may be
--------------------
amended or waived with the written consent of the Company and the Holders of at
least a majority of the outstanding shares of the Registrable Securities. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each Holder of Registrable Securities and the Company. In addition, the
Company may waive performance of any obligation owing to it, as to some or all
of the Holders of Registrable Securities, or agree to accept alternatives to
such performance, without obtaining the consent of any Holder of Registrable
Securities. In the event that an underwriting agreement is entered into between
the Company and any Holder, and such underwriting agreement
17
contains terms differing from this Agreement, as to any such Holder the terms of
such underwriting agreement shall govern.
3.8. Effect of Amendment or Waiver. The Investors and their
-----------------------------
successors and assigns acknowledge that by the operation of Section 3.7 of this
Agreement the holders of a majority of the outstanding Registrable Securities,
acting in conjunction with the Company, will have the right and power to
diminish or eliminate any or all rights or increase any or all obligations
pursuant to this Agreement.
3.9. Rights of Holders. Each holder of Registrable Securities shall
-----------------
have the absolute right to exercise or refrain from exercising any right or
rights that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
3.10. Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such non- breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; 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 party of any breach or default under this
Agreement, or any waiver on the part of any party 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.
3.11. Prior Agreement. Effective upon the execution and delivery of
---------------
this Agreement by all parties hereto, the 1997 Rights Agreement, the 1998 Rights
Agreement and the 1999 Rights Agreement are hereby terminated and shall be of no
further force and effect and are hereby superseded and replaced in their
entirety by this Agreement.
3.12. Entire Agreement. This Agreement constitutes the full and
----------------
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
[Remainder of Page Intentionally Left Blank]
18
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
TOPTIER SOFTWARE, INC.
a Delaware corporation
By: /s/ Xxxx Xxxxxx
----------------
Xxxx Xxxxxx
Chief Executive Officer
[Signature Page to Rights Agreement]
19
"INVESTORS"
VITRIA TECHNOLOGY, INC.
By: /s/ XxXxx Xxxxx
------------------
Name: XxXxx Xxxxx
--------------
Title: President and CEO
------------------
AZURE CAPITAL PARTNERS
By: /c/ Xxxxxxx Xxxxxx
-------------------
Xxxxxxx Xxxxxx
Managing Partner
BLUEVECTOR, LLC, a Delaware limited liability
company
By: /s/ Xxx Xxxxxxxxx
-----------------
Name: Xxx Xxxxxxxxx
-------------
Title: Managing Partner
----------------
KINGDON CAPITAL MANAGEMENT
By: /s/ Xxxxx X. Xxxxx
------------------
Name: Xxxxx X. Xxxxx
--------------
Title: General Partner
---------------
[Signature Page to Rights Agreement]
20
